Last week’s essay closed on the note that our government (and society in general) has tried to ignore the principle that every action results in a specific consequence. The method by which a government levies taxes upon its citizens is no exception to this rule. So now the question before us in considering our current taxation system based upon income is whether or not its consequences are acceptable and if these consequences are the best results for the maintenance and furtherance of our society and nation.
The motive behind our income tax system is to achieve the Fascist/Marxist/Socialist goal of a redistribution of income so that citizens within the society are more “equal” in the naive utopian view of these political philosophies and those who adhere to them ─ which in our current day are the leftists controlling the Democrat party, the leadership of Congress, and the most fascist of them all, President Barak Hussein Obama. But this matter of why we have the income tax will be the subject of our investigation in a future post. For the moment, the income tax is what we have to deal with; so what are its consequences, and does it produce a positive or negative impact upon our nation? Some of this I touched on in last week’s essay, but beginning with this week’s post I will develop the subject matter in more detail.
There were two giants in the field of economics in the past century and early part of this one who understood how economic control and taxes by a centralized government would ultimately strangle the very breath of freedom and liberty out of the soul of a nation. These two men, F.A. Hayek and Milton Friedman, both Nobel laureates in economics and Presidential Medal of Freedom recipients, will be the source of much of what I share with you in the following paragraphs. When there are two men of this stature who render the same evaluation of the kind of tax system that we currently labor under, it bears listening to and taking notice.
To begin with, both men considered the concept of a progressive graduated taxation on income to be a failure and a fraud. The Fascists (or “Progressives” if you prefer the more benign term) love to trumpet the advantage of this progressive structure of tax rates as a vehicle that makes the rich pay “their fair share” (read, “wealth redistribution” by government coercion). Friedman, in Free to Choose, totally refutes this claim:
“By general consent, the personal income tax is sadly in need of reform. It professes to adjust the tax to ‘ability to pay,’ to tax the rich more heavily and the poor less heavily and to allow for each individual’s special circumstances. It does no such thing….the law is riddled with so many loopholes, so many special privileges, that the high rates are almost pure window dressing” [emphasis added].
He expanded on this notion in another book, Capitalism and Freedom, by pointing out that progressive income tax rates do not fall upon the rich, the “über” wealthy, that the left sets up to be its straw man as the target in its class warfare rhetoric, but rather on the middle class and those entrepreneurs who take the risk to start and build businesses, to expand employment and the economy. He makes the case in that work that the rich do not pay that much in income tax as instead they pay capital gains taxes on an increase in wealth that their basic “stock” of wealth produces, which rate come January 1, 2011 will be one-half of the highest income tax rate. Their amassed wealth remains relatively untouched by these progressively high income tax rates, yet those individuals who are trying to generate and create wealth for themselves, their families, and others ─ they are the ones upon whom these oppressively high tax rates fall because what they generate is not capital gains but income. So this notion of “soaking the rich” is a complete myth and a lie that the leftists use upon an unwitting populace in order to manipulate them and keep themselves in power. To this myth Hayek also weighs in with this comment in his monumental work, The Constitution of Liberty:
“If the belief that the high rates levied on the rich make an indispensable contribution to total revenue is thus illusory, the claim that progression has served mainly to relieve the poorest classes is belied by what happened in the democracies during the greater part of the period since progression was introduced.”
The greatest danger posed by this progressive form of taxation is not necessarily the consequences that I will be discussing in the remainder of this post but, as both Friedman and Hayek point out, there is no logical stopping point to the level at which the government can wrest the fruit of our labors from us. Indeed, at one point in time the highest marginal tax rate was 94% in 1944-45 and then 91% from 1951-63; keep these astronomical rates in mind when I get to some of the consequences of such mind-numbing thievery.
