Tax policy

 

Less, in general, is better…but there is a point of diminishing returns.  For instance, obviously you cannot tax at a zero rate because even if economic activity shoots through the roof it still won’t provide any tax income to run the government.  Equally obviously, though, you cannot tax at 100% either, because who would work for nothing? 

 

Much like the abortion dilemma, somewhere in between sits the solution.  It isn’t fixed, of course, but changes with the circumstances of the time, otherwise we’d just say X% and have done with it forever.  (A philosophical stance that seemed obvious to me even as a young boy was the 50% number.  No matter what, it didn’t seem right to me that anyone should take away more than half.)

 

Much of the time you have to estimate what the best number might be, given the situation, sometimes called guessing, and you can’t tell the results until some time afterwards.

 

This was the situation with the much-maligned tax cuts blamed on President Bush, incorrectly described as tax breaks for the rich, including his corporate buddies.

 

The New York Times recently ran an article admitting—admitting!—that tax collections from ‘the rich’ and from corporations were surging ahead, MUCH more was coming into the government coffers than had been expected.

 

Why, the deficit was even shrinking!

 

You can play politics and applaud or blame Bush for what happened, but the truth is that it has happened before under other administrations, including the sainted John F. Kennedy’s (I voted for him for different reasons I still think valid), and no matter who is in office tax cuts are a good thing whenever tax rates get too high.

 

It is in the nature of the brains of politicians to get the idea to equate tax rates with tax receipts.  We have politicians today who think if you need more tax receipts then what you do is raise tax rates.  Simple.  As a result of this simplistic thinking, over the years tax rates tend to rise, not shrink, each increase designed to bring in more money.

 

Eventually what people now like to call the ‘tipping point’ is reached and higher rates bring in fewer receipts, but it’s very hard at this point to find a politician brave enough to call for a tax cut. 

 

Social critics decry this, screaming tax breaks for the rich and the wealthy corporations, but let’s get real, again…who else even pays taxes at all?  The poor do not…you can’t either cut or raise their taxes, nothing happens either way when you do.

 

In the end it is simple: what counts are receipts, the ka-ching of the cash register.  If reducing rates on the rich and corporations produced fewer ka-chings, it’s a bad idea.  If it produces more, it’s a good idea.

 

I see America failing when it finally creates a tax policy where only a small handful of people pay virtually all of the taxes.  And we’re on the way to that point.

 

The mathematical science of calculus teaches that it is sometimes instructive when trying to discern what is happening in the middle by looking at what it happening at the limits.  Obviously, then, the limiting tax case on the upper end is when one person pays all of the nation’s taxes.  Bill Gates, maybe.  Until he moves to Switzerland.  Or dies.

 

Surely anyone can see the danger inherent in this situation, so why isn’t it obvious even while the taxpaying class is shrinking towards that limit, even if not yet there?

 

Our politicians today are looking for tax breaks for Middle Americans.  Middle Americans are precisely the ones who should NOT be excused from taxes, simply because they produce the bulk of the voters who will be electing, and controlling, their politicians.  Once they are removed then the democratic system collapses from inertia.  Or do I mean apathy?

 

We need to broaden the tax base, not shrink it.  I’m of the opinion that if you don’t pay any income taxes at all then probably you shouldn’t even be allowed to vote.  Yes, I’m a big fan of Heinlein and his book (not the movie) Starship Troopers.