Redistributing wealth is no way to grow the economy
High marginal tax rates and other pernicious taxes also discourage savings and investment
Many South Africans and foreign investors are keenly awaiting finance minister Tito Mboweni’s Budget speech on February 20, probably wondering how he plans to balance the national accounts. Faced with a widening deficit, mounting debt, and a dismal economic outlook, to supposedly soften the looming fiscal catastrophe the government may well be tempted to raise taxes, particularly on SA’s wealthiest citizens. However, the focus should be on two key issues: significantly cutting expenditure by reducing the size of a bloated state; and broadening the tax base by allowing more people to work. As the late economist Milton Friedman pointed out, “You cannot reduce the deficit by raising taxes. Increasing taxes only results in more spending, leaving the deficit at the highest level conceivably accepted by the public. Political rule number one is government spends what government receives plus as much more as it can get away with.” Taxes penalise a targeted activity. For example, taxes on al...
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