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Innovation and Regulation

Dec 2, 2010 • Demand, Supply, and Markets, Government, Innovation • 94 Views    No Comments

Is more innovation the opportunity cost of more regulation? If so, which do you prefer? To see one person’s opinion, I recommend a recent Washington Post op-ed, “Strangling innovation and job creation with red tape.”

The Washington Post article took me to the “Doing Business” website of the World Bank. Depending on the category, the U.S. ranking for the ease of doing business varies. Out of 183 nations, for paying taxes, the U.S is #62! Our overall rank, though, is #5, we are #9 for starting a business, and #14 for closing one. You might enjoy looking at the site. It is up-to-date, easy to read and will help you decide where innovation could thrive. Some of the facts are surprising.

The Economic Lesson

I am reminded of 1986 tax legislation. “Simplify” is the one word associated with it. The Tax Reform Act of 1986 had 2 principle marginal tax rates: 15 percent and 28 percent.

By contrast, in 1985, depending on your taxable income, you would have paid between 11 and 50 percent of it to the federal government through some or all of 15 marginal tax rates. That wasn’t the whole story, though. There were lots of permissible deductions.

 

 

 

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