As Rush Limbaugh so rightly pointed out, “No nation has ever taxed itself into prosperity.”
So many people have accepted the argument that progressive taxation is just, necessary, and fair, so I know this article will offend many. Hopefully it will also make a few people reconsider their acceptance of policy. Many who are vehemently opposed to socialism, collectivism, and all the other trappings of the centralized corporate state believe that any injustice that might result from a free society would and should be mitigated by a policy of progressive taxation. The government through its education arm and the politicians through their media arm have used both hands and done a superb job.
It hasn’t only been dumbing down it has also been indoctrination convincing the patient that it makes sense to cut off both legs to keep them from running amuck. However; as James Madison said, “Knowledge will forever govern ignorance, and a people who mean to be their own governors, must arm themselves with the power knowledge gives. A popular government without popular information or the means of acquiring it, is but a prologue to a farce or a tragedy or perhaps both.”
The easiest thing to do would be to ignore this 800 pound elephant. As the cop on the block says when something has happened and there is most definitely something to see, “Move along there’s nothing to see here.” However as the Historian of the Future that would be irresponsible. For it is in the mass acceptance of this inherently unfair coercive action as fair that the base of democratic irresponsibility forms the basis for the towering structure which is the Progressive State.
For generations this once unconstitutional procedure for wealth distribution has been accepted without question. This was not always the case.
James Madison, the Father of the Constitution, had some interesting things to say about unequal taxation. Such as in his Essay on Property, March 29, 1792, “That is not a just government, nor is property secure under it, where the property which a man has in his personal safety and personal liberty, is violated by arbitrary seizures of one class of citizens for the service of the rest.” And “A just security to property is not afforded by that government, under which unequal taxes oppress one species of property and reward another species: where arbitrary taxes invade the domestic sanctuaries of the rich, and excessive taxes grind the faces of the poor.”
In Europe which is often the source and first scene of the crime when it comes to the Socialist/Utopian schemes foisted on the uninformed and unsuspecting American public, when progressive taxation was first proposed during the French Revolution the classical liberal Anne-Robert-Jacques Turgot, said, “One ought to execute the author and not the project.”
During the socialist led revolutions of 1848 Karl Marx and Friedrich Engels frankly proposed “a heavy progressive or graduated income tax” as one of the measures by which, after the first stage of the revolution, “the proletariat will use its political supremacy to wrest, by degrees, all capital from the bourgeois, to centralize all instruments of production in the hands of the state.” And these measures they described as “means of despotic inroads on the right of property, and on the condition of bourgeois production … measures …which appear economically insufficient and untenable but which, in the course of the movement outstrip themselves, necessitate further inroads upon the old social order and are unavoidable as a means of entirely revolutionizing the mode of production.”
According to John Chamberlain in 1961, “It was Marxian socialism—‘From each according to his abilities, to each according to his needs—which fathered the great attack on proportional tax equity: a ‘heavy graduated income tax’ is a salient feature of the Communist Manifesto of 1848. But the Marxians would have made little headway if non-Marxian economists had not come unwittingly to their support with the theory that ‘it is not equal to treat unequals equally.’ In cases of charity, this is undoubtedly true, but no comprehensive legal system can be reared on a rule which begins by regarding everybody as an exception.”
After these proposals for income redistribution had been dismissed out of hand by economic experts and thinking people as inherently unfair they were smuggled in as supposedly rational arguments based on the need or desire to spread the sacrifice equally. Those who presented this type of argument were careful to stress that they were not interested in income redistribution and that any progression beyond a modest scale should of course be condemned. Opponents tried to point out that once the principle of progression was accepted there was no limit to which the progression could be pushed. These opponents were said to be maliciously distorting the argument and showing a lack of confidence in democratic rule. Even today the watch word for the advocates of progressive taxation is that everyone should pay their fair share. This fair share is never defined.
The countries of Europe led by Prussia fell first to this pernicious scam. In the 1910 and 1913 respectively Great Britain and then the United States bought into the lie that inequality in taxation provides equality in sacrifice. At first the rates were moderate. In Great Britain they started at 8.5 % and In America at 7%. However within 30 years the top rates were 97.5% and 91 %. Within one generation that which its proponents said would never happen and its opponents said was inevitable came to pass.
This radical change in the rates and the progressive nature of the tax changed not only the degree but also the character of what was taking place. This soon became a vehicle for income distribution and nothing more. Social engineering based on the communist dictum “From each according to his ability to each according to his need.” This is all based upon the difference between greed and envy. Greed wants more and will do what is necessary to attain it. Envy wants what someone else has and will do what is necessary to take it.
To solve the problem of greedy people making more than others, envious people created a system to take what the greedy had earned.
One of the foundation stones of the continuing support by the general non envious public for this institutionalized theft is the belief that the high rates levied on the rich make an indispensable contribution to the total revenue of the nation. This is an illusion. If all the assets of the rich were expropriated in their entirety they would not cover the profligate spending of the political class.
