Tuesday, November 04, 2008

The Tyranny of Taxation

Taxes have been in the news a lot during the campaign, as the two presidential candidates argued over which one has the best tax policy for America’s future. Most Americans will have judged the two plans on how each plan affects him or her, which, while being a normal reaction, avoids thinking about the broader perspective about how these philosophies of taxation affect the national economy.

Our system is in general a free market capitalistic system where the wants and needs of society are provided for by the private sector where businesses of all sizes and descriptions produce what people need and want, and provide jobs by which people earn their living.

All of the wealth in the United States is created in the private sector; government does not produce anything. It does not produce jobs, only business produces jobs. Yes, government does pay people to perform certain tasks, but those tasks contribute nothing to the wealth of America. In fact, government survives only by taking the production of the private sector, taking money derived from working and the production of goods and services to fund government actions. Government has nothing with which to fund its operations that it has not taken from the citizens it serves. Every dollar taken by government for its operations is a dollar removed from the private sector.

Government’s role, according to the United States Constitution and the ideals of the Founders, is a limited one with only a few specific responsibilities to be supported by taxes as described in Article 1, Section 8 of the Constitution, which says, in part, “The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States ...”

Most of the problems we see today with our government are due to the “general welfare clause” of Section 8, which has been folded, bent, spindled, mutilated, twisted, stretched and mangled into something that has been used to justify whatever some bunch of politicians and judges want to do. But the true idea of what “general welfare” meant to the Founders can be found by looking at how they interpreted it in the early years after the Constitution was ratified, and that is a far cry from the huge and intrusive government we have today, which makes a mockery of the intentions of the Founders.

The concept of limited government is the primary reason that the Founders didn’t put things like welfare and a Department of Education in the Constitution, but it was also because they were wary of a large, powerful government, and didn’t need or want government to take care of them. These resilient and independent people carved a living out of rugged wilderness. The last thing they needed or wanted was a bunch of bureaucrats telling them how to live. It is to our national shame that rugged individualism has given way to dependence upon government to the degree we have today.

Our Constitution originally did not include an income tax, providing for funding government’s limited activities through other forms of taxation. But as our government has grown beyond its intended limits, taxation has had to grow to support it. In order to raise enough money to support its voracious appetite government confiscates the earnings of everyday Americans through the income tax, which punishes success, and through taxes on businesses, which raise the cost of living for all Americans, and make operating a business more expensive, forcing businesses and jobs overseas.

The income tax was added through the passage of the Sixteeenth Amendment to the Constitution in 1913, and has provided a money-raising mechanism that has enabled politicians to create and fund a long list of inappropriate government programs that were unimagined by the Founders. Funding these expensive programs sucks the life out of the private sector where the solutions to society’s problems are born and live.

Taxes are a necessary mechanism for funding the essential operations of the federal government. The operative phrase here is “essential services.” Our government has grown well beyond providing essential services, and now indulges in numerous activities that are far outside the narrow parameters and intentions of the Constitution, as it was originally conceived and written.

What should be happening, what must happen, is that spending must be sharply reduced, government must be pared down to something resembling what the Founders envisioned and we must begin paying down the national debt.

However, if we believe the polls, Barack Obama will be elected president and the Democrats will gain stronger control over the Congress. The Obama tax plan calls for dramatically more spending, not less, and the Democratic Party is notoriously fond of tax and spend policies, and bears the substantial responsibility for where we are today.

The prospects for reigning in our profligate government in the next few years are dim, indeed. The policies espoused by those likely to win this election will only compound the already fragile economic conditions we are experiencing, risking driving the economy into a deep and long-lasting recession.

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