Thursday, January 26, 2006

Tax as an investment?

From Colin James' NZ Herald column of January 24;

Labour spent much effort in 2004 on its "brand" to encapsulate its "values". But a brand has no value if voters don't value it. Waffle words like "fair and inclusive" are not likely to frame the way voters think. A "fair go" might. Getting voters to see tax as an investment, not a drain on good people's good times and a dole for wastrels, might.

I see tax as an investment - lost. It is money confiscated from the private sector and lost to private investment.

In the words of James Gwartney, Dwight Lee and Richard L.Stroup, authors of Commonsense Economics,
"There is every reason to believe that investors risking their own money will make better investment choices than central planners spending the money of taxpayers. Remember, an investor who is going to profit must discover and invest in a project that increases the value of resources. The investor who makes a mistake - that is, whose investment project turns out to be a loser - will bear the consequences directly. In contrast, the success or failure of government projects seldom exerts much impact on the personal wealth of government planners. Even if a project is productive, the planner's personal gain is likely to be modest. Similarly, if the project is wasteful - if it reduces the value of resources - this failure will exert little negative impact on the planners. They may even be able to reap personal gain from wasteful projects that channel subsidies and other benefits towards politically powerful groups who will then give the bureau added political support at budget time. Given this incentive structure, there is simply no reason to believe that central planners will be more likely than private investors to discover and act on projects that increase society's wealth."

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