Itinerant commentator John S Bolton suggested the relationship might be meaningless and that it would be better if performed exclusively on developed nations:
This correlation needs to have almost all the low-income countries removed, in order to show significance; but what is wanted to be explained how growth can be predicted, with the full variation of factors whcih occur in the world, being allowed to weigh in.I wish the desired explanation would be revealed!
His contention is that the 'growth' in many destitute countries comes from foreign aid or fluctuations in commodity prices that less developed economies are tied to. But removing the lower income developing countries from the analysis is something I can do (although the poorest country Forbes used is India, and the average national PPP for the index is $22,743). And I'm glad John prodded me into do so.
I cutoff all countries poorer than Russia, judging it to occupy the lower limit of the developed world. With a sample size of only 33 wealthy countries, the inverse correlation jumped to .64 with virtually absolute significance at any confidence level. For something as broad and complicated as global economic growth, that's pretty powerful. Capital of all kinds (investment, human, technological) is becoming easier to shift around the world. Capital-affable places are going to get the most of it.
We should scrap the IRC and adopt a national sales tax. In addition to making the US an incredibly attractive place for investment, it would reduce spending on cheap consumables (which does little for long-term, sustainable economic growth) and encourage saving, and it would make illegal immigration less attractive by forcing migrants to pay based upon consumption rather than the US government's ability to track them and by a credit issued to valid US citizens equal to each person's poverty threshold.
Yes, the black market would be problematic. But it already is. The IRS estimates $290 billion each year in taxes owed are not collected (the 2006 deficit was $372 billion--eliminating the black market would theoretically eliminate more than three-fourths of the current shortfall). Also, collecting for ecommerce presents a challenge.