"It profits me but little that a vigilant authority always protects the tranquillity of my pleasures and constantly averts all dangers from my path, without my care or concern, if this same authority is the absolute master of my liberty and my life."

--Alexis de Tocqueville, Democracy in America

Tuesday, October 26, 2010

"Tax Cuts for the Rich" and the Free Lunch

Thomas Sowell -- the great Thomas Sowell -- has a new article on NRO on the liberal canard of "tax cuts for the rich."  The meat is in the historical record he recites:
Between 1921 and 1929, tax rates in the top brackets were cut from 73 percent to 24 percent. These were what the Left likes to call “tax cuts for the rich.”

What happened to federal revenues from income taxes over this same span of time? Income tax revenues rose by more than 30 percent. What happened to the economy? Jobs increased, output rose, the unemployment rate fell, and incomes rose. Because economic activity increased, the government received more income tax revenues. In short, these were tax cuts for the economy, even if the Left likes to call them “tax cuts for the rich.”

 This was not the only time that things like this happened, nor was Andrew Mellon the only one who advocated cutting tax rates in order to increase tax revenues. John Maynard Keynes pointed out in 1933 that lowering the tax rates can increase tax revenues, if the tax rates are so high as to discourage economic activity.

Pres. John F. Kennedy made the same argument in the 1960s — and tax revenues increased after the tax rates were cut during his administration. The same thing happened under Ronald Reagan during the 1980s. And it happened again under George W. Bush, whose tax-rate cuts are scheduled to expire next January.  The rich actually paid more total taxes, and a higher percentage of all taxes, after the Bush tax-rate cuts, because their incomes were rising with the rising economy.

Do the people who keep repeating the catch phrase “tax cuts for the rich” not know this? Or are they depending on your not knowing it?
All of this is exactly right as a matter of economic history, just as you'd expect from Dr. Sowell. 

However, I would tend to quibble with the mode of argument that says that tax cuts for the rich are OK because they help the larger economy, or because the rich through their investments and business ownership generate jobs for others, or because the government actually gets more revenue under the Laffer Curve with lower  marginal tax rates.  That is still an instrumental view of "the rich" as useful.   The "rich" are people, human beings.  They cannot be viewed morally as means to our ends, or as instruments to be used for our purposes.   They have just as much right to the fruits of their labor and investment as anyone else, and the government confiscating it is just as morally suspect at a lower tax rate as it is at a higher tax rate. 

Consider:  I have friends from college who have done very well for themselves.  They would certainly be termed "rich."  I suspect that some of my old chums have millions of dollars a year in income and tens of millions of dollars in net worth, if not more.   Imagine if we go out to lunch to reminisce about old times -- the nights in college when, wandering along Prospect Street, we would stagger in and out of clubs, beer cups in hand, looking for wherever fun could be had.   We sit down to lunch and a restaurant, we eat, we talk, we laugh.   We are equals in all ways.  

Then the check comes.   Would the Regular Guy -- me -- let his rich friend buy lunch for him?  I wouldn't.  Sorry, too much pride.  Just because my friend has worked harder or worked smarter or gotten marginally luckier than I did -- more likely he simply chose to do something that I would not have wanted to do -- that doesn't mean that I am going to debase myself by letting him pay my share.   Not a chance.  Won't happen.

But that is what the liberal regime of progressive taxation does every day in this country.  It says to half of the men in the country -- the 50% or so of the country that doesn't pay any income taxes -- "you don't have to pay for your lunch, buddy."  It's degrading and dehumanizing in both directions.   To the man that pays no income taxes, the state says "you, sir, are a freeloader."   To the rich man who bears a disproportionate share of taxes under the regime of progressive taxation, the state says, "you, sir, are our slave, because the fruits of your labor are at our disposal."  

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