The Dirty Little Secret About Taxes
Over the summer I have been reading through The Federalist Papers. They are a series of 80 papers written by several of our founding fathers after the Constitutional Convention to persuade the colonists to adopt the Constitution. They provide the philosophical reasoning behind our system of government. So far I have only gotten to number 12. I am not going very fast. This particular paper is about how the Constitutions encourages "commercial prosperity. " It makes it clear that the constitution sought to build a nation that would expand wealth by reducing taxes. After declaring that expanding commercial growth increases wealth and prosperity and raises increases the standard of living of the entire population.
"The degree of a country to pay taxes must always be proportioned in a great degree to the quantity of money in circulation, and to the celerity with which it circulates. Commerce, contributing to both these objects, must of necessity render the payment of taxes easier, and facilitate requisite supplies to the treasury... It is evident from the state of the country, from the habits of the people, from the experience we have had on the point itself. That it is impractical to raise any considerable sums by direct taxation. Tax laws have in vain been multiplied: new methods to enforce the collection have in vain been tried... and the treasuries of the States have remained empty. The popular system of administration coinciding with the real scarcity of money incident to a languid and mutilated state of trade has hitherto defeated every experiment for collections and has at length taught the different legislatures the folly of attempting them... Revenue... must be had at all events. In this country if the principal part be not drawn from commerce it must fall with oppressive weight upon the land." (Alexander HamiltonThe Federalist Paper,Number 12 Historical Documents, copyright 2008-2010 Standard Works LLC, StandardWorksApp.com).
The founders of the Constitution understood that prosperity for all increase as the economy grew. The best way to "spread the wealth around" is to turn entrepreneurs loose to expand capital and create jobs. All the people became more prosperous as the nations industry and economy grows. The founders understood that taxation hinders the growth of commerce. Burdensome taxes cause economic decline which make less revenue available for the government and decrease both prosperity and government revenue. They understood that when an economy was prosperous it grew, more people had jobs, more people paid taxes, more taxes were collected and brought more money into the government coffers. Our constitution was designed to establish a government that taxed only to provide necessary government service, because in so doing the economy would grow, and so would government revenue.
History proves this to be the case. Look at the oppressive government controlled, highly taxed economies. Government revenues shrink. The countries decline. Despotism and tyranny rule. This is why those who argue we should raise taxes on the rich or discontinue the Bush tax cuts to bring more revenue in the government and strengthen the economy show their ignorance of history and economics.
The dirty little secret is the more taxes are assigned inequitably so that the rich pay a higher percentage than the middle class the more you can expect economic decline and government corruption. The rich are the ones who possess the wealth. They are the ones who distribute the wealth in forms of creating capital and marketing good and services. When rich people use money it grows the economy, creates economic prosperity and opportunity. If you give a wealthy man a tax cut and he buys a gulf stream jet, thousands of people participate in the manufacture distribution and sale of the jet. If, however, he merely invest the money in Bonds or T Bills or new business interests that money gets reinvested in the economy through those funding channels. If you give me a middle class person a tax cut I might buy a new computer, and I might feel better, but the impact on the economy will be negligible.
This is why those who saw the recipient of the recent AIG bonuses as villains were convoluted in their reasoning. The bonuses were not ill gotten; they were earned. Business do not give bonuses to people because they like them. They give bonuses to reward exceptional performance. Although some of the recipients were in the corporate entity that was collapsing, they individually exceeded expectation or they would not have been given bonuses. Furthermore, these rich people were not greedily taking the money away from the poor. A person who gets a huge bonuses uses that money in ways that strengthen the economy. This is why Robin Hood economics of taking wealth from the rich through excessive taxation, and using the government to distribute it justly is formula for economic failure.
Now the converse of this argument is equally true. If you give tax relief to the middle class. They will go and buy consumer goods or pay bills or make small investments, but those purchase will not be large enough to increase commerce. They really want do any body any good. And giving tax relief to the middle class does not increase government revenue.
Now I hear the argument liberal propose, but how do you pay for tax cuts? The very question belies the rationality of the liberal argument. You see that argument assumes that all the things the government is currently spending our tax money own should remain funded at their current levels. Of course if you reduce taxes you may have to cut out some thing you are currently spending money on. Who can be against that? Do you think raising taxes will bring down the cost of government. When taxes are raised they will be spent. They will not be used to balance the budget and reduce program.
This is why economic prosperity and releasing money into the economy to grow the economy is the best way to increase revenues to the government and a wealthy population. Our founding father understood this and most of our government leaders did until the age the New Deal, The Great Society and Hope and Change. Rest assure capitalism is the engine for liberty.
In the current debate about tax policy some people argue we ought to tax those can afford it and give relief to those of us who are working hard for a living. The argument that we should put burdensome taxes on the rich to give relief to the poor belies the truth about taxes. When you the tax the middle class you only tax the middle class, when you give tax relief to the middle class, you fail to increase revenue substantially. When you tax the rich, you tax everyone, and when you give tax relief to the rich you give tax relief to everyone, and increase the government revenue. This is why supply-side economics worked when tried by Presidents Kennedy and Reagan. When you relief the rich, their relief, at least in a capitalist economy, gets inevitably spread throughout the economy. When you give the tax cut to a $50,000 per ca pita family. You usually only benefit the family. It is the difference between growing wealth by addition or by multiplication. Our founding fathers understood that our democracy, and our liberty would be healthiest in an environment of small government and lower taxes. That is the dirty little secret about taxes.
