03 January 2013

The Truth About Taxes


Ross Douthat speaks it:

Alas for liberals, the tax debate isn’t that simple, because it’s taking place in the context of immense projected future deficits and a welfare state that seems unsustainable without substantial increases in revenue. Given these realities, fairness and progressivity are necessarily less important to liberalism over the long run than simple dollar figures, and the American left actually has a long-run incentive to make the federal tax code less progressive, because only a broader base can keep the liberal edifice solvent in the long run. [Emphasis added.]

While it may be quite pleasant to imagine that the tax code can be used to arbitrate fairness across social classes (a bullshit concept if there ever was one), the simple reality is that taxes have only one fundamental purpose:  revenue.  That’s it.

Taxes exist to generate revenue to the government.  Thus, while it may be pleasant to imagine soaking the rich with a 90% income tax rate—in the name of fairness, of course—the reality is that this attempt at soaking the rich will inevitably lead to a decrease in tax revenues for the very simple reason that people simply do not like having large portions of their income taken away from them by jack-booted parasites.  Thus, in the long run, the tax code must conform to fiscal reality instead of nebulous concepts of social fairness.  The liberal vision of social fairness is literally unaffordable, and this must inevitably be reflected in the tax code.

The more rational approach to taxation is exactly what Douthat recommends:  increase the tax base and keep rates lower.  This would effectively mean lowering marginal tax rates on the wealthy and actually imposing real income taxes on the bottom two brackets.  This won’t be fair, per the liberal definition, but it will ensure that the government remains funded.  Of course, once poor moochers have teeth in the game, they may decide that they don’t want to pay the government for overpriced, substandard services.  But then, those who are poor often tend to be short-sighted and foolish, and so it is also conceivable that they will learn nothing from history, and thus condemn themselves to a life of dependency.  But at least they’ll have skin in the game.

2 comments:

  1. No, this is incorrect.

    Sovereigns do not need to tax to raise revenue.

    The function of taxes is to, initially, to establish sovereign power over a geographic area by demanding taxes be paid in the currency dictated by the state. The secondary concern is to use taxes to control social behavior.

    Anyone who claims taxes are about raising revenue simply doesn't understand how monetary systems work. Simply look at the US. Tax bills are passed at the END of the year for the prior year. The money has already been spent. It was created by the government.

    ReplyDelete
  2. "The function of taxes is to, initially, to establish sovereign power over a geographic area by demanding taxes be paid in the currency dictated by the state. The secondary concern is to use taxes to control social behavior."

    You've confused the chicken with the egg. No state can effectively demand that taxes be paid in a specific currency without first having established sovereign power.

    "Anyone who claims taxes are about raising revenue simply doesn't understand how monetary systems work. Simply look at the US. Tax bills are passed at the END of the year for the prior year. The money has already been spent. It was created by the government."

    The final tax rates, credits, and deductions may well be finalized at the end of a fiscal year, but only an ignoramus would assert that this is meaningful since taxes are collected periodically throughout the year, and therefore a good portion of the money that is spent comes directly from tax revenue.

    ReplyDelete