The truth about taxes

Facebook Friend Michael Smith:

Taxes suck. Some taxation is necessary but in general, taxes suck. They especially suck when they are used in social and economic engineering because, like anything that becomes political, they are subject to manipulation as politicians attempt to curry favor in the class war.

I was part of a discussion on a friend’s post where a person actually thought the income tax was implemented as a tool to “equalize” incomes and that’s why a progressive tax scheme was “popular”.

No. Just no.

Income taxes were initially implemented as temporary tools used to pay off debts for wars – that was before politicians figured out taxation was a gravy train and the 16th Amendment was ratified. Then things got nuts and we got the Current Tax Payment Act of 1943 which authorized withholding – allowing the government to take a percentage of your earnings before you even see them.

The fundamental premise that we should enact tax policy to “reward working people” or to “penalize the idle rich” is flawed and why there will never be agreement on tax “reform”. Of course any across the board tax cuts “benefit the rich” – the top 20% now pay 95% of all income taxes.

The idea that investment income isn’t taxed enough is just a collectivist back door to wealth taxation, as are estate taxes. What right does any entity have to confiscate a percentage of what someone has earned or built? Sure, wealth is concentrated – it always is – but as some have noted, 20% of the tax filers pay 95% of all income taxes. How is that by any definition a fair distribution, especially when each vote counts the same?

Taxes should never have become a tool of social or economic engineering. Taxes are to fund the activities of government – that is it. Cut government to its constitutionally enumerated powers, create a flat percentage so that all pay an equal share based on income and force government to live within that budget.

High tax rates on the “rich” is a feel-good fiction. If rich people are smart – and they are or they hire smart people – they will never pay a top tax rate. As Thomas Sowell pointed out in 2011, progressive tax lovers are completely unburdened by the weight of knowledge of history. We have seen this movie and it premiered in 1921 – the “rich” won’t stop working but their capital will:

>>>”Ninety years ago — in 1921 — federal income tax policies reached an absurdity that many people today seem to want to repeat. Those who believe in high taxes on “the rich” got their way. The tax rate on people in the top income bracket was 73 percent in 1921. On the other hand, the rich also got their way: They didn’t actually pay those taxes.

The number of people with taxable incomes of $300,000 a year and up — equivalent to far more than a million dollars in today’s money — declined from more than a thousand people in 1916 to less than three hundred in 1921. Were the rich all going broke?

It might look that way. More than four-fifths of the total taxable income earned by people making $300,000 a year and up vanished into thin air. So did the tax revenues that the government hoped to collect with high tax rates on the top incomes.

What happened was no mystery to Secretary of the Treasury Andrew Mellon. He pointed out that vast amounts of money that might have been invested in the economy were instead being invested in tax-exempt securities, such as municipal bonds.”<<<

Taxation should be about financing the necessary functions of government, not social engineering.

Raising taxes on millionaires only punishes successful people for being successful. Taxes “punish” whoever has to pay them. Anyone who says with a straight face that government deserves to take 40-50 cents of every dollar in income or confiscate someone’s estate after they die to fund spending without end is an idiot, an ideologue, or a liar…or more likely just economically and historically ignorant.


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