Tax The Rich For What, Again?

Government is necessary for only some essentials restraints. America’s founders designed a republic of freedom constrained only by a few very fundamental moral principles; the protection of life, liberty and property. That meant the maintenance of regularity in interstate commerce and the constraint of grave danger and fraud. It included no license to intervene in the distribution of goods and property.

Well, watching the response to the spectacle around Herman Cain, which has been amplified in the absence of any objective verification, I want to discuss the media and popular misunderstanding of what the job of a chief executive is, and how shallow and petty is the typical treatment of campaign events. And that was further demonstrated in the silliness over Rick Perry having drawn a blank about a federal agency he thought should be eliminated. Sure, you expect some jokes from Jon Stewart and his feeble impersonators, but people are talking about the end of his candidacy and whether he should withdraw from the campaign! And I’m talking about people who are quite capable enough to know better, but evidently have spent too much time as critics of a political stage that amounts to little more than a rhetorical obstacle course.

Look, I think Rick Perry is looking at rather a challenge of surviving the mine-field of a campaign that is measured that way. But if he manages, good for him. And frankly, I think he’d be a better president than all but a few in the last 100 years, though admittedly that assumes that heroic presidents have been few and far between. I also am amazed at how few, again even among people who I think should, understand the jet fuel that Herman Cain’s 9-9-9 plan would be for the American economy. I think it would exceed, maybe even dwarf, the expansion of GDP and the doubling of federal revenue that occurred during Reagan’s presidency, after he dramatically cut tax rates.

The ignorance that popular culture has crop dusted on the American public is depressing. Most people don’t seem to know the difference between tax rates and tax revenue, between profits and luxury, or between liberty and democracy. But I had to deal with another conversation I heard today, again moderated by a conservative who should offer a broader perspective, but didn’t. It’s an old debate that I’ve discussed before, once again being pressed hard today. Polls suggest that most Americans think the rich (read: not them-not me either, by the way) should pay more in taxes, usually referred to in advocacy as “their fair share.” A relative pedestrian plead this case, ignorantly saying that they make 90% of the income in this country. The conservative corrected him with IRS numbers, that actually the top 1% make 20% of the income, but pay 38% of the tax dollars. Undeterred of course, he persisted that given how much money they make, they could afford to pay a little more and still maintain a lavish (my word, not his) lifestyle. He was right about that, but wrong that it would have any positive effect, the rhetoric of Democrats and billionaire Warren Buffett notwithstanding.

The conservative protested that it wasn’t fair or right to presume that government should confiscate near to or a majority of a man’s property, and that’s true. It’s an abomination to liberty and privacy. But even if we erroneously grant that all property is the government’s to take or leave, this serious conservative failed to address the problems that remain regardless. 1) Even if you confiscated ALL of the wealth of the top 1%, it would only scratch the deficit. And of course, you could only do that ONCE. Next year there is nothing. And that points to 2) It’s the money of the wealthier and corporations, that maintains everyone’s jobs, including the government’s which operates on everyone’s taxes. If you take ALL of the wealth and profits, no one has anything next year. And, every dollar you take, reduces employment opportunities. What about all of the extravagance, you ask? Well, let’s get back to the truth that “the rich” (set aside who the heck that includes) would still live well even if they paid a little more (Of course, there will always be a little more. There always has been).

As a manufacturer’s rep., my product was sold through a network of largely exclusive dealerships. The businessmen who owned these dealerships had a stack of responsibilities on their desk, none of which could get all of their attention. As a salesman, my job was to keep our product near the forefront of the dealer’s attention, and not lost in the pile on his desk. Now, a wealthy man has his own priorities about how he will use his profit and income. Let’s use an actual income that was mentioned as one who “should pay a little more in taxes.” Though there are Americans with a much greater income, there are really very few who make $10 million or more.

But if a man earns $10 million, let’s consider what must be near the top of his priorities. High on that least will be keeping his business in the black; making money not losing it. Also, will be the comforts of his family. Some wealthy people are frugal and sometimes frugality is a big reason they got wealthy. But most people earning $10 million+/year are not going to skimp on cut gifts and trips for their family because they pay even a 10% higher tax rate. So, what expense will be lost when that money is gone? New employees will come after the family and balancing the books. But at the very bottom of the pile, what those dollars are taken from is what’s left after maintaining a profit and tending to the family are taken care of. That “extra money is what goes through financial managers or brokers to investments. However much those investments are reduced is how much does not go to improving the productivity of other businesses, which includes hiring new employees. Now add all the dollars taken from all wealthy people and institutions. That’s all money taken out of the economy. That’s how expanding government kills employment.

Adam Smith called the benefit to others of improving yourself, the work of an “invisible hand” in the nature of human relations. But it’s no accident. God created society so that we benefit ourselves by benefitting others. Government is utterly incapable of improving on that divine design. Government can only corrupt and diminish that benefit. And that’s what it constantly does.