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Of course, this is not to say that the tax system should penalize consumption in favor of saving. As Milton Friedman understood, government has no business trying to set the saving rate through the tax system or in any other manner. How a person allocates his income between the present and future should be entirely up to him, regardless of what politicians and economists believe. As far as possible, government should be neutral regarding consumption and saving.
Therefore it must cease penalizing saving through the double and triple income taxation we labor under today. Few politicians would have the courage to call for abolishing the tax on investment, but economists should have the integrity to tell the public that this bad policy not only inflicts an injustice, it also harms society by impeding economic growth.
This article originally appeared at The Project to Restore America.