Right Thinking From The Left Coast
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Tuesday, September 14, 2010

A Simpler Vision

The Senate today, with several Republicans breaking ranks, passed a $50 billion bill to “help small businesses” through government loans and tax cuts. Megan McArdle makes the case against here, pointing out that what we’re seeing now is precisely the sort of “creative destruction” we need to get the economy going.  The problem in business right now isn’t a lack of business loans, which are plentiful.  The problem is that too many business are tied to broken business models.  By creating a government loan business, we’re simply delaying this process, keeping zombie businesses going at the expense of future businesses.

If the government really wants to help, here’s a better idea.  This is also from a McArdle piece, in which she argues against the asinine idea that small businesses should be buried in 1099 forms so the government can collect an extra $2 billion in tax revenue.

Tax compliance is a big deal in the US--by one estimate, the ratio of compliance costs to compliance revenue for the corporate tax is almost 30%.  According to the Tax Foundation, the total compliance cost of the tax code is $196 billion--or more than 1% of GDP.  The IRS estimates that Americans spend 6.6 billion hours a year filling out tax forms.

That’s $200 billion in deadweight loss on the economy because our tax system is so complicated.  Overhauling the tax system would cost the government nothing.  But it would inject an amount of money into our economy that, over the next decade, would be greater than the Bush tax cuts, forty times this small business bullshit and three times the stimulus.  It would make it far far easier to move capital form failing businesses to expanding ones and make the US instantly the best business environment in the world.

I’m not surprised that this has no support in the Obama Administration.  If Obama’s daughters opened a lemonade stand on the White House lawn, they would, by the end of the day, have more business experience than his entire cabinet combined.  But where is the GOP on this?  Isn’t this the sort of “reducing the burden of government” thing they should be all over?

Posted by Hal_10000 on 09/14/10 at 05:57 PM in Politics   Law, & Economics  • (0) TrackbacksPermalink
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