YOU CAN’T TAX YOUR WAY BACK TO PROSPERITY

By PETER ROFF

April 15, 2023
Saturday

(SitNews) - It’s tax season again and, with the possible exception of President Joe Biden and a few members of Congress, we’re not happy about it.

Overall, thanks to the 2017 Tax Cuts and Jobs Act, the federal tax bill many of us will pay is down from what it might have been. Biden thinks that’s a problem, even though tax revenues soared as a result of the lower rates. His core economic message continues to be that the wealthiest among us need to pay more even though the IRS data shows they are. After the tax cuts became law, tax payments by the top 1% of income earners rose by 17.3%.

What Biden and the other Democrats won’t admit is that by “more” they don’t mean just more than everybody else. They mean “more” much in the way Karl Marx did when he wrote about the distribution of resources: “From each according to his ability, to each according to his needs.”

For Marx, it was a matter of abundance. He believed the economic system he advanced would produce enough for everyone. We know how that turned out. Biden and his fellow travelers likewise see abundance unequally distributed but call it “income inequality.”

To address it, they want to impose a wealth tax, tax unrealized capital gains, and levy higher taxes on incomes above a certain amount. They’re for just about everything that would transfer more of the assets of the so-called rich to Washington so they could redistribute it – enlightened progressives that they are – to the poor, the needy, and the favored.

Sounds benign, especially if you think you’d be on the receiving end. That’s how class warfare rhetoric is used to buy votes – making people believe the rich do well while the poor do not because the tax rates and the taxes paid by the highest earners are too low.

That’s nonsense. The real problem is the horrific state of the U.S. economy, which has swung back and forth toward recession during Biden’s presidency. Coming out of the lockdowns, the economy should have grown by 5% a quarter or more getting back to where it was before the politicians forced businesses to close during the pandemic.

Plenty of jobs were re-created for a while, but they’re starting to go away. The government, meanwhile, keeps spending. The American Recovery Act pumped trillions into the economy. The Inflation Reduction Act pumped in more. Pretty soon we had so much money chasing too few goods and services that inflation caused prices to rise faster than many people in the United States have ever seen. Those who have hadn’t since Jimmy Carter was president.

In that kind of economy, the rich still get richer. To be blunt, they always manage to ride it out because they’re better able to plan for the tough times. The poor and the working class have to take it as it comes, which means they do worse, and the income gap widens.

When the economy is growing, everyone benefits. The rich get richer, but so does everyone else because they have the opportunity to move up the income scale by finding better-paying jobs or by starting their own businesses. If that sounds simple, it is.

It’s basic economics, just like the fact a growing economy is more likely to produce greater tax revenue at lower rates than could be gleaned from a badly performing economy at higher rates. A bigger pie yields more slices than a smaller one.

People who are struggling may think Biden’s push to have government effectively redistribute the nation’s wealth more equitably sounds good. They don’t realize the numbers don’t add up – even after the IRS gets through hiring new agents and new auditors to uncover what the president and others like to suggest are hundreds of billions in potential tax revenue hidden each year by so-called tax cheats.

The pathway back to a healthy economy doesn’t include a trip down Tax Hike Lane or a stop at the Inn of Enhanced Collection Procedures. Overall spending by the federal government needs to come down.

As a mediating step, reducing the rate by which it increases (the liberals like to call that “cuts in vital services” and few people ever challenge them on that) is the quickest way to bring back the prosperity everyone needs. “A rising tide lifts all boats,” as the late Jack Kemp used to say.