If foreign adversaries wanted to undermine the U.S. economy they would find it very simple, writes Richard Rahn. Target a few key industries and induce hapless bureaucrats to tax and regulate the industries until they are uncompetitive. Which industries are key?
[T]he computer, Internet and wireless industries, coupled with the world’s most productive financial engineering, have provided much of the U.S. economic growth for the last quarter-century.
Here is how you, as an agent of a foreign government, make the industries noncompetitive:
The IPO market in the U.S. is drying up and moving to other countries. Venture capital firms are shutting down or reducing their investments. Legislation, such as the Sarbanes-Oxley bill, has made it prohibitively expensive to take a company public.
Restrictions on stock options, regulations requiring their expensing, and excessive auditing costs required by the Securities and Exchange Commission have taken away the profit potential and driven up the expenses for any exit strategy. If you cannot exit, you will not enter.
Congress and state and local governments have saddled the wireless industry with equally destructive and stupid taxes. The average wireless tax burden is about 14 percent in the U.S. compared to the approximate 7 percent tax rate on other goods and services, not counting the income, property and all the other taxes paid by companies. Discriminatory taxation against a product that greatly adds to the productivity of business and makes all of our lives better by giving pleasure and greatly reducing the time response to medical and other emergencies is not the product of clear thinking minds.
In a rare show of good judgment, Congress passed a moratorium on Internet taxation a few years ago. But some in Congress now want to allow state and local governments to tax parts of Internet services, and have proposed weakening the Internet tax ban. They argue that state and local governments need money, even though those tax collections are at an all-time high as a percentage of gross domestic product (GDP), and much of what states and localities spend is wasted,