If you take a $1 bill and double it each year,
after 20 years, it will compound to a total sum of $1 million. But if
you take the same $1 bill, double it each year and then subtract 35
percent in taxes, after 20 years it will have generated only about
$24,000. — Malcolm Forbes
The raging national debate today is between
raising and cutting taxes — more money in the hands of government, or
more left in the hands of those who earn it. A few billionaires say we
should raise income taxes on the rich. Of course they say it.
Progressive taxation is not a tax on the rich but a tax on becoming
rich. Income and wealth aren’t the same. Take 100 percent of Bill
Gates’ income, and with $56 billion he’d still be the world’s next
wealthiest man. Malcolm Forbes has explained how progressive taxation
makes it far more difficult for anyone to compete with the already
rich.
Spend or cut? Farmers save a portion of their
seeds each year to plant new crops. Today’s insatiable spenders want
to eat all the seeds today. They look at a “Bill Gates” and say he
doesn’t need $56 billion — tax him. The tax cutters say let the
farmers keep their seeds, let Gates keep his seeds, his savings and
his capital, which will provide more prosperity for everyone. Gates
may be a million times richer than the average person, but he does not
have a million times more happiness nor a million times more cars or a
million homes. After personally consuming a tiny bit of what he’s
earned, he invests the remainder in future production for consumers,
or lends to others to invest.
Would any of us be better off if Henry Ford,
Thomas Edison, the Wright Brothers or Alexander Graham Bell had been
taxed 35 percent or more and thereby prevented from building their
empires and providing us the indispensable products we rely upon? No
one is poor because they got rich. Ford Motor Company would not exist
if Henry Ford’s profits had been taxed at today’s rates.
If the government would have anticipated the new
technologies of Google and Facebook and promulgated the inevitable new
regulations, would they have grown to the public serving behemoths
they are today? Progressive taxation and progressive regulations will
undoubtedly slow them down and, more importantly, any upstart
competitors. So it’s no wonder many businessmen advocate more
regulations, higher taxes and higher minimum wages that reduce
competition — once they’re on top. Big business is not and never has
been a big supporter of the free enterprise profit and loss system.
Big business prefers profits be privatized and losses socialized —
meaning government, aka taxpayers, covers losses. (Think TARP,
automakers, banks, insurers.)
If millionaires are prevented from becoming
richer, prevented from supplying the public with the many ingenious
devices that made them rich, average Americans would be poorer without
phones, BlackBerrys, computers, handheld calculators, iPads, GPSs,
HDTVs, contact lenses, oral contraceptives, artificial hearts. When
their ability to invest in new and better products, once only
affordable by the rich, when that ability is cut off we cut off our
nose to spite our face. Inequality of income is the energizer for the
many things we depend on every day. Where ever there’s less inequality
of income, the majority of people have a lower standard of living.
The free market is an economic democracy in which
every dollar spent in effect is a vote every day, versus every four
years for a president. Compare the things in your home provided by
government to the things provided by the free market. Government,
without a doubt, is absolutely essential for maintaining and defending
a free society, but only when adhering to the Constitution. Americans
have a natural avarice for freedom. Freedom in political terms means
“freedom from government” through the Rule of Law.
One thing tax advocates never explain is why
money taxed and spent by politicians magically provides more economic
growth than spent or invested by people who earn it. Accumulated
private wealth nearly always depends on how well someone satisfies not
voters, but consumers. Mere mortals working in government always do,
always have, always will spend other people’s money differently. So
why is it better to build “Bridges to Nowhere” to create or save jobs?
Many people believe something has gone
fundamentally wrong, that our politicians are out of touch, that our
children and grandchildren will be economically worse off than we are.
To understand how the economy really works, how many members of
Congress, city councils and supervisors have ever read one word of
“The Road to Serfdom,” “The Fatal Conceit,” “The Constitution of
Liberty” (why I’m not a conservative pg. 397) by Nobel laureate F.A.
Hayek? Or “Human Action” by mentor Ludwig von Mises, or one word from
that whole race of fierce Mont Pelerin free market advocates? Who
today reads “This Time is Different” by Carmen M. Reinhart and Kenneth
S. Rogoff? In 66 countries it’s never been different. Could anything
be worse than today’s “gridlock” on the national debt, or as the
founders would say, checks and balances? Thank God for gridlock!
When the economy turns around, it won’t be led by
the government. It can only be led by a less hampered free market —
fewer regulations, lower taxes. The Federal Register, which lists
government regulations, reached an all-time high of 78,090 pages under
President Bush. Some need to be suspended. Taxes have already been
lowered by previous administrations for almost half the population
that pays nothing. The IRS reported that 47 percent of those filing
tax returns in 2009 paid no “income taxes.” Now it’s time to lower
taxes for the other half to grow jobs and expand the economy.
Contrary to what politicians tell us, things have
to be nurtured and produced before they can be consumed. Our
government can give nothing it doesn’t first take from others. If
growth and prosperity could be created by more government regulations,
then Cuba and North Korea would lead the world, and the Soviet Union
never would have collapsed. If real wealth could be produced by
greater government spending, then Zimbabwe, where every citizen’s a
billionaire, would be the richest country in the world.
Sen. Edward Kennedy gave us an insightful
observation: “All spending cuts are someone’s income.” He could have
easily said all spending cuts are someone’s votes for one political
party or the other. Think about the enormous implications of Kennedy’s
statement — how jobs and wealth are created, and why we are in danger
of cutting off our nose to spite our face.
(See 867A.D. When nuns of York cut off their noses to uglify
themselves to avoid being raped by Vikings)
