It's fair to say there is an increased level of angst in the business community since the government announced it's new budget on May 29, 2013.
Higher import taxes, increased business license taxes and a myriad of other fee/tax increases.
A few points for consideration:
- Realising the government is "desperate" for revenue they've worsened the tax and spend policies of successive governments.
- The cost of goods and services are bound to increase, impacting everyone.
- The negative unintended consequences of high tax policies on investment and private sector job growth are not a mirage. History is replete with examples.
- Have taxes reached the point of diminishing returns? (The Laffer Curve is where government will receive less revenue even though taxes are higher.)
- It's not clear why the Chamber of Commerce seems to be doing very little canvassing of its membership to represent the business community in a more formal way on these issues.
- Times are tough for the government and for most of the business community, but continuing to implement more and more negative policies seems to be the opposite position they should be taking.
A study by William McBride of the Tax Foundation in the US, released December 2012 finds that, "Nearly every empirical study of taxes and economic growth published in a peer reviewed academic journal finds that tax increases harm economic growth."
According to McBride; "… a series of OECD working papers, [14] summarized by Arnold et al.,[15] OECD affiliated economists have determined a ranking of the most harmful taxes for economic growth. They find that corporate taxes are the most harmful, followed by personal income taxes, consumption taxes, and, finally, property taxes…"
In other words, higher taxes mean lower economic growth, caused by discouraged entrepreneurship, and business that impacts employment prospects.
For three successive budgets now there have been major increases in taxes and changes to the tax code that create confusion not only in the private sector, but the government as well. In addition, taxpayer subsidies continue to increase further impacting government revenue.
To top off the confusion, the government is proposing adding a Value Added Tax on July 1, 2014. A VAt of 15% will dramatically increase the cost of living and discourage investment even more.
Each budget gets more discouraging as government keeps rolling the dice that more of the same will improve the economy.
More betting against the odds will continue to push us toward slower economic growth.
Further reading
Doug Bandow; Raise Taxes to Clinton-Era Levels? How about Spend at Clinton-Era Levels?
William McBride; What Is the Evidence on Taxes and Growth?
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