When the income tax was proposed, it was sold to the citizenry as something that would only affect the rich – that the government would make these filthy rich “robber barons” pay to provide for all of the “little people” (now a century later, the rhetoric and justification of the Fascists hasn’t changed one iota), and even then it would only be a small percentage. One of the major political writers and statesmen of fifteenth century Florence, Italy, wrote the following about the nature of progressive taxation which was introduced in Florence when the Medici family came to power:
“It lies in the nature of things that the beginnings are slight, but unless great care is taken, the rates will multiply rapidly and finally will reach a point that no one could have foreseen” (“La decima scalata,” Opere inedite, ca. 1538).
Florence, Italy, 1538 ─ the United States of America, ca. 20th and 21st centuries ─ it simply proves the old saying that “the more things change, the more they remain the same!”
Hayek explained why this is so in his work The Constitution of Liberty:
“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….the argument based upon 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….It is no slur on democracy…that…once it embarks upon such a policy, it is bound to go much further than originally intended….Progression…indicates no halting point for its application, and the ‘good judgment’ of the people on which its defenders are usually driven to rely as the only safeguard is nothing more than the current state of opinion shaped by past policy.”
Clearly, based upon Hayek’s evaluation, this is not the wisest method upon which to base a system of revenue for a government, and as such, is ripe for the following eight very undesirable and destructive consequences of a progressive income tax system.
The most obvious consequence of this kind of system that is rampant throughout is consequence of cheating it produces among the populace. Consider just how many individuals Obama either appointed to high-level positions within his administration or attempted to appoint who were revealed to have either cheated on or avoided paying their income taxes altogether ─ including Timothy Geitner who serves Obama as the Secretary of the Treasury, of which the Internal Revenue Service is a subsidiary! In “Free to Choose”, Friedman quotes Graham Turner, a British tax authority as stating this obvious fact:
“I think almost everybody now feels that the tax system is basically unfair, and everybody who can, tries to find a way round that tax system. Now once there’s a consensus that a tax system is unfair, the country in effect becomes a kind of conspiracy ─ and everybody helps each other to fiddle.”
Elsewhere, in Capitalism and Freedom, he stated that “…so long as the individual income tax is as highly graduated as it is now, there is strong pressure to find devices to evade its impact.” The point of these quotes is the government, by reason of its oppressive, unfair and unjust tax system, invites its citizens to become law breakers as this system descends into a lack of respect for law itself ─ obviously not a healthy attitude for the maintenance and continuance of any civil society. Friedman refers to a case of a couple who were taken to court for starting a business to compete with the U.S. Postal Service in Freedom to Choose. The case went all the way to the Supreme Court where the couple ultimately lost, and in commenting on the wife’s reaction to the verdict he wrote:
“Pat…is expressing a natural human response to the attempt by other people to control her life when she thinks it’s none of their business. The first reaction is resentment; the second is to attempt to get around obstacles by legal means; finally, there comes a decline in respect for law in general. This final consequence is deplorable but inevitable.”
The notion that progressive taxation is a vehicle to determine at what various levels individual citizens are to have their wealth confiscated depends, as the saying goes, on “whose ox is being gored.” Clearly this system creates a divisiveness within a nation and causes an evil that, outside of the realm of taxation, leftists hold as a cornerstone of their philosophy to correct ─ discrimination. To expose this consequence I will return to Hayek’s work I previously referenced:
“…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….
That a majority, merely because it is a majority, should be entitled to apply to a minority a rule which does not apply to itself is an infringement of a principle much more fundamental than democracy itself, a principle on which the justification of democracy rests….
Even if progressive taxation does not name the individuals to be taxed at a higher rate, it discriminates by introducing a distinction which aims at shifting the burden from those who determine the rates onto others….Progression provides no criterion whatever of what is and what is not to be regarded as just.”
As you read that first paragraph of the quote above, did the current debate over the extension of the tax cuts passed in the Bush administration spring to your mind? What logic do we hear spewing forth from President Obama for not extending the lower rates for all individuals? It is, of course, that the rich don’t deserve to have their lower tax rates continued; the government can’t afford to give them back that much of their money! And just where does he draw the line demarking who comprises this wealthy group? Why those wealthy undeserving citizens who make over $250,000 per year! And upon what basis is that the cutoff point? Who knows? As Hayek said, “the pretended principle of justice must become the pretext for pure arbitrariness”!
