Perverse incentives

If you tax something, you will get less of it.
If you subsidize something, you will get more of it.


Keep this in mind while contemplating the following:


When businesses are taxed, production is taxed at least twice, and frequently more often: first, as corporate income tax, and then again when individuals are taxed on investment returns (dividend income and capital gains) --and the investments themselves were bought with previously-taxed personal income! Postmortem estate taxes add yet another layer of wealth expropriation by the government.

Then consider that interest expense and business losses are tax deductible. Multiple government programs exist to make "home ownership" (i.e. mortgages) more affordable. Failing businesses are (repeatedly) subsidized through government bailouts.


Production is taxed multiple times.
The cost of debt and failure is subsidized.

If you tax something, you will get less of it.
If you subsidize something, you will get more of it.

Government policies are the root cause of these artificial, inverted incentives. It is precisely these incentives which encourages excessive debt and risk-taking, and which in turn have led to the instability and eventual collapse of so many financial institutions. The solution is "Separation of Market and State" thus releasing proper market forces to supply the natural incentives of profit and loss with the resultant discovery of the most efficient use for scarce resources.

Wealth is not the problem.
Prosperity depends on production.
We need to let the producers produce, and reward success, not failure.

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