April 29, 2012

Liberating Entrepreneurs and the Soon to Be

Is parity with WallStreet activity too much to ask? Why incentivize Wall Street and collect more from direct producers, employers, and those on path to be? Isn’t it proven that Wall Street, as some sort of a convoluted surrogate welfare Government, cannot take care of anyone but themselves? Wall Street activity is no significant job creator.

THIS is not Adam Smith’s time, where the worker was a forever lazy bum, and the chattel owner and the financier were to be showered with bailouts and artificial procurement, so they could, in turn, dole out survival to the worker.Today’s entrepreneurs often graduate from college, work as employees for many years, save up the capital, and then start their own business after also collecting sufficient understanding of how the World really works and what consumers are missing in the marketplace.

Today’s tax systems do not reflect this new reality when trying to pay for Government. They collect less from financial activity, like playing in a secondary market for stocks, bonds, futures and options, swaptions (and we are not even talking IPO market that directly provides money for business capital), and what have you; and place the larger burden of paying for Government on the incomes people make doing mainstreet work and saving capital, and on the income generated from actual real world risk taking, production and providing employment. If one wants any favorable treatment, one has to do things that involve financial institutions, like taking a loan, even if for an unproductive asset such as a house!
All in the name of encouraging job creators...!

Government shrinkage-to-sense is one thing; equally sensible is to remove compliance paperwork imposed on running a real business. Towards the latter - we all know that we cannot murder a fellow man. But we do not go about filing paperwork every year that we have not violated this law. Yet we know that we cannot, and don’t. If that simple, straight law is violated, there will be trouble. But there is no paperwork nightmare, with attendant penalties if it were less than perfect (the paperwork)! You don’t have a standing battery of lawyers and accountants to traverse the path of compliance regulations to continuously do the paperwork that you haven’t harmed someone, and hopelessly depend on them through the legal maze in routine enquiry situations, or when the exactness of the paperwork is questioned. That makes sense.

However, until there is Government to be paid for, even if greatly shrunk from current size, and there are taxes, unfavorable treatment of the income of entrepreneurs and soon to be entrepreneurs - than that of financial players - does not help the economy, or the cause of job creation. There is a pressing need to make tax rates uniform between real world work & business v/s Wall Street games. The tax reduction, in the process, that the real economy and job creation will receive, will give it a new enthusiasm, and should be complemented with removal of strangulating compliance paperwork.

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