Final answer:
Taxation discourages work and investment through two main arguments: high taxes on gains from private investment can lower investment incentives, and high income taxes can reduce work incentives.
Step-by-step explanation:
The book discusses how taxation can discourage work and investment through two arguments. Firstly, low capital gains taxes incentivize investment and economic growth. When the government imposes high taxes on gains from private investment, it reduces the potential return on investment, which discourages individuals and businesses from investing their capital. On the other hand, when capital gains taxes are low, it encourages investment as investors can expect higher returns on their investments.
The second argument relates to the impact of income taxes on work incentives. According to the supply-side economic theory, lower income taxes increase the incentive for individuals to work harder. Higher taxes on income reduce the potential rewards for work, leading to a decrease in work effort. In this way, taxation can discourage work and reduce overall productivity.