In 2011 Steve McCann pointed out, “Using the latest statistics from the IRS, in 2004 there were 2.7 million adults with a net worth above $1.5 million. If the government were to seize all the wealth above the $1.5 million threshold, Washington would realize a one-time windfall of $4.0 Trillion — and no one would again attempt to accumulate wealth. Assuming it was applied to the national debt (unlikely with the Left in charge as they would spend it) the national debt would only be reduced from$14.5 Trillion to $10.0 Trillion.” And that would be a once in a lifetime score. Today the debt stands above 18 trillion.
In 2012 John Stossel noted, “If the IRS grabbed 100 percent of income over $1 million, the take would be just $616 billion. That’s only a third of this year’s deficit. Our national debt would continue to explode.”
According to the non-partisan Tax Foundation’s David Logan, “Even taking every last penny from every individual making more than $10 million per year would only reduce the nation’s deficit by 12 percent and the debt by 2 percent.” In any event according to Parkinson’s Law, “The expenditures of the State always rise to meet potential income.”
According to F. A Hayek:
“The real reason why all the assurances that progression would remain moderate have proved false and why its development has gone far beyond the most pessimistic prognostications of its opponents is that all arguments in support of progression can be used to justify any degree of progression. Its advocates may realize that beyond a certain point the adverse effects on the efficiency of the economic system may become so serious as to make it inexpedient to push it any further. But the argument based on the presumed justice of progression provides for no limitation, as has often been admitted by its supporters, before all incomes above a certain figure are confiscated and those below left untaxed. Unlike proportionality, progression provides no principle which tells us what the relative burden of different persons ought to be. It is no more than a rejection of proportionality in favor of a discrimination against the wealthy without any criterion for limiting the extent of this discrimination.”
J. R. McCulloch expressed the problem with progressive taxation in this way, “The moment you abandon the cardinal principle of exacting from all individuals the same proportion of their income or of their property, you are at sea without rudder or compass, and there is no amount of
injustice and folly you may not commit.”
When will the insanity of unequal = equal stop? It will never end because there is no ideal rate of progression that can be demonstrated by any type of formula. There is never a reason why “a little more than before” should not always be represented as just and reasonable.
Looking to the end result Alexis de Tocqueville told us long ago, “The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.”
Hayek assures us that this is not a general attack upon democratic principles. It is instead the revelation that democracy must be guided by principles or it will founder on the shoals of expediency and the illusion of rationality.
Hayek expressed it well, “It is no slur on democracy, no ignoble distrust of its wisdom, to maintain that, once it embarks upon such a policy, it is bound to go much further than originally intended. This is not to say that “free and representative institutions are a failure” or that it must lead to “a complete distrust in democratic government, but that democracy has yet to learn that, in order to be just, it must be guided in its action by general principles. What is true of individual action is equally true of collective action except that a majority is perhaps even less likely to consider explicitly the long-term significance of its decision and therefore is even more in need of guidance by principles. Where, as in the case of progression, the so-called principle adopted is no more than an open invitation to discrimination and, what is worse, an invitation to the majority to discriminate against a minority, the pretended principle, of justice must become the pretext for pure arbitrariness.”
So what’s the answer? First it should be obvious that the majority should not be able to impose a tax rate that it does not pay. Secondly the maximum rate of taxation should be tied to the % of the GDP devoted to government. If the government is absorbing 25% of the economy no rate higher than 25% should be allowed. If in the case of a war or other national emergency the rate of government cost rises the rate could rise, and when it falls the rate should fall.
Raising tax rates as a way to solve the debt problem just doesn’t work. Looking at the 1950s when the rates were higher than they are today Hayek pointed out, “How small is the contribution of progressive tax rates (particularly of the high punitive rates levied on the largest incomes) to total revenue may be illustrated by a few figures for the United States and for Great Britain. Concerning the former it has been stated (in 1956) that the entire progressive super-structure produces only about 17 per cent of the total revenue derived from the individual income tax’-or about 8.5 per cent of all federal revenue,– and that of this half is taken from taxable income brackets up through $16,000-$18,000, where the tax rate approaches 50 per cent (while] the other half comes from the higher brackets and rates.”
When Congress was debating the 16th Amendment to allow for individual income taxes Massachusetts Rep. Samuel McCall stated, “The character of the argument which had been made leads me to believe that the chief purpose of the tax is not financial, but social. It is not primarily to raise money for the state, but to regulate the citizen and to regenerate the moral nature of man. The individual citizen will be called on to lay bare the inner-most recesses of his soul in affidavits, and with the aid of the Federal inspector, who will supervise his books and papers and business secrets, he may be made to be good, according the notions of virtue at the moment prevailing in Washington.”
To paraphrase Parkinson ’s Law, “Government spending always rises to exceed revenues.”
So what happens when Progressives tax? They tax us into poverty.
Spend us into insolvency.
Dr. Owens’ newest book Colonial American History: The Essential Story is now available at Amazon.com http://www.amazon.com/Colonial-American-History-Essential-Story/dp/1633911349/ref=sr_1_1?ie=UTF8&qid=1420818654&sr=8-1&keywords=colonial+american+history+owens
Dr. Owens teaches History, Political Science, and Religion. He is the Historian of the Future @ http://drrobertowens.com © 2015 Contact Dr. Owens [email protected] Follow Dr. Robert Owens on Facebook or Twitter @ Drrobertowens / Edited by Dr. Rosalie Owens