Monday, January 22, 2007

From Larry Kudlow: "Don't Mess with Success"



Kudlow's Money Politic$: Don't Mess with Success

"...In 1993, before the 13 years of no tax hikes began, the federal deficit was 3.9% of GDP. Today, after 13 years of tax cuts, it's about 2.5%.

And back in 1993 the cumulative federal debt was 49% of GDP. Now it's only 39%."

Larry says it pretty well indeed. When taxes on investment gains are low, investors have a better reward for taking the risks of investing. When taxes on gains are higher, investors have less of a reward from investing. Everyone say it together: "Taxation alters taxpayers' behavior."

In investing, higher tax burdens deter the acceptance of risk, as the risk is less-well compensated. Acceptance of less risk means lower investor returns. That is not at all what the country needs now, as the baby boomers are heading into their retirement years significantly underfunded as a group.

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