Chapter 14: Savings and Taxes

1. Exploitation - where the benefits of a relationship flow in one direction-is commonplace. But under modern mutualistic capitalism, exploitive situations are noteworthy not only because they are unconscionable but also because they are so unusual.

2. With only a minor portions of the profits generated in a capitalist economy deriving from parasitic behavior, profits per se, do not deserve condemnation.

3. In the broadest sense, value-added - the difference between the cost of inputs and the worth of the finished products - can be thought of as social profit.

4. The existence of taxes on profits is a crucial distinction between profit flows in nature and in the economy. All the profits retained by a bumblebee hive are reinvested in new queens and new drones. But in the American economy, nearly half of an organization's profits will be drawn off by various types of profit taxation.

5. The design of the tax system is crucial to an economy's long-term vitality, because it influences countless millions of consume/save decisions.

6. Only when the tax law wildly favors consumption does the entire population's normal consumption/saving pattern become distorted.

7. Survey's now show that Americans don't save at all. Of the saving Americans do have, most of it is in pension plans.

8. If your potential savings is going to be taxed, but your consumption isn't, you might as well spend your money now. Only when potential savings, like pension funding, is beyond the reach of the IRS, does it make sense to save.

9. Economic thought has been crippled by two fundamental errors. From the time of Karl Marx, profits have been widely regarded as inherently evil. The second error was made by John Maynard Keynes. He argued that recessions and depressions were caused by too much saving and not enough consumption.

10. A sound tax system need only meet two requirements. First, it must be fair within each generation. The taxes each family pays should reflect its ability to pay. Second, it must be fair across several generations. To protect the viability of the future economy, taxes must not distort the people's usual consumption/saving preferences.