by Jarad Perry

Created on: August 20, 2009   Last Updated: August 22, 2009

Yes, is the short answer but that too comes with a longer explanation. On a purely macro-economic level it does seem that lower taxes do play a major part in the overall health of a countries long term growth. The Laffer curve does illustrate the general theory of how such a model works, but while such a device may be used on a state by state basis, using it to model countries leads to some major problems the least of which being the failing of the whole premise that when taxes are too high companies move.

Companies do have the capacity to move from state to state, but capital expenditure does become more difficult when one is dealing at a national level.

Lower taxes give a country a competitive advantage, but that also depends on the overall tax structure in place. Pure income taxes don't play that large of a role when they are levied against individuals, yet when corporations are treated as individuals, as they are in the United States, the justification for such a system becomes difficult.

Treating a national and multinational company as an individual is a fallacy of democracy. Companies do not have the right to vote, there members do that is why a income tax is levied against them, but the company itself cannot vote in an election therefore to levy a tax on their income seems illegal.

Some may say that companies must pay their fair share, but do they pay that now? The answer is No, and that is because anyone who has taken a basic economics class understands that any tax paid by a company is cost shifted to the customer. So in essence, the customer is both paying their own income tax as well as that of the company they are purchasing the good or service from.

This type of system exists in the United States, and the reality is that as inflation rises due to an increase of the money supply real purchasing power will diminish but taxes on companies will not. The quickest way to lower prices, other than control monetary policy, is to lower or abolish income taxes on companies.

Doing so will lower real cost of doing business and also lower prices. However, this does not work when the government shifts money from the private sector to the public sector via fees and taxes, and current trends show that such shifting will continue.

Once the levying of income taxes on companies is abolished, the tax on capital should be the next thing to go. The capital gains tax is really a tax on monies already taxed. If capital is how a business expands, wouldn't it be logical to conclude that if more capital is available more investment will follow?

Of course one does not have to think to hard on such a question as common experience shows this to be true.

There are many ways to affect the economic health of a country, and taxes can play a large part in this if they are structured correctly and wisely. Eliminating illogical taxation is one such way of correcting downward trends.

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