'Velocity of Money' is RX for Economy
By Bradley Blakeman
Newsmax.com
It doesn’t take a rocket scientist or even a
Georgetown MBA to understand that it is the
“velocity of money” that is the prescription for a
healthier economy.
It is common sense that every time a dollar changes
hands it gins up the marketplace, whether it is
exchanged at the deli on Main Street or the
brokerage house on Wall Street. If a dollar changes
hands once, we are in a depression, however, if that
same dollar changes hands 10 times in the same
amount of time we are in boom times.
How do we then increase the velocity of money?
Do that which has been done before and is proven.
Unleash the power of the individual. Get rid of the
restrictions to velocity imposed by the government
on the taxpayer and small business owner.
It is not the government collecting and spending
money on its own maintenance that increases
velocity, it is the private sector exchanging money
that creates a velocity of money that will rally and
rebound our weakened economy.
The problem today dates back to age-old, fundamental
differences in philosophy between Democrats and
Republicans regarding the economy.
Republicans believe in smaller government, lower
taxes, less regulation and people. Democrats believe
in large government, high taxes, more regulation,
and more government.
Here are a three things we could do now that would
have an immediate positive affect on the economy and
get money moving:
1. Eliminate the capital gains tax:
Today, individuals are penalized for selling their
property out of fear that they will have to pay 20
percent on the gain on the sale of assets like
stocks, bonds, precious metals and real property.
If this tax were eliminated, people would be free to
move their property via sale, exchange, etc.
unencumbered. The sheer velocity of the money moving
throughout the country generated by these transfers
would be immediate and real.
2. Eliminate the death tax:
American families are faced with a huge tax
liability upon the death of a loved one. The same
assets that were taxed on the purchase of an asset
during one’s lifetime are taxed again upon their
death.
This amounts to double taxation. The current death
tax rate is 46 percent with an exemption on the
first $2 million. This burden hits small business
owners the hardest. If for example a gross estate
comprised a small business with assets of $3
Million, the estate would have to come up with
$460,000 in taxes.
In most instances this burden would mean the end of
the family business. The heirs would be forced to
liquidate or sell the business just to pay the tax.
Many economists believe that the elimination of the
death tax would favorably increase the velocity of
money because businesses would continue in operation
and would be more successful without the the fear of
a looming tax that would in effect put them out of
business.
3. Do not let the Bush tax cuts expire. The marketplace needs surety and confidence. We need to keep tax cuts in place while severely reducing government spending. Then in 2012 with a new president, work to scrap the tax code for a simplified national tax structure.
By eliminating the restrictions to velocity, and
encouraging the American people to be successful,
more money will flow into our treasury by way of
income taxes.
The sheer velocity of money at the hands of the
individual will create and preserve jobs and
encourage and foster the great entrepreneurial
spirit that is America.
Bradley A. Blakeman is a professor of public
policy, politics and international affairs at
Georgetown University and he appears regularly on
FOX News. He served on President George W. Bush’s
senior staff from 2001-2004. Read more reports from
Bradley Blakeman —
Click Here Now.
© Newsmax. All rights reserved.