For example, when different amounts of taxes are taken from two individuals who receive the same gross pay, it is nothing more than a another form of discrimination. Or, in another case, continuing Hayek’s thoughts:
“Not only may services which before taxation receive the same remuneration bring very different rewards; but a man who receives a relatively large payment for a service may in the end be left with less than another who receives a smaller payment. This means that progressive taxation necessarily offends against what is probably the only universally recognized principle of economic justice, that of ‘equal pay for equal work.’”
Yes, indeed, “equal pay for equal work”; how often have we heard that cry from these leftists when it comes to labor issues, yet somehow it becomes a deafening silence when brought into the arena of taxation! In Capitalism and Freedom, Friedman gives an example that brings this concept down to such a simple level that even the most myopic of Obama’s drones should be able to see the light:
“Suppose you and three friends are walking along the street and you happen to spy and retrieve a $20 bill on the pavement. It would be generous of you, of course, if you were to divide it equally with them, or at least blow them to a drink. But suppose you do not. Would the other three be justified in joining forces and compelling you to share the $20 equally with them? I suspect most readers will be tempted to say no. And on further reflection, they may even conclude that the generous course of action is not itself clearly the ‘right’ one. Are we prepared to urge on ourselves or our fellows that any person whose wealth exceeds the average of all persons in the world should immediately dispose of the excess by distributing it equally to all the rest of the world’s inhabitants? We may admire and praise such action when undertaken by a few. But a universal ‘potlatch’ would make a civilized world impossible“ [emphasis added].
What is most striking about this is the closing application and conclusion that Friedman makes of his example, when on September 16, 2010 the following is reported in the news about Obama’s “Science Czar”:
“In a video interview this week, White House Office of Science and Technology Director John P. Holdren told CNSNews.com that he would use the ‘free market economy’ to implement the ‘massive campaign’ he advocated along with Population Bomb author Paul Ehrlich to ‘de-develop the United States.’
‘A massive campaign must be launched to restore a high-quality environment in North America and to de-develop the United States,’ Holdren wrote along with Paul and Anne H. Ehrlich in the ‘recommendations’ concluding their 1973 book Human Ecology: Problems and Solutions.
‘De-development means bringing our economic system (especially patterns of consumption) into line with the realities of ecology and the global resource situation,’ Holdren and the Ehrlichs wrote.
‘Resources must be diverted from frivolous and wasteful uses in overdeveloped countries to filling the genuine needs of underdeveloped countries,’ Holdren and his co-authors wrote. ‘This effort must be largely political, especially with regard to our overexploitation of world resources, but the campaign should be strongly supplemented by legal and boycott action against polluters and others whose activities damage the environment. The need for de-development presents our economists with a major challenge. They must design a stable, low-consumption economy in which there is a much more equitable distribution of wealth than in the present one. Redistribution of wealth both within and among nations is absolutely essential, if a decent life is to be provided for every human being‘”
My fellow Americans, this is the thinking of the man Obama chose to advise him on scientific matters, and if this does not leave you speechless and trembling at the power this man and all the other fascists Obama has surrounded himself with posses, then I have failed miserably to sound the alarm of the ominous threat against our freedom, our liberties, and our very way of life that these who hate the principles upon which our republic was founded have.
And just how will these Fascists accomplish this transition to a one-world styled government with themselves at the helm, having reduced the greatest country to ever cross the stage of world history into a third-world nation by re-distributing its wealth? Until next week when I shall continue our examination of the eight consequences of a progressive income tax system, I leave you with the answer from Hayek that I quoted in last week’s post:
“Whatever may happen in the future, for the present at any rate, progressive taxation is the chief means of redistributing incomes, and without it, the scope of such a policy would be very limited” (The Constitution of Liberty) [emphasis added].
- Epaminondas
