Savings is More Important than Spending (Chapter 1, Spread the Wealth)

Capital is the core of capitalism. Prior to selling any products, the entrepreneur must take on risk in the form of borrowed assets. Financing is the key to any endeavor. Even at the most microeconomic level, very few individuals write a check when they buy their home. This is why national savings is more important than spending. Most economic theory is demand driven, with spending trumping savings.This is backward.

More emphasis must be placed on savings and capital formation by reducing or eliminating the capital gains tax. This is a tax most associated with purchasing an asset at a given price and selling at a higher price; the gain is subject to tax.  It is not a tax on capital; it is a tax on the formation of capital. People should be encouraged to save as savings is postponed spending and allows others to borrow money.

Modern lending dates to the Venetians, who needed capital to finance the building of ships. It was difficult to pay for a ship, before fish were caught or goods were delivered to ports of call. Loans were needed to support ventures that had not yielded any profit. This is true today as no one generates sales without making an outlay of capital first. The capital comes in the form of a loan. Contrary to popular political belief, you do need bondholders to build cars.

The Basis of American Free Trade (Chapter 4, Spread the Wealth)

The foundation of free trade in the United States can be found in the Constitution. Article I, Section 9, establishes free trade between the states. Not since the Roman Republic had such a large contiguous area been subject to such free movement of commerce. The Articles of Confederation allowed for taxation of interstate goods and the economy underperformed as a result. The Constitution corrected this.
The founding fathers got it right:

No Tax or Duty shall be laid on Articles exported from any State. No Preference shall be given by any Regulation of Commerce or revenue to the Ports of one State over those of another; nor shall vessels bound to, or from, one State, be obliged to enter, clear, or pay duties in another.

U.S. Constitution Article I, Section 9

The Nature of Currency (Chapter 5, Spread the Wealth)

Two important aspects of currency are stability and neutrality. In other words, it must be stable and it must favor no one. Currency stability allows for individuals and business to be able to project costs and depend on true profits, rather than inflation adjusted ones. If the currency is worth less every year, purchasing power is eroded and it takes more money to buy the same product. Rising prices do not necessarily equate to increased wealth.

A neutral currency favors no one. A policy of inflation favors those who have access to borrow money first, as they receive this money before prices rise and the currency is devalued.
The most important feature of a currency is the underlying trust that the value will not be rendered worth less over time. As the government violates the public trust over time allowing inflation, alternatives to the currency will be sought by global markets.

Incentives Matter (Chapter 9, Spread the Wealth)

In 1997, Steven Spielberg went to France to begin looking at locations to film the D-Day landings for his new film “Saving Private Ryan.” Instead of shooting a majority of the film in France, he only filmed the beginning and end of the film at the American military cemetery in Normandy. The reason: taxes. During an interview with the French in Deauville at the film’s preview the next year, he stated that, “I wanted to shoot the entire film in France and came here first, but when our production team came here they found the taxes were 52%.”

The additional taxes would have increased the cost of the film from $65 million to $95 million. Spielberg chose Ireland as the location instead, as the Irish government provided DreamWorks SKG with a tax break. This policy by France actually cost the local economy millions in lost revenue and went against the grain of post World War II improvements in trade relations.

*The above excerpts from Spread The Wealth are protected by copyright and prohibits  copying or distribution of this material.