"The degree of a country to pay taxes must always be proportioned in a great degree to the quantity of money in circulation, and to the celerity with which it circulates. Commerce, contributing to both these objects, must of necessity render the payment of taxes easier, and facilitate requisite supplies to the treasury... It is evident from the state of the country, from the habits of the people, from the experience we have had on the point itself. That it is impractical to raise any considerable sums by direct taxation. Tax laws have in vain been multiplied: new methods to enforce the collection have in vain been tried... and the treasuries of the States have remained empty. The popular system of administration coinciding with the real scarcity of money incident to a languid and mutilated state of trade has hitherto defeated every experiment for collections and has at length taught the different legislatures the folly of attempting them... Revenue... must be had at all events. In this country if the principal part be not drawn from commerce it must fall with oppressive weight upon the land." (Alexander HamiltonThe Federalist Paper,Number 12 Historical Documents, copyright 2008-2010 Standard Works LLC, StandardWorksApp.com).
The founders of the Constitution understood that prosperity for all increase as the economy grew. The best way to "spread the wealth around" is to turn entrepreneurs loose to expand capital and create jobs. All the people became more prosperous as the nations industry and economy grows. The founders understood that taxation hinders the growth of commerce. Burdensome taxes cause economic decline which make less revenue available for the government and decrease both prosperity and government revenue. They understood that when an economy was prosperous it grew, more people had jobs, more people paid taxes, more taxes were collected and brought more money into the government coffers. Our constitution was designed to establish a government that taxed only to provide necessary government service, because in so doing the economy would grow, and so would government revenue.
History proves this to be the case. Look at the oppressive government controlled, highly taxed economies. Government revenues shrink. The countries decline. Despotism and tyranny rule. This is why those who argue we should raise taxes on the rich or discontinue the Bush tax cuts to bring more revenue in the government and strengthen the economy show their ignorance of history and economics.
The dirty little secret is the more taxes are assigned inequitably so that the rich pay a higher percentage than the middle class the more you can expect economic decline and government corruption. The rich are the ones who possess the wealth. They are the ones who distribute the wealth in forms of creating capital and marketing good and services. When rich people use money it grows the economy, creates economic prosperity and opportunity. If you give a wealthy man a tax cut and he buys a gulf stream jet, thousands of people participate in the manufacture distribution and sale of the jet. If, however, he merely invest the money in Bonds or T Bills or new business interests that money gets reinvested in the economy through those funding channels. If you give me a middle class person a tax cut I might buy a new computer, and I might feel better, but the impact on the economy will be negligible.
This is why those who saw the recipient of the recent AIG bonuses as villains were convoluted in their reasoning. The bonuses were not ill gotten; they were earned. Business do not give bonuses to people because they like them. They give bonuses to reward exceptional performance. Although some of the recipients were in the corporate entity that was collapsing, they individually exceeded expectation or they would not have been given bonuses. Furthermore, these rich people were not greedily taking the money away from the poor. A person who gets a huge bonuses uses that money in ways that strengthen the economy. This is why Robin Hood economics of taking wealth from the rich through excessive taxation, and using the government to distribute it justly is formula for economic failure.
Now the converse of this argument is equally true. If you give tax relief to the middle class. They will go and buy consumer goods or pay bills or make small investments, but those purchase will not be large enough to increase commerce. They really want do any body any good. And giving tax relief to the middle class does not increase government revenue.
Now I hear the argument liberal propose, but how do you pay for tax cuts? The very question belies the rationality of the liberal argument. You see that argument assumes that all the things the government is currently spending our tax money own should remain funded at their current levels. Of course if you reduce taxes you may have to cut out some thing you are currently spending money on. Who can be against that? Do you think raising taxes will bring down the cost of government. When taxes are raised they will be spent. They will not be used to balance the budget and reduce program.
This is why economic prosperity and releasing money into the economy to grow the economy is the best way to increase revenues to the government and a wealthy population. Our founding father understood this and most of our government leaders did until the age the New Deal, The Great Society and Hope and Change. Rest assure capitalism is the engine for liberty.
In the current debate about tax policy some people argue we ought to tax those can afford it and give relief to those of us who are working hard for a living. The argument that we should put burdensome taxes on the rich to give relief to the poor belies the truth about taxes. When you the tax the middle class you only tax the middle class, when you give tax relief to the middle class, you fail to increase revenue substantially. When you tax the rich, you tax everyone, and when you give tax relief to the rich you give tax relief to everyone, and increase the government revenue. This is why supply-side economics worked when tried by Presidents Kennedy and Reagan. When you relief the rich, their relief, at least in a capitalist economy, gets inevitably spread throughout the economy. When you give the tax cut to a $50,000 per ca pita family. You usually only benefit the family. It is the difference between growing wealth by addition or by multiplication. Our founding fathers understood that our democracy, and our liberty would be healthiest in an environment of small government and lower taxes. That is the dirty little secret about taxes.
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