Taxing

Taxing is what politicians do. They take from the unproductive as well as the productive proclaiming they are doing the “common good”.  We all concede that  taxing is “common” but most question how “good” it is.

Taxing is an acquired taste. The Founders of America deliberately left out of the Constitution the right of the Federal government to tax either the income or wealth of its citizens. It took an amendment to the Constitution to germinate the disease it has become.  Taxes always leave a bad taste in your mouth.

Today the French tax their people unmercifully. Fifty (50%) per cent of their entire Gross National Product is absorbed by taxes for the government to redistribute as it sees fit. In America, those who would tax us to death have only managed to take about 20% of our national income.

The problem of allowing politicians to tax citizens is that politicians need the support of the people to be elected. As there are more poor people than rich people, politicians in the French-type democracy have voted to paralyze their economy to buy the votes of the common man. 

The French (and much of old Europe.) have enacted 35-hour work weeks, 6-week vacations, retirement packages at 50-years old, enormous pensions, anti-business worker protections, etc.  Workers in the public sector make more than comparable workers in the private sector ( a feat America has duplicated in Washington DC).

The French economic model is like their revolution – mob rule. As the pundits say once the people get wind of their power, they vote themselves into poverty. They destroy by “taxing” the very democracy they were building by selfishly crippling their productive segments by “taxing”.

In America,  it continues to amaze the “tax and spenders” that when taxes are cut that Federal government revenues rise. It happened in the 20’s, 60’s, 80’s and the 00’s. In fact the NYT editorial this AM had the following passage:

In an interview with National Review, Mr. McCain justified his reversal by saying, “Tax cuts, starting with Kennedy, as we all know, increase revenues.” It was the political equivalent of Galileo conceding that the Sun does indeed revolve around the Earth.

The writer is empirically correct, cutting something usually makes less of it.  However, it doesn’t work that way when “taxing” humans is involved.  You see intelligent people have a choice to work hard or hardly work at all. When I started practicing as a CPA with a international accounting firm, the marginal Federal income tax rate was 91% - the intelligent and the rich had little incentive to work for the politicians in those days.

When Kennedy dropped that rate to 70%, Reagan dropped it to 28% and Bush dropped the taxation of dividends and capital gains to 15% government’s tax receipts increased defying the concept that cutting rates reduce tax receipts.  So with humans the receipts “Sun” does revolve around the “tax cut” Earth.  It is a function of self-interest.

Taxing people just takes money that would be otherwise used to start business and create jobs and improve the quality of life on Earth. In this regard the poor and middle-class have only been “trickled on”. They can escape the income tax but can’t avoid the paralyzing effect of payroll taxes – that 15.3% wasted by government promising hope but only delivering a starvation-free stipend in the form of a Social Security check when they retire.

If we replaced the manner in which we finance Social Security and Medicare with personal accounts and take the responsibility to fund those programs from government and let personal accounts grow into millions invested in the American economy so retirees could live affluently, buy the best medical care on the planet and will millions to their kids we could put one “tax” – the payroll tax – in the dustbin of history.

By enacting what I call the Rise Up America plan we could reduce government’s take from 20% of our national income to 10%.  Taking the entitlement industry out of the hands of government can only be a good thing. It should also increase the wealth of the nation 25 times more in the next 40 years than it is now.  Click www.riseupamerica.us  to learn all about it and www.riseupamerica.us/donations.html  to help us fund the effort.