The House Health Fix: Even Higher Job Killing Investment Taxes

Karen Campbell / March 18, 2010

It takes investment to get sustainable economic growth. We can’t spend our way to growth. We have to save some of the stuff we make today and use it to create new, higher value, tomorrow. If we produce and consume it all, then our economy lives “hand-to-mouth” and we do not grow.

Investing is risky. There is no guarantee that the investment will pay off. Investors weigh many possible scenarios when determining whether or not to make an investment. If the expected return on an investment does not meet an investor’s next best opportunity for his cash, he will forgo that investment.

The expected rate of return compared is the after-tax rate of return. The higher the tax on returns, the more investments will be foregone. So why is Congress trying to discourage investment at a time when the economy desperately needs investment to start growing again?

Because in order to get a deficit neutral score from CBO the legislators needed to find more ways to squeeze revenue from taxpayers.  Unfortunately increasing taxes from things that produce economic growth will cause the deficit to increase in a dynamic economy. Slower economic growth will result in fewer jobs and less tax revenue. (more…)