More on taxes, later...

I would like to discuss more on taxes from a small-government, Christian perspective. Dan and Michael both present some good arguments for a liberal ideal of taxation, using Christian ethics and empirical arguments.

Right now though, I don't immediately have time, as I have an anniversary weekend coming up for my wife and I (Hooray!!!), and of course, working for the man. After all, those trees in the rainforest won't cut themselves down! Just kidding, Dan and Michael. I don't actually chop trees down. I capture baby seals for their fur. Okay, I don't do that either. Maybe I'll give a prize to whoever can guess what I do*.



* Any guarantees for prizes by Chance are null and void.

On taxes

Before I go into progressive taxation, I want to state that I really do not know the ideal form of taxation. Each one has their own problems. The income tax and sales tax are intrusive, because it requires paperwork on every financial transaction made. The income tax has become very complicated, in which vast amounts of money and time are spent just trying to figure it out. The sales tax, I admit, is somewhat regressive, because it does hit the poor the hardest. Now, that statement may make me sound like a Democrat, but I think there is a difference between choosing a type of tax that does not provide extra burden on the lower classes, and engineering a tax system specifically to provide extra burden on the rich. The property tax has issues because it can still tax people who make little to no income. Some old lady that has vast amounts of land can still be taxed on it, even if she is living only on Social Security. Unless it is a couple decades in the future, then she won't have any Social Security.

So, the income tax is probably the fairest form of taxation, simply because those who make little, pay little, those who make much, pay much. I do believe the income tax should be simplified. Despite being somewhat conservative in many things, I do not believe in social engineering through taxes. I do not believe I should have gotten a tax credit (which I still accepted) for moving to a different state to get a job. It is not the government's role to spur individuals (or corporations) to make economic decisions. I should make a decision on a job based on what is best for me and my family, not because I get some tax credit. Corporations spend countless man power deciding on things such as profit-sharing plans, which are made extremely complicated by tax codes.

I also do not believe I should get a tax credit for getting a more efficient water heater. Shouldn't the fact that I spend less in energy bills be proper motivation? That's like me asking my next door neighbor "Hey Bill, I got a more efficient water heater, now give me some cash because of my good efforts in saving money." Of course, I know there are differing opinions on this, by those who believe government should take an active role in conserving resources, and their opinion is understandable.

The overall point is, Congress keeps saying they want to simplify the tax codes. Then, they pass some new legislation giving exemptions or credits to individuals or corporations for doing certain things. The income tax should be simple. Instead of passing a 25% tax on a certain group with exemptions, simply pass a 20% tax without exemptions, except for charity.

Now, concerning the tax rate. Sometimes, I think the high tax rates are a symptom of big government. At the same time, however, I believe that government does get extra money at times, and simply just finds ways to spend it.

There is a view that tax rates should be no more than 10%. After all, 10% is good enough for God, why not the government? Granted, God does expect and sometimes ask more than what a person gives in tithe to their church, but the idea common in modern day Christianity is that there is a 10% tithe to the church that is expected, and anything beyond that is between them and God. What if the same idea was mirrored with giving in general? Ten percent, at the most, expected in taxes, and anything else that a person wants to give, whether to their church or some other charity, is voluntary.

What about progressive tax rates? That is, tax rates that increase, based on how much income one makes. The common argument is that the rich can afford to pay more in taxes, the poor cannot. Of course, I would just say, "Find the rate that the poor can afford, then have everyone pay it. " I like that idea, but people's ideal governments are bigger than my own.

I had this discussion with Michael the Leveller concerning his post on Economic Justice. For a liberal perspective on taxes, give his blog a visit. His post kind of inspired mine, which is really probably the opposite of his. I guess you could call me Bizarro Michael.

I could probably go to the Cato website and find data showing that progressive taxes don't work, but I feel like that has less meaning if I have an idea, then look up a random site to support my thoughts. I typically like to read an article, and if it makes sense to me, post on that. Anyway, my empirical argument against progressive taxation is this. The rich are typically the most productive concerning the economy. Their investments and personal spending spur job creation. In addition, the rich have more room to give to charitable work, Bill Gates being the example. High tax rates diminish this. Part of the argument concerns the size of government in general. I, being limited government, do not believe that this money is productive in the first place.

