Testimony for the Legislative tax working group meeting

Chairman Collins, Chairman Siddoway and Committee Members, thank you for taking my testimony.

The essence of good tax policy is to provide revenue in a way that does the minimum damage to the economy. Prosperity is a function of economic growth and growth requires cash. If a manufacturing business wishes to double its output then it must double its capital commitment to employees, equipment and raw materials. Siphoning capital away from the business in the form of taxes reduces growth which reduces prosperity which ultimately reduces revenue because even though the tax rate is higher the things being taxed are much smaller.

Multiple economic studies have shown that the Gross Domestic Product (GDP) the government consumes, in total, has increased from 23% of GDP in 1950 to 35% of GDP today. Had governments’ appetite kept pace with the economic growth of the nation, the economic growth rate would have been approximately 2% per year higher. 2% sounds like a small number until you consider the effect of compounding. 2% compounded for 65 years is approximately 350% or three and a half times greater. Instead of a GDP of 15.3 trillion dollars we would now have a GDP of 54 trillion dollars. Average household income currently at $53,000 per year would be $300,000 per year because of the dual effect of a larger economy and a lower tax rate.

The most important fact for this committee to consider is that had taxation remained at 23% of GDP then total government revenue would have increased 234% from 5.3 trillion dollars (35% of $15.3T) to 12.4 trillion dollars (23% of $54T). We are eating our seed corn.

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In terms of prosperity, it is much better for the government to take a small piece of a large pie than a large piece of a small pie. Imagine budgets more than 2 times greater with tax rates two thirds of what they are today. Keeping government small, as a percentage of the economy, makes everything bigger, including government.

The economic engine of growth is the small business and small businesses are ALWAYS cash limited. Providing tax relief to small business will result in greater growth of the economy, improved employment statistics and ultimately greater revenue with lower tax rates. I urge you to increase the property tax exemption and decrease tax rates as this will free up the cash business must have to grow.

Finally, taxing someone then giving that money back makes government look foolish. Eliminating the sales tax on food and repealing the grocery tax credit demonstrates common sense and good judgement.

Thank you for your kind consideration.

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