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Updated: May 26, 2025
I believe our tax rate cuts for the people have done more to spur a spirit of risk-taking and help America's economy break free than any program since John Kennedy's tax cut almost a quarter century ago. Now history calls us to press on, to complete efforts for an historic tax reform providing new opportunity for all and ensuring that all pay their fair share, but no more. We've come this far.
It is much to be regretted that in English we have no clear corresponding word. The word "capitalist" is not uncommonly employed to do duty in this connection, but this is a source of much confusion. For the word is also used, and more appropriately, to include all investors, whether or not they are active business men. Risk-taking and Control. But there is an allied confusion of more importance.
I believe our tax rate cuts for the people have done more to spur a spirit of risk-taking and help America's economy break free than any program since John Kennedy's tax cut almost a quarter century ago. Now history calls us to press on, to complete efforts for an historic tax reform providing new opportunity for all and ensuring that all pay their fair share, but no more. We've come this far.
But it is precisely here that Government Departments are apt to fail. It is here that the individual, who need consult no one but himself, has a pull over any form of organization, where decisions are reached by the method of debate and agreement among a heterogeneous committee. Hence it is that we have come to regard exceptional risk-taking as the peculiar province of individual enterprise.
Now, it is obvious enough that in an exceptionally risky industry, where there is a considerable possibility that the capital invested will yield no return at all, the profits of those concerns which succeed are likely to exceed the rate of interest on gilt-edged securities. But what is likely to be the magnitude of this excess? Is risk-taking rewarded if there is any such excess, however small?
Bankers enter the picture, providing capital and collecting interest on their loans. Where credit is abundant and relatively cheap, borrowers spend beyond their incomes, hoping to pay later when the loan falls due. Borrowing and over-spending are among human frailties. They are also forms of risk-taking or gambling.
It will, in addition, encourage the initiative and risk-taking on which our free system depends induce more investment, production, and capacity use help provide the 2 million new jobs we need every year and reinforce the American principle of additional reward for additional effort. I do not say that a measure for tax reduction and reform is the only way to achieve these goals.
We commonly suppose it to be a leading feature of our present "capitalist system" that the control of industry rests in the hands of those who supply the capital. Nor, as a general statement, is this untrue. But it conceals the essential point. Strictly speaking, it is risk-taking with which control is associated. The mere lending of money carries with it no title to control.
It will, in addition, encourage the initiative and risk-taking on which our free system depends induce more investment, production, and capacity use help provide the 2 million new jobs we need every year and reinforce the American principle of additional reward for additional effort. I do not say that a measure for tax reduction and reform is the only way to achieve these goals.
Earnings of management, payments for risk-taking and for the special knowledge and advantages associated with it, are ingredients of the gross profits of a business. The chief element that remains is that of interest on capital. Frequently, indeed, it is not the only one.
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