Belmont University

Going the Wrong Way

From the testimony of the Tax Foundation's Vice President for Economic Policy Robert J. Carroll before the Senate Finance Committee this week:

...[F]undamental tax reform has the potential to reduce the compliance burdens imposed on both households and businesses, and at the same time create an environment for greater economic growth in the long-term in a manner that is appropriately fair.

A fundamental issue...[is] the choice between income-based and consumption-based taxes. Consumption taxes generally reduce the tax on saving and investment, and... [will] boost economic performance and living standards in the longer term, in a way that retained the current progressivity of the tax system.

...[R]eforming the corporate income tax is becoming more urgent as our major trading partners around the world take the initiative.

Tax compliance (not taxes, just the paper work they create) costs small businesses more than $1,300 per employee per year. That is $26,000 for a small business with twenty employees that could have gone to adding another employee or expansion.

The corporate tax levied by most states in the US is higher than the corporate tax rate of country of France. Even socialist nations are finding the benefits of lower tax rates for their economies.

But, there is no relief in sight for those of us in the US. None of the three remaining Presidential candidates have real tax reform or tax cuts in their platforms. All three include policies that will significantly expand government, and in turn, will create the need for higher taxes to support their new initiatives.

Not only are jobs going overseas, but so are the entrepreneurs we need to help transform our economy. We have always benefited from the entrepreneurial spirit of our immigrants. More and more immigrant entrepreneurs are finding that they can find more opportunity in their home countries.

Bad news all around for the long-term outlook for this entrepreneurial economy.


Posted by Jeff Cornwall on April 18, 2008 05:45 AM |

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Comments

The sun burns up energy.
Human consumption is energy being burned.
The entire monetary system in the world is based on consumption basis of supply and demand.
The problem is - human consumption turns into waste that is disgarded.
Debt - is a monetary waste and should be at a point - as in Jewish Law of being 7 years - be disgarded and the records cleared. A monetary system must be based on creation and disgard. You can't take a debt and keep killing people forever - for that debt. That debt can exist on paper long after the people are dead and gone. Nature seems to know this - why can't politicians and Ph.D's. At the end of a person's working life - all their debt should be cleared so they can enjoy a few years of retirement before the dirt gets them. A consumption tax solves this problem in tax debt. The IRS personnel are so ignorant that they believe that a Tax Debt should give them rights in a Next World to keep going after the person who left the Tax Debt behind when they died in this world. That is so stupid and ignorant. You have to solve the issues of ignorance on the planet if you want to solve the issues of taxation...and quit giving Tax Collectors law to kill with. A consumption tax is the only logical and fair way to tax.

Birdied by: Miles Bradford | April 18, 2008 05:03 PM

It is not as easy as one might think to categorize consumptive versus productive spending. One way to do it is classic accounting techniques that capture benefits and costs in a disciplined way. Banks and bonding companies do it all of the time by looking at the ratio of projected income streams to costs over the same time span. Capitalism survives by virtue of such awareness. To kill Capitalism, one only needs to feed it a steady diet of ineffective and consumptive tasks.


Fortunately some secondary and tertiary recipients in the cycle of spending may harness the wasted capital within their own productive enterprises but that only mitigates the damage, not eliminates the damage.

As an example, the government might build an Interstate that creates a more productive economic ecology for the growth of jobs and businesses. It also kills off the lest efficient ones at the same time. A net positive benefit is realized by government spending on asphalt because it enhances productivity.


The government then decides to build a four lane interstate as a dead end road in a remote location and instead of serving thousands per day, it serves only hundreds. This pavement is more consumptive in nature even though it may have created a few jobs during the construction. The damage to the economy is compounded by the fact that the asphalt will call out for more maintenance over the years as chemical and physical forces will attack it even if no traffic ever goes onto it.

Consumption is a little like pornography, it is hard to define but most people know it when they see it. Two people living in a 30 room house would be seen by many people as consumptive. I have a relative who would like to solve the unemployment problem by getting the unemployed to hand write Social Security checks. I think that is consumptive also but I know better than to try and argue the point with him. I am pleased just knowing that there is no close and measurable genetic link between us.

Birdied by: Danny L. Newton | April 19, 2008 04:50 PM

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