I posted this in April, 2010, and I’m reposting it as my response to Willard Romney’s recent “47%” remark, as well as a response to Barack Obama’s constant wealth-redistribution and “you didn’t build that” diatribes.
April 27, 2010
What would happen if Congress cut the income tax and capital gains tax across the board, and made those cuts permanent? People would have more of their own money to spend, save, invest, start businesses, invest in businesses, and more. For example, just one national corporation could expand and create new jobs, putting thousands of people back to work, better able to provide for their families and afford to live in better homes in better neighborhoods. Tax cuts not only “benefit the rich,” as our leftist commie friends like to fantasize, but they benefit the lower classes and middle classes as well. Tax cuts benefit everyone. Cutting taxes creates prosperity — economic booms — regardless of the propaganda dished out by those who love having the State loot the wealth of others.
So, if cutting taxes increases prosperity, then why not just end the income tax and capital gains tax completely (and property taxes as well!)? As 1996 and 2000 Libertarian presidential candidate Harry Browne has written, in ending the income tax,
There will be a similar increase in take-home pay for everyone you do business with — your customers or your employer — meaning that people will have more money to spend on what you have to offer.
A similar increase in take-home pay will occur throughout America, unleashing the biggest boost in prosperity that America has ever seen. There will be a job for everyone who can work and charity for everyone who can’t.
Your life will be your own again: an end to government snooping into your finances, an end to keeping books for the IRS, an end to fear of an audit, an end to rearranging your financial life to minimize your tax burden.
There are some people out there — and they know who they are — who have been proposing several alternatives to the income tax, such as the value added tax (VAT), the “Fair Tax” (national consumption tax), and other alternatives. LRC recently posted this article (from 1972) by Murray Rothbard, The Value-Added Tax Is Not the Answer, and Rothbard noted that the VAT is a “regressive” tax, hitting lower income Americans certainly more than the higher income ones. Rothbard exposes the VAT for what it really is:
It allows the government to extract many more funds from the public – to bring about higher prices, lower production, and lower incomes – and yet totally escape the blame, which can easily be loaded on business, unions, or the consumer as the particular administration sees fit.
The VAT is, in short, a looming gigantic swindle upon the American public, and it is therefore vitally important that it not pass. For if it does, the encroaching menace of Big Government will get another, and prolonged, lease on life…..
We have seen just how destructive governments are to the lives of those over whom government — the State — has such monopolistic and compulsory power. It is especially the U.S. federal government that has wrecked the lives of so many millions of Americans, and millions of lives overseas. These taxes that are forced on everyone are enablers. Americans must withdraw the means by which the government has been enabled to cause so much destruction, stress and anguish of so many people. Americans are starting to wake up and see how the government has turned them into slaves. As Jacob Hornberger noted a few weeks ago,
Prior to the enactment of the income tax, the relationship between the citizen and the government was one of master and servant. The citizen, who was free to accumulate unlimited amounts of wealth, was sovereign because there was nothing the government could do to interfere with that process. The government was the servant.
The nature of that relationship fundamentally changed in 1913. With the enactment of the income tax, the citizen became the servant and the federal government becoming his master.
Once we have regressive, destructive taxes such as the income and capital gains taxes, we automatically become a socialist society: wealth taken by force from the citizens and redistributed to politicians, bureaucrats and other professional parasites. By its very nature of compulsion and monopoly, government can’t run any kind of service, such as the services government purportedly has been running this past century, including national defense, social security and medicare. As Rothbard noted in his The Myth of Efficient Government Service,
….Since there is no pricing, and therefore no exclusion of submarginal uses, there is no way that government, even if it wanted to, could allocate its services to the most important uses and to the most eager buyers. All buyers, all uses, are artificially kept on the same plane. As a result, the most important uses will be slighted, and the government is faced with insuperable allocation problems, which it cannot solve even to its own satisfaction…..
…Proponents of government enterprise may retort that the government could simply tell its bureau to act as if it were a profit-making enterprise and to establish itself in the same way as a private business. There are two flaws in this theory. First, it is impossible to play enterprise. Enterprise means risking one’s own money in investment. Bureaucratic managers and politicians have no real incentive to develop entrepreneurial skill, to really adjust to consumer demands. They do not risk loss of their money in the enterprise. Secondly, aside from the question of incentives, even the most eager managers could not function as a business. Regardless of the treatment accorded the operation after it is established, the initial launching of the firm is made with government money, and therefore by coercive levy. An arbitrary element has been “built into” the very vitals of the enterprise. Further, any future expenditures may be made out of tax funds, and therefore the decisions of the managers will be subject to the same flaw. The ease of obtaining money will inherently distort the operations of the government enterprise…..
…. As we have seen, a government enterprise competing in an industry can usually drive out private owners, since the government can subsidize itself in many ways and supply itself with unlimited funds when desired. Thus, it has little incentive to be efficient. In cases where it cannot compete even under these conditions, it can arrogate to itself a compulsory monopoly, driving out competitors by force. This was done in the United States in the case of the post office. When the government thus grants itself a monopoly, it may go to the other extreme from free service: it may charge a monopoly price. Charging a monopoly price — identifiably different from a free-market price — distorts resources again and creates an artificial scarcity of the particular good. It also permits an enormously lowered quality of service. A governmental monopoly need not worry that customers may go elsewhere or that inefficiency may mean its demise…..
…. A further reason for governmental inefficiency has been touched on already: that the personnel have no incentive to be efficient. In fact, the skills they will develop will not be the economic skills of production, but political skills — how to fawn on political superiors, how demagogically to attract the electorate, how to wield force most effectively. These skills are very different from the productive ones, and therefore different people will rise to the top in the government from those who succeed in the market….
We know that cutting, or better, eliminating the taxes and other intrusions and restrictions on growth and prosperity, as well as ending those costly, inefficient and destructive government services, would resolve America’s woes and help renew the country’s progress and freedom after a century or more of grief. Unfortunately, the selfish neanderthals and vultures in Congress aren’t willing to let go of their own little fiefdoms and their unearned, undeserved privileges and perks. As Jacob Hornberger wrote in his blog post yesterday,
….There really are some simple solutions to all this. For example, at both the state and federal level drugs could be legalized, which would enable federal, state, and local governments to lay off lots of officials whose jobs revolve around that immoral, idiotic, and destructive war. But needless to say, all too many public officials oppose losing their access to bribes, payoffs, asset forfeitures, and political power that accompany the war on drugs….
…The problem at the federal level is no different. Statists will simply not let go of their favorite welfare-state programs, regulatory programs, and warfare-state programs, even if they are taking our country down….
….It’s the same with respect to the warfare state, which also constitutes a large portion of federal spending. Despite 8 or 9 years of continued occupations of Iraq and Afghanistan, Americans are still not willing to let go of their beloved empire and its imperial adventures….
….Dismantling all the welfare-state programs, the regulatory programs, and the warfare-state programs would resolve America’s fiscal problems immediately. Alas, however, the American people are still not prepared to let go of their socialism, interventionism, and imperialism….
I am hoping for a miracle.