The Case for Low Taxes
At first glance, there is seemingly no connection between the $70 billion tax break bill House Republicans are backing and the story of East Asians in England but there are economic lessons from the latter that can shape views of the former.
The House legislation wants to extend the reduced 15 percent tax rate for capital gains and dividends, currently set to expire at the end of 2008, and shield 15 million families from being hit with the alternative minimum tax. The tax was designed to make sure the wealthy paid taxes but is ensnaring more middle-income families because it is not indexed for inflation
Columnist Val MacQueen of TCS (Technology, Commerce Science) Daily recently told the remarkable story of the East Asian immigrants. About 40,000 were thrown out of Uganda in 1972 by the power-mad and fiscally stupid Idi Amin. Since they were Commonwealth citizens, the British gave them passports and allowed them to come to England. The Asians were wealth-creators but Amin did not allow them to take their assets with them. Most arrived in London with only a suitcase.
Today, the East Asians are among the most productive and wealthy citizens in England.
As Mr. MacQueen writes, "How does one account for a group of people who came from the Third World to the First World with nothing but a suitcase, and within three generations overtook 99.5 percent of the natives in terms of wealth?
"Like the Chinese, the East Asians have a reputation for shrewd commercial instincts and a willingness to sacrifice short term advantage in the service of the long-term goal. The entire family stays focused."
"Another key to ethnic Indians’ success is they do not look to banks for money – they look within the family or extended family, offering a part of the business as repayment."
What also helped was the drop in British tax rates after Margaret Thatcher was elected prime minister. There’s very little money left for families — and no initiative — when the government has a 90 percent — or even 50 percent — tax rate.
Critics of the tax legislation will gripe that it only helps the wealthy. But at one time, the East Asians were not wealthy. Their entrepreneurship allowed them to both gain and create wealth, which benefits vast number of other people and their nation.
This is about the best case for lower taxes that I have seen in quite a while.