Some Good Perspective On Taxes

It's a good bet that most Americans will see higher taxes in the next four years.  The sad part is that many Americans will accept this, and even want it to happen.  Why?  Because they want to stick it to the rich, and that's what Obama-Reid-Pelosi will say they're doing.

If you're a reader of this blog, you've seen many of the reasons I've put forward about why raising taxes on anyone is bad.  To recap briefly, here are a couple of the biggest ones.  If people feel that higher taxation on the wealthy is okay because that tax money is used to benefit others with fewer resources, I would ask them to point out a single thing -- anything at all -- that government does better than the private sector.  Assuming there isn't one (and I have yet to see one), I would point out that if people want to benefit society, that's what churches and charities are for.  Private organizations like the Red Cross and thousands of others are far, far more capable of getting resources and aid into the hands of real people who need it; who honestly believes government can do it better?  Another big reason is that taxation is a guaranteed disincentive.  By taxing something, there is always less of that thing.  So, by taxing the wealthy and productive in this country, you're going to get less wealth generation and productivity.  It's basic economics.  Another reason is common sense - don't we all strive to become wealthier to better provide for ourselves and our families?  Yes, of course we do.  So, why would we endorse higher taxes on the very same income group we hope to join?  By doing so, we're just making it harder on ourselves.

Thomas Sowell illustrates this last point well in the New York Post:

AN old Russian fable tells of two poor peasants - Boris, who had a goat, and Ivan, who didn't. One day, Ivan came upon a strange-looking lamp; when he rubbed it, a genie appeared. She told him that she could grant him just one wish, but it could be anything he wanted.

Ivan said, "I want Boris' goat to die."

This fable may tell us something painful about many Americans today, when so many people are preoccupied with the pay of corporate CEOs. It isn't that the CEOs' pay affects them so much. If every oil-company executive in America agreed to work for nothing, that wouldn't be enough to lower the price of a gallon of gasoline by a dime.

But too many people are like Ivan, who wanted Boris' goat to die.

It isn't the general public that singles out CEOs for so much attention. Politicians and the media have focused on business leaders, and the public has been led along, like sheep.

The logic is simple: Demonize those whose place or power you plan to usurp.

Politicians who want the power to micro-manage business and the economy know that demonizing those who run businesses is the opening salvo in the battle to take over their roles.

Those who want more power know that giving the people somebody to hate and fear is the key.

This isn't just a question of which elites win out in a tug of war in America. It is the people at large who have the most at stake.

We have just seen one of the biggest demonstrations of what happens in an economy when politicians tell businesses what decisions to make.

For years, using the powers of the Community Reinvestment Act and other regulatory powers, along with threats of legal action, politicians have pressured banks and other lending institutions into lending to people they would not lend to otherwise.

Yet, when all this blows up in our faces and the economy turns down, what is the answer? To have more economic decisions made by politicians, because they choose to say that "deregulation" is the cause of our problems.

No matter what happens, for politicians it is "heads I win and tails you lose." If we keep listening to them and their media allies, we are all going to keep losing big. Keeping our attention focused on CEO pay - Boris' goat - is all part of this game. We are all goats if we fall for it.

So, this illustration of the goat - how does killing the other guy's goat help us?  Similarly, how does limiting CEO pay help us?  To be clear, I'm not talking about the golden parachutes that CEOs of failing companies often get; in my opinion, CEOs who have tanked a company should be kicked out the door with nothing.  No, I'm talking about the simple limiting of CEO pay that Congress is now contemplating.  What does it accomplish?  Who does it benefit?  If a CEO grows a company by 25% each year for ten years, aren't they worth some major coin?  Absolutely!  That company has now provided many jobs, insurance, revenue, and many other community benefits because of that CEO's leadership, so I have zero problem with that CEO being handsomely rewarded.  Here's another thought, too: by cutting a CEO's pay to some arbitrarily tiny number, what happens to that rich CEO's charitable donations?  Maybe that CEO earns $5 million a year and gives $500,000 a year to the United Way, so what happens if you cut that CEO's salary to $250,000 a year?  This could be a major unintended consequence if this CEO pay thing actually happens.

The key to sound fiscal policy is an understanding of (and reliance upon) economics, and a huge component of that is taxation.  More taxation is always a drag, less taxation is always an accelerator.  The problem with liberals and their tax policies is that they see taxation as an issue of 'fairness' rather than economics, so they believe it's 'fair' to tax the rich and give it to the poor.  Unfortunately, that's really bad economic policy, because we've never in the history of mankind -- please feel free to correct me if you can -- seen a net benefit to a population by hammering the top end specifically for the benefit of the bottom end.  Leveling the playing field always ends up dragging down the top without bringing up the bottom.  On the other hand, opening up opportunities for everyone always benefits everyone - that old saying about a rising tide lifting all boats is true in economics.  Increasing taxes on the rich will hurt the rich without helping the poor, but lowering taxes on everyone will benefit everyone.

It's not rocket science, but it's beyond the grasp (or acceptance) of liberals.  Common sense does not apply when it comes to 'fairness' or political correctness.

There's my two cents.