A Growing Economy



Why is it that some countries have growing economies and some are stagnant?  Well there is more than one reason, but here are some:


Basically a growing economy derives from the creation of new jobs.  New jobs are created by $$ – tens of thousands for land and buildings.  Working capital and inventory.  $$ can come from the government or from profits of high income individuals or companies.  The level of tax on high incomes determines the split between private investment and public investment.  High taxes will result in mostly government investment and 100% tax results in socialism.


So to soak the rich results in fewer new companies being formed and fewer new private initiatives by individuals and companies.  On the part of government there are many ways the $$ can go:  social services, more government employees, world charity, and defense and infrastructure.


So which is more important – well all are, but the percentages are different in different countries.


Now, for instance, in a Socialist country the government runs all the businesses.  In such cases the split is heavily away from innovative investment and heavily toward public services, welfare and corruption (i.e. businesses owned by friends of the politicians).  In a dictatorship, the money goes to the dictator – who never uses it to start a new business.


In the USA with moderate taxes, hundreds of new private companies are started every year, creating new jobs.  Most new companies die in the first year from inadequate capitalization, so lower taxes result in more jobs both by more starting and more surviving.


Finally, people in the jobs created by the government do not pay taxes so do not create more jobs.  Also, they do not often expand because they are dedicated to serving the programs of the politicians rather than the desires of the people.


So how productive are high taxes on the rich?



Comments are closed.