Let’s Talk Taxes
It’s almost that wonderful time of year in America. The period between the holidays and the first signs of spring when we take stock of our contribution to the free world. The time when we sit down with a pile of papers and try to figure out what we owe Uncle Sam this year. We are either taking the dangerous route of doing our own taxes or setting up the documentation to give to a CPA that will charge at least $500 to prepare them for us.
The problem we have with taxes in the U.S. could be called our perverse attitude toward success.
Instead of a simple, fair system for everyone, with something like an across-the-board 15% income tax, what the U.S. does is place a higher rate of federal tax on those who earn higher incomes. This is called progressive taxation.
Human beings, like any living creature, are driven by incentives. If they do something and get rewarded for it – through more money, more friends, or whatever – they will do more of it. It‘s really very simple logic.
Progressive rates of taxation send the signal that the more you produce and succeed, the more you'll get robbed. It's a little stupid to punish success, to punish productive behavior. It ultimately leads to decay.
If a business person produces something everybody wants and he makes $1 billion a year from it, why should he have to pay 50% of his earnings to the government, when someone making $25,000 pays just 15%? All the billion-dollar businessperson did was produce something people wanted, and he is punished with the higher tax rate. It's not like he gets 35% more government in return for his greater contribution. (which he prays he won’t get anyway)
Progressive taxation supporters – let's just call them “idiots” for short – defend their position by saying, "But the rich can afford the tax... So they should pay more."
Yes they can. But that is ignoring the real issue. The real issue is a moral one. It's an issue of treating all people fairly. As long as you're not stealing from others, if you produce a service or product people are willing to pay a lot of money for, you should be rewarded commensurately. If you produce a product or service people are not willing to pay a lot of money for, you should also be rewarded commensurately.
To take more from those who succeed by serving others is a corrosive policy. It's the heart of the reason why the Soviet Union collapsed. People will only put up with extremely perverse incentives for so long. As Margret Thatcher, former Prime Minister of Great Britain said, “Eventually, you run out of other people's money.” We're not at Soviet levels of taking from the productive, but we could get there, and sooner than you might think.
I believe progressive taxation is a policy enacted and encouraged by lazy, jealous, uncreative people wanting to take away from successful people. It's people wanting to take things they have not earned. And when you institutionalize this policy, it corrodes the spirit of a nation. Politicians (especially the brand we have in charge right now) have traditionally used the tax system to gain power. They rob Peter to pay Paul and then ask Paul to vote for them every election cycle. When you do that, you will build a large political base of Pauls and eventually run out of Peters.
That's what we're currently doing in the U.S. I worry that if Barack Obama and the Democrat controlled Congress gets their way, it will get much worse. It's obvious progressive taxation and socialism are some of Obama’s core beliefs.
If he is allowed to go whole hog with his crazy socialist plans, you will truly see Ayn Rand's novel Atlas Shrugged play out in real life. You will see hard working, successful people say, "I'm not willing to pay 60% of what I earn so others can enjoy the fruits of my labor." They will stop working or leave the country.
I deeply love the idea of America... I think the founding of this nation is the greatest thing in the history of mankind. My grandfather and my father were capitalists and provided me with a foundation and a work ethic I take very seriously. But we are so far from the ideas the Founding Fathers believed in – low, fair taxes; small government; no foreign wars of aggression – I will seriously consider leaving if it gets worse, if we turn into a communist or socialist nation. I will not serve as a milk cow for those who refuse to work or produce.
Men like Theodore Roosevelt, Woodrow Wilson, Franklin Delano Roosevelt, Lyndon Johnson, and Barack Obama have trashed the ideas and memory of men like Thomas Jefferson and George Washington. It's really very sad. The progressive mindset that dates back to 1900 has done more to erode the social structure of this nation than anything.
But I always try to find the positive side of things... so I keep the hope that early on the road to American socialism, there will be a rebirth of American ideals and the basic concepts of life, liberty and the pursuit of happiness, and it will once again discredit the belief that you can run a society based on rewarding failure and punishing success.
Life just can't work properly that way. And it has nothing to do with "Democrats" or "Republicans." It's a simple, common-sense notion our nation's founders believed in.
Jim Getten
Capitalist Tools
January, 2010
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