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Thursday, January 8, 2015

The Importance of Export and Taxes in Economic Growth and Government Budgets

Export and taxation are fundamental aspects of the American economic engine. Exports help create wealth that results in increased employment and tax generation. Government relies on taxation to pay its bills and keep the doors open. When exports wain and job creation slows both the economy and government suffer shortfalls that make their way into government spending crisis. Ignoring exports in the debate on taxes is like ignoring the cow when discussing how to produce milk.

The news is aflutter with the upcoming debates on taxes and budgets. How to cut back, how to spend more wisely, and how to reduce waste are just some of the discussions. These are important debates and questions for a nation that desires to ensure that government is not so top heavy as to suck an unreasonable amount of resources from the economy. Yes...government does cost money and more government costs more money.

Finding the right balance between enough government to ensure proper national management while not impeding future growth is difficult. Leaders have debated this for hundreds of years since the very first tax man came to confiscate chickens to feed the chieftains troops. The argument typically revolves around how to get more taxes and use collected taxes to accomplish certain national objectives; a legitimate function of government.

A few times  the conversation may move to something beyond tax rate and expenditures to how taxes are generated. Tax revenue comes from the economic production of a nation's businesses and people that sell their products on the international market to produce additional revenue. As business revenue grows the dollar amount (not tax rate) should grow as more wealth and new jobs are created.

Beyond the specific taxes a company pays on income are the secondary taxes earned through improved labor markets. As employees are put back to work and their opportunities rise there is a exponential growth in the amount of taxes being paid (not tax rate) due to more gainfully employed individuals paying into the system. Business and employment are two sides of the same coin.

Exportation, and the wealth it generates, is a direct result of the competitiveness of American businesses that manufacturing and producing within the country. You can't have jobs unless you have employers and you can't have taxes unless you have economic activity. You can't sustainably increase taxes unless you increase economic activity. Consider a few important associations of tax and exportation:

Tax as a Revenue Source: Taxes and fees are major sources of revenue for government. Increasing the amount of paying tax members also increases the wealth government can accumulate. Higher taxes generally decrease economic activity while lower taxes generally increase economic activity. Developing a parsimonious tax policy that ensure an appropriate tax rate that encourages growth with the ability to ensure everyone is paying their fair share of taxes is beneficial. 

Employment and Wages: As exports increase the revenue gained from increased sales and improved employment wages can make a big difference to state and federal budgets. Opening up additional international sales helps to encourage growth beyond the consumption patterns of Americans making it possible to create higher levels of wealth generation. A net positive export environment is also a net positive growth market. 

Investment Growth: As regions become export oriented and are able to generate new forms of wealth they will naturally draw interest from investors who also desire to earn profit. Entrepreneurs often attract larger investors that seek to create economies of scale. As investment and exports grow so does the amount of revenues government earns.

International Influence: America wouldn't have the influence today it does unless it was able to generate new wealth through innovation and sell those innovative ideas on the market. As people engage for business across the globe they will begin to adopt certain characteristics of successful nations to emulate in their own countries.

Export activity is an important part of the discussion as it relates to tax generation and balancing the budget. One method of increasing tax revenue is to put in place proper pro-business policies that help create new opportunities through the generation of small business and the enhancement of large businesses to create export oriented local economies. Government has a fiduciary responsibility to use policies in a way that lower transactional costs, improve upon national infrastructure, and create new opportunities to employ Americans. Exportation and taxes are part of the discussion on government budgets and cannot be easily separated.

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