The American Spectator

Donlan explains the process of economic growth starting with taxes, saying:

Oddly, if you really want to raise taxes on the rich, you should cut their tax rates the way Congress and President Bush did in 2001, 2002, and 2003. It sounds like a joke but it's the most sensible way to read the results of the Bush years in U.S. tax policy. After the Bush Administration and Congress reduced the top marginal `rates, the people with the highest incomes shouldered a larger share of the tax burden because they made so much more money....Of more importance, the expanding economy generated more revenue from income taxes, sales taxes, corporate income taxes, and social insurance taxes....By fiscal 2007, higher economic growth and lower tax avoidance covered the loss of revenue from lower rates.

The Left has seized on this as an excuse for more government power, arguing that the market is obviously failing working people. But the Left offers this same response on every issue and development, including the weather (or more precisely its theories about the weather).

Unfortunately, some putative conservative intellectuals are now effectively taking this same position as well. They are arguing that conservatives and Republicans are losing their appeal to working class voters because of this wage stagnation. As a result, conservatives should drop their focus on limited government, free-market Reaganism, which, they say, is failing these voters. They should embrace instead a modern, big government conservatism with Republicans offering the working class government redistribution that will recognize their economic difficulties and their pain, and so win their votes.

How these intellectuals can fail to understand that this is socialism not conservatism is unfathomable. What they are saying is no more than that the free market has failed their politically favored interest group, but look at them in their central planning genius, they know the perfect government intervention to fix it.

THERE IS A REASON why wages for unskilled and lesser skilled labor have fallen behind in recent years. That is because the market for this labor is increasingly global, as modern technology allows the work forces of the emerging economies of China and India, and the liberated economies of the former Soviet bloc, to compete in the world market. This is a radical increase in the supply of basic labor, which naturally holds its price in terms of wages down. What should be surprising is that it hasn't had an even bigger effect.

But this is not a reason to abandon the free market. Quite to the contrary, this increased global competition means that there is even less margin for error, or big government fat and waste. We must adhere even more closely to free market policies, and seek even more ardently to maximize economic growth. This is the way, the only way, for American workers to keep earning the highest wages in the world.

In particular, for American workers to succeed in this global marketplace, we must equip them even more with the latest, the best, and the most in advanced, high-tech capital. Such capital investment, enabling workers to produce more, is the key to higher wages and incomes. Taking into account the huge increase in the global supply of basic labor, we need even more of this to get wages for the working class moving up again.

This means that we need even more urgently to rid our tax system of outdated, neo-Marxist, multiple tax burdens on capital investment. Every educated person needs to know by now that the biggest problem in our tax system is the multiple taxation of capital. The returns to a typical capital investment today are taxed once by the corporate income tax. If any of that return is paid to the stockholders, it is taxed again by the individual income tax. When the stock is sold, the returns to investment are taxed again by the capital gains tax. When the investor dies, the capital returns saved over a lifetime are taxed a fourth time by the death tax.

Then investment expenses are not treated fairly either. Every other business expense is deducted in the year it is incurred. But capital investment expenses must be deducted over many years according to arbitrary IRS depreciation schedules.

Letter to the Editor

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