Two decades ago I wrote an article entitled “What’s inside a number?” It was about the challenge of a growing rapidly elephant population in northern Botswana which was confined to a sizable but finite area. At that time the wildlife managers, scientists and conservationists close to the problem argued incessantly about exactly how many elephants there have been. Was it 80,000, or 110,000 or 92,421?

It was a peculiar focus given that the real challenge wasn’t how many elephants there were, as everyone agreed that there were many, but what, contrary, ended up being to be achieved about the consequences of every year there being increasingly more hungry herbivores how big a truck. Essentially the issue was the effects of population growth.

Today around australia there’s a simmering debate about numbers. This time around to expect the growing population of humans and just how many there must be living on the island continent.

Would 26 million Australians or 36 million be best? Perhaps it ought to be some number in between. And at what rate should Australia get to regardless of the final number ought to be, considering the fact that as at June 2011 there are 22.Six million residents?

Well known Australian entrepreneur Dick Smith argues for any stable 26 million. He proposes that the extra 3 million approximately ought to be achieved by limiting annual immigration to 75,000 per year (in the current 185,000) and letting the number climb steadily. Typically for a modern economy birth rates have fallen so that population is stable without immigration. The primary logic behind Smith’s 26 million is that this is the quantity of humans that the environment can handle.

Financial analyst Bernard Salt believes 33 million by 2050 is essential. Any less and Australia will run out of workers. His conclusion comes from the demographic numbers that see retiring Seniors leaving the workforce and, because they find it difficult to pay for their retirement, insufficient new workers leaving school to exchange them. Annual immigration of 180,000 over the next 15 years would be essential to prevent serious labor shortages along with a stalling from the economy.

These two contrasting views capture the essence of the debate which has also begun to spread towards the political sphere. Should the optimal population size count on available resources (Smith’s view) or by the have to keep up with the financial system (Salt’s argument)?

Before we attempt to unpick this conundrum, some context is required.

The worldwide population of 6.7 billion will grow to a minimum of 9 billion over the coming decades. It may be more, 12 billion perhaps, but it will definitely grow before it contracts back to perhaps 5 billion post-2100.

A rise in population over the next decades is as inevitable as death and taxes, just like development in amounts of a protected elephant population in northern Botswana would be a biological certainty. There are already a lot of youngsters in big families who will themselves reproduce. We have to see out the demographic transition because it is a certainty.

Australia is large enough and rich enough to deal with its share of the 50% rise in human numbers and so reach the 30 or so million Salt says is important.

It’s also able to feeding far more. There is land, technology, a reliable economy and the people smarts to overcome challenges of irrigation, nutrients and old soils to develop much more food that the resident population would require. Later on, as now, agriculture will be an important export industry for however many Australians live on the continent.

As a retail entrepreneur, Smith is aware of the importance of growth. He would be also familiar with the political economy mantra of ‘more workers, more consumer demand, more tax’.

Consequently his suggested shift from the economic model of growth at any given time when the local population ages, is a huge call. Although he would probably reason that even within stable population, individuals will expect standards of living to increase and that this is enough to keep the paradigm of economic growth.

Salt’s 33 million will put enormous pressure on housing, transport and utilities. The cities will sprawl and the coastlines where people want to live will become more crowded. However, all of the building and development, plus the goods and services to maintain the folks happy will, obviously, fuel the economy. An additional Tens of millions of people will purchase a large amount of refrigerators, toasters and flat-screen TVs.

Economic growth happens if the number were 43 million as well as 63 million. Indeed there are some politicians who see such large numbers as a laudable goal. But, just like the elephants, it is not the number that means something, it’s the decisions on what should be done when they increase.

The ability to tax is the capacity to destroy. Even Pharaoh, 3000 years back, was conscious of this wise saying. Unfortunately, it appears to have been forgotten by some of the more influential modern economists. But, what’s destroyed? What’s destroyed are economic incentives for business formation and growth.

With Congress and also the White House talking sporadically in regards to a stimulus bundle to spur economic growth, you should distinguish what tax policies works and what’s sheer political puff and business as always (increase spending) disguised as an economic stimulus bundle. With this in mind, in ways this article is a short primer on comprehending the growth facets of tax policy.

Taxes, broadly speaking, can be categorized into two types of headings–taxes on capital and taxes on labor. Because this article is going to be coping with taxes on income, capital taxation would be identified using the corporate tax. Similarly, a tax on labor is the same as the private income tax schedule. Now the sixty-four thousand-dollar question. Which is more important in helping to stimulate economic and business growth?

As President Lincoln stated in among early speeches as president, the tax on labor is more importance than the tax on capital. Why? Economic growth is driven by net new business formation. Or, to place it another way–the economy is driven briskly when we all want to become a business proprietor. When entrepreneurs (risk takers) start an enterprise, their business tax is initially reported about the personal tax schedule. As the business grows, owners may incorporate and file using the corporate tax rate. (As a reminder, when individuals start businesses, they hire people. Businesses with under 100 employees are responsible for 75% of the net job growth. Net start up business formation ought to be the goal of tax policy made to stimulate economic growth.)

Since the tax on labor is much more important than the tax on capital, the top marginal income tax rate on labor ought to be under the top corporate rate. Presently, the top corporate tax minute rates are 35%, as the top tax rate on labor is about 35%. If policy makers are serious about providing incentives for stimulating vibrant business growth, the top personal tax rate should be reduced to under 35%. To provide a real fillip to economic growth, the top personal income tax rate should be significantly below 35%. It had been on purpose that President Regan, in the second term, reduced the top individual rate to 28%. It was a genuine top rate that didn’t include any phaseout of deductions or some of that nonsense which has the perverse effect of increasing the marginal rate.

Economic policy makers, whether they are in an administrative or legislative position, like to go ahead and take path of least resistance–similar to electrons in a circuit. Their path of least potential to deal with stimulate economic growth is to increase spending. It doesn’t work! (If it did, many of the major European economies could be booming right now. Instead they have been in the doghouse for the past 10 years.) The money for his or her increased expenses are just sucked-out from the private sector. The web effect is zero.

Providing financial incentives for individuals to take business risks by significant and immediate reductions within the top individual marginal tax minute rates are the best way to promote sustained and vibrant economic growth.