Will you recognize me?
Call my name, or walk on by?
Rain keeps falling, rain keeps falling
Down, down, down, down
--Simple Minds
Recently we observed that higher taxes reduce capital available for investment--despite Warren Buffett's ridiculous claim. More taxes mean less savings. Less savings mean less investment.
Prof Cochrane adds another dimension. Investment projects will look less attractive because discounted cash flow analysis will yield smaller prospective after tax returns on projects that are subject to higher tax rates. More simple math that seems to escape Mr Buffett.
Thus, the smaller amounts of capital still around after higher tax rates will be less likely to be put to work.
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Taxes of all kinds discourage production. Man works to satisfy his desires, not to support the State. When the results of his labors are taken from him, whether by brigands or organized society, his inclination is to limit his production to the amount he can keep and enjoy.
~Frank Chodorov
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