RALEIGH – “The power to tax, wrote Chief Justice John Marshall in the famous McCullough v. Maryland decision, “involves the power to destroy.” Because taxes are inherently coercive, and are imposed by political bodies where demagoguery and special-interest pleading are often influential, the power of taxation inherently poses a danger to our liberty and prosperity.
Unless you are a confirmed anarchist (and thus immune to logical or empirical argument, in my opinion), you can recognize the dangers inherent in taxation while also recognizing its potential to advance our liberty and prosperity by financing valuable government services such as courts of law and true public goods.
In other words, to be an advocate of limited, constitutional government in the Lockean tradition is to advocate taxation. The vast majority of those who protest against big government would be satisfied to pay taxes, levied fairly and uniformly, to finance a smaller government. They protest current federal, state, and local governments that impose unfair and excessive taxation to fund government spending that is are ineffective, inefficient, or unconstitutional.
So when fiscal liberals accuse fiscal conservatives of opposing tax hikes because we hate government or the people who work in government, they are being either lazy or dishonest or both. There is no mystery about the objectives of the conservative movement, in North Carolina or elsewhere. We seek to reduce the size, scope, and cost of government because we think it will make our society more free, more fair, and more prosperous.
It will enhance our freedom because high taxes reduce our ability to make our own decisions. The resources stripped from us, to be spent by government, are resources we’d prefer to spend pursuing our own ends – be they basic necessities, investments for a future return, or voluntary gifts to charities and causes of our choice.
Regarding fairness, we do not see the perpetuation or expansion of our current morass of tax laws as advancing the goal of equality under the law.
There are good reasons to believe that those who enjoy a higher standard of living in a society ought to pay higher taxes, as long as government is limited to those core, constitutional services that truly benefit everyone.
But that’s an argument for a proportional system of taxation – if your standard of living is about twice as high as mine, you ought to be paying about twice as much in taxes to the government. It’s not an argument for a “progressive” or punitive system of taxation that forces people to surrender higher percentages of their income or wealth to the government as their standard of living rises. Redistributionist programs are contrary to the values and interests of most Americans.
As a practical matter, I would add, there simply aren’t enough rich people with enough “surplus income” to pilfer to balance the government’s books, as several writers have recently pointed out. Most “rich” people aren’t trust-fund babes in the woods. They are successful business owners, investors, or professionals who invested a significant amount of time and money in their youth for the promise of higher returns in their middle and old age. When government tries to confiscate their return on investment, they respond rationally. They shield it with shelters and careful tax planning.
They aren’t easy marks, nor should they be. That’s why over the past several decades, changes in marginal tax rates haven’t dramatically changed the percentage of gross domestic product collected in tax revenue. The best way to increase tax collections over time is to increase economic growth, a task best accomplished by lower and flatter tax systems, not punitive ones.
In other words, economic prosperity and fiscal balance aren’t contradictory goals. They are complementary goals.
Liberals say they agree with this proposition, but they see the matter differently. In their minds, raising taxes to increase government spending will itself make the economy stronger by increasing the provision of valuable government services.
They are incorrect. We are already well past government’s point of diminishing returns. Throwing additional tax dollars into inefficient government monopolies and cartels is not an investment strategy. It is a strategy of progressive impoverishment.
Hood is president of the John Locke Foundation.