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Show THE VOICE OF BUSINESS The lessons of Greert BiivaSrc still hold I5 Richard I.. I.esher, Preside nl Chamber of Commerce of the 1' nited Slates Remember all those warnings by conservatives, a few years back that we .wie ollwoi.iiz Great Britain down the road to socu.lim. and eventual economic nun'' It was an argument socialist sympathizers at the time found hard to refute. The British welfare state was an economic mess, characterized by inefficient, nationalized industries, ballooning lxihlic sector expenditures, punitive taxation, rapid inflation, substantial unemployment, anemic growth, a plunging currency and a growing balance of payments deficit. The human response to these failures was telling Call it a brain drain, or talent drain, or people drain, but for years individuals of every stripe, from engineers, to doctors, musicians, athletes and ordinary working people were leaving merne old England for more favorable economic surroundings. surroun-dings. One problem, more than any other, cau.se them to flee: high taxes. In 11)77. for example. ( personal income over $:u,ooo was taxed at a rate of 83 percent Even a S'Jl.nno family man with a modest mortgage could see 60 percent of a Si. (too raise eaten up by taxes. Investment income was taxed even more heavily with a top rate of 98 percent. But then came Margaret Thatcher. Elected in May 1979 on a platform to denationalize industries, freeze the growth of the bureaucracy, slash public spending and restore tax incentives to promote work, savings and investment, she seemed the angelic answer to every supply-sider's dream It hasn't quite worked out that way. After nearly two years, spending and inflation is up, unemployment has almost doubled, and Mrs. Thatcher has come under fire within her own Conservative party. One Tory' actually bolted the party ' '' altogether:' '' The interesting thing about all this is that American liberals now insist there is a new lesson from Great Britain: Supply-side economics does not work, tax cuts are inflationary and President Reagan should avoid making the same mistakes. In defense of Mrs. Thatcher, who has more courage than most economists and politicians combined, she should not be burned at the stake for failing to reverse more than three decades of mistakes in just 22 months. But in defense of supply-side, personal tax rate reductions the real object of the liberals' attacks thay have not been tried in Great Britain. To pretend they have is to be intellectually dishonest. Despite certain adjustments in personal and investment tax rates, the overall tax rate burden in Great Britain has increased following a tremendous jump in the value-added tax and the introduction of other levels. The British are now told tax reduction must wait. Arthur Iffer. economic adviser to President Reagan and backer of his 30 percent personal tax rate reduction proposal, warned as early as October 19R0, that by raising rather than reducing tax rates Mrs. Thatcher's policies would provoke a sharp recession. This is precisely what happened. The lesson of Great Britain remains the same, and it also applies to the Nixon-Ford-Carter presfe Trying to balance the budgets -j tax rates only reduces prrc centives. Reduced Ik;: discourage production, incomer pavings investment. Slot r ' "increases unemployment and ;. which, in turn, lead to new ol more spending. But liberals are never convi; high taxes caused so many a flee their country, and if we sc"; these same problems, why, tbr are so many people knocking r doors trying to live here? ik: Countries like Cuba and Vies: no freedom, political or ec: Compared to these to:L. dungeons. America is still a ? And compared to socialist e: like Great Britain, we scl -relatively lower tax burden. Thus, we have no people fe we do have a capital drain i continue rising, Americas t more and more ways loan:: Tax shelters for all income fx; now valued at $300 billions amount is growing. Certaisiyi-these Certaisiyi-these investments are p Some estimates peg the sis: underground economy nearK-and nearK-and it is growing. Tax F-outright F-outright cheating are also c--All this evidence should warning to us. For heaven's sate. Punitive taxes in thesis' help those in need or pr revenues to government. K force people with capital shelters, to run away, or. ul&; give up and do nothing pr all. |