From a philosophical standpoint, I do not have much ammunition, other than "it just does not feel right." Or actually, it seems too easy. Taxing the rich more because they can afford it just seems like a solution that is too simple. Schools need more money? The rich have some money to spare! Health care too expensive? Need preschool for the kids? Notice that I use examples that are really good things. I feel that the philosophy behind progressive taxation is that the many benefits so much, with so little cost to the few. To the economically liberal, I feel that it's like "the rich don't need that money anyway", or "it costs so little to them." And I apologize if I am putting words in the liberals' mouths. This is just the devil's advocate viewpoint I come up with when trying to view things from another perspective. Here's the thing though. For one, there are no easy, intuitive solutions. I believe freedom is a easy solution in the sense that it is a simple concept, but it is not always the immediately easy solution. It is not intuitive, but actually counter-intuitive on many occasions. Progressive taxation seems too easy.

Also, the laws of nature typically state that something that benefits a lotwill cost a lot. Nothing is for free. Energy is conserved. However you want to look at it. The thing with progressive taxation is that people believe they have a situation in which so much is gained for so little. The "so much" being the billions of dollars that mean so much to the poor. The "so little" meaning the thousands or millions of dollars of one individual, who has a lot of money anyway. The idea I have here is that something that seems to come so cheaply will end up biting people back. Yeah, Bill Gates has so much money, so he can afford to be taxed millions of dollars. Right? Like I said, nothing is for free. How does that bite people back? I believe in the examples that I gave. Less money given to effective charity, and less job creation.

Another situation with progressive taxation is that it can set up a system of envy. With flat taxation, everyone pours into the pot and get something out. With progressive taxation, it sets up an "us" vs. "them" situation. If something is needed, like a new government program, we do not chip in and all make the sacrifice. We ask others (the rich) to make the sacrifice. Democracy can become a tool for personal gain. Instead of working harder for college money or health insurance, one can simply legislate money from the rich. I am not saying all Democrats are looters, but it sets up a system in which looting becomes possible.

In summary, income tax is probably the way to go, concerning the forms of taxation. However, I believe this tax should be simplified. I am not necessarily advocating one tax bracket for all people, but I do not believe that we should set up a system in which there is such a large discrepancy between the tax brackets. Such a solution may seem easy, but I do not believe there are any easy answers.

Taxes, Taxes, Taxes Pt. 1

Dan Trabune has started visiting the site and has brought up many good questions concerning taxes and what they are used for. He asked this question in response to a previous post

It's a totally unworkable solution, but don't you ever wonder what would happen if our US Budget were written by The People? That is, if our tax system allowed us to say, "I'd like 10% to go to defense, 10% to helping the poor, 20% towards the environment, 5% to foreign aid..." etc.

Pretending that it were somehow workable, what do you reckon the results of that approach would be (besides a big mess)?

I think there are good and bad things to such an approach. The good thing is that it would provide immediate accountability to where our tax dollars go. If you asked any random person how their tax money is distributed, they would probably have no idea, and I do not either. Government accountability of how our money is spent is something that needs to be addressed.

Another issue though, is that I believe our founding fathers wanted it more like the current situation, in which decisions concerning money are one step removed from the people. Whether this is right or wrong, or best for the people is a whole issue within itself. I think Congress was designed to make legislative and budget decisions for the people, instead of the people doing it themselves. This is what makes our nation a republic, as opposed to a direct democracy. A political scientist could probably tell you more about the differences, and why one is better than the other. I believe it has something to do with legislators being less subject to shifting political whims, as opposed to the everyday person.

It would be interesting, however, to see what would happen in such a situation. Would the distribution be more just? Would it still be subject to simply redistributing money to special interests?

I suppose the biggest issue I have with our tax system is the way it redistributes money from one person to another. As I have said before, I have no problem with a basic welfare system. However, when the objective of the welfare system is to simply redistribute money from the rich to the poor for egalitarian purposes, or simply because "the rich can afford it", that I have issues with. I am afraid that a direct system would cause this to happen to an even greater extent.

While democracy is a great form of rule, the greatest I can think of, other than a direct rule by Christ, a democratic form of government is not perfect, especially if it is not constrained. As the saying goes, the minority can still suffer from the tyranny of the majority. That's why we have the Bill of Rights, so that the majority cannot silence speech they disagree with, or jail someone they dislike for no reason at all. I also believe in the enumerated powers doctrine, which says that the Constitution spells out the powers that the government has. A problem with democracy that has so much power over our money is that it can simply transfer money from the minority to the majority. While this is great for when the money is really needed, it could get to the point where democracy is no longer a tool to keep the peace and keep government accountable, it becomes a tool for material gain.

Dan's question could also point to a greater issue: which is better, a more direct rule by the people, or a more representative republic?

Update 3:52 PM MDT: Made some edits to the last couple of sentences for clarity.