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Published online by Cambridge University Press: 02 September 2013
In this country, we are in general agreement that high-level production and employment should be sought for in the framework of a private-enterprise economy. This is specifically acknowledged in the “Full Employment Act” now before Congress, which said in its earliest version under Sec. 2(a): “It is the policy of the United States to foster free competitive enterprise and the investment of private capital in trade and commerce and in the development of the natural resources of the United States.” Declarations to a similar effect are to be found in other parts of the bill.
At the present writing, the bill is not yet law, and in what form it may emerge for final vote, if it does emerge, is not clear. There will doubtless be a considerable number of changes, some of them important, but it is not probable that major dependence will be asserted on anything except private enterprise. This position is not merely that reflected in the pending legislation. It accords also with the belief and practice of an overwhelming majority of the people of the country, as is evidenced by political action and by popular polls. Thus we face no practical necessity for defending private enterprise as compared with other forms of economic and political organization.
1 This point is little understood by most people. We read in the papers that some one has an income of $50,000 or $100,000 or $200,000 a year. Surely such a man can afford to take a flyer in a new undertaking! But let us look at the hard facts. If the income is net income (that is to say, after all allowable deductions have been made), under rates applicable to interest and dividends on 1944 income the federal government will leave of the $50,000 only about $20,000 after taxes, of the $100,000 only $30,000, and of the $200,000 only $37,000. This leaves far less to spend or invest than most of us realize.
But there is worse and more of it coming. These three men will invest with the expectation of making additional income. But they are in the upper income brackets, and additional income is taxed accordingly. The federal government will take 78 per cent of the increased dividends from the $50,000 man, 92 per cent from the $100,000 man, and 94 per cent from the $200,000 man. This leaves too little to be justifiable for a risky, new venture. Even though it should return 10 per cent, the investment would net but 2 per cent, ⅘ per cent, and ⅗ per cent, respectively. The richer the investor, the more foolish is it for him to invest except in old, tried, gilt-edged securities!
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