John Tamny | Memo to Washington: Economic Growth Is Easy

John Stuart Mill long ago observed that we trade “products for products”, so if the desire is for increased consumption, we must stimulate the supply side of the economy. Specifically, we must remove the tax, regulatory, trade, and monetary barriers to productivity. For individuals to consume, they must produce first.

Considering taxes, they’re nothing more than a price we place on productivity. For the software developer whose innovations will enhance business efficiency, or the scientist who will work enormous hours to find a cure for cancer, income tax rates are the price we charge for their efforts. In that case, the goal should be to lower the price of work as much as possible in order to stimulate as much economic effort as possible. By virtue of their success entrepreneurs greatly improve our lives, and because they do, the fact that top earners are relieved of 35% of their income should strike us as grotesque.

Capital gains taxes are a price placed on investment, and here it should be remembered that there are no companies and no jobs without investment first, so why not a zero rate of taxation on capital gains?

Moving to regulations, businesses are in business to achieve profits, yet regulations inhibit the path for so much effort and money extended spent to remain in compliance. Regulations rarely work (figure the struggling U.S. banking sector remains one of the most regulated on earth), but they always succeed in distracting businesses that should be focused on the bottom line.


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