The View From 1776
Friday, July 30, 2010
A Pox On Both Houses
Both Republicans and Democrat/Socialists have failed to address the necessity for reforming our tax system and making it as permanent and stable as possible.
Doing so would have facilitated businesses’ making long-range, capital-intensive investments to bolster our manufacturing industries that create new jobs. For that, the ability to project, with reasonable confidence, tax costs over as along as twenty years is essential. The tens, or hundreds, of millions of dollars cost of new production machinery or a new production plant must be recouped over a very long time. In addition to depreciation cost, business managers must factor in their best estimates of long-range operating costs, of which taxes are a significant part.
As Austrian-school economists point out, government intervention such as constant shuffling of tax rates and imposition of new taxes to fund our socialistic welfare state, induces uncertainty. Too many American manufacturing businesses, finding this a hostile economic environment, have outsourced jobs to investor-friendly domains overseas.
Democrat/Socialists, who see business as the enemy in the Marxian class struggle, are oblivious to such considerations. Instead they bash business for failing to write off long-term investments and switch production to money-losing green cars and alternative energy boondoggles. This attitude is more than usually evident in the Obama administration, staffed mostly with career politicians or former inhabitants of academic ivory towers, people who have no first-hand experience with business management.
Bruce Bartlett, a left-leaning economist, explains what needs to be done about taxes in the short run and in the long run.
Given the weakness of the economic recovery, it would be unwise to raise taxes; economists across the political spectrum are united on that. Unfortunately, this means that substantive debate on the efficacy of the Bush tax cuts and alternatives that might be better for the economy will be put off until next year.