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Tuesday, August 26, 2003

Tax and Invest

People generally assume that it matters (impacts economics and productivity) how much a government taxes its populace, but my analysis says that matters very little in the long term compared to how the government spends its money. What would happen if the government raised taxes and cut spending enough to be running with a surplus (hey, it's happened before!) and invested all that surplus in its own stock market? Essentially they would be forcing people to consume a little less and invest a little more, which is the fuel of exponential growth. Is there any reason that eventually such a government couldn't eliminate taxes entirely and run on dividends? (A followup question being: would that be any different in net effect than running on taxes?)

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