The abundance agenda is gaining traction. The idea that we should deregulate the economy and free the supply side to achieve greater abundance and lower prices is becoming increasingly popular across the political spectrum. To be sure, there’s nothing fundamentally new about this effort — conservatives, classical liberals, and libertarians have long championed the benefits of deregulation. Even the idea that subsidies with loads of government requirements may be counterproductive to the effort of abundance is something we have been expressing for a long time.
However, I am delighted that so many scholars on the left are now embracing these ideas, which have been adapted to address the issues they care about. We may not agree on everything, but on that we agree, and thanks to their approach, they will reach audiences who might otherwise dismiss them. They may also be more effective than we ever have been. At least, I hope so.
That said, I have noticed one glaring omission in most conversations about abundance: tax policy. While deregulation is essential to growth and affordability, an agenda aimed at unleashing America’s productive capacity can’t ignore the tax code. Yet until now, the tax side of the abundance agenda has been mostly missing in action.
Not anymore. Over at the Cato Institute, Adam Michel and I make the case that tax reform is just as critical to abundance as regulatory reform. A truly abundant economy requires not only freedom to build but also incentives to invest productively. And that means getting taxes right. Here’s a preview of the core arguments we make:
- Abundance requires capital formation. Lower taxes on saving and investment are essential to unlocking the private capital needed to build housing and infrastructure and to spur innovation. Deregulation alone can’t do the job if no one has the incentive to act on the new freedom.
- Taxes shape the incentives to work, invest, and take risks. Punitive taxes on capital gains, dividends, and business income discourage the very risk-taking and entrepreneurship that an abundance agenda depends on.
- Our current tax code punishes productive activity. The U.S. system double- and even triple-taxes saving and investment, thus distorting behavior and slowing long-run economic growth.
- Regulatory wins can be undercut by poor tax policy. If after-tax returns on investment are too low, businesses won’t pursue even legally permitted projects. Red tape might be gone, but the math still won’t pencil out.
- History and international evidence support our case. Estonia’s zero tax on reinvested corporate profits and the post-TCJA investment surge in the U.S. are examples of how pro-investment tax policy can drive growth.
- Key provisions of the Tax Cuts and Jobs Act are expiring. The phaseout of full expensing and the return of delayed R&D deductions are raising the cost of capital just when we need more private investment, not less.
- A well-designed tax code amplifies the gains of deregulation. Lower marginal rates, neutral treatment of saving and investment, and long-term predictability all help transform deregulated potential into actual economic output.
In short, if we want an abundance agenda that delivers abundance, we can’t afford to leave tax reform on the sidelines — or to make the tax code worse. It’s time to finish the job and align our tax code with the kind of dynamic, investment-driven economy that we want to build.
The whole thing is here.