"In political arithmetic, two and two do not always make four.'' Alexander Hamilton quoted this old maxim in the Federalist Papers in his discussion of the need for taxes to support the government being proposed by the Federal Convention of 1787. Hamilton contended that a tax on consumption was adequate for all practical purposes which also had the virtue of being almost self regulating in that citizens reduce their spending, and therefore government revenues, if the tax is too high. Of course, Hamilton never heard of what in recent years has been called "supply-side economics," which is based on the idea that high income tax rates are also self defeating. But his reasoning and President Ronald Reagan’s were exactly the same.
Unfortunately, this political wisdom is disregarded in Sacramento and Washington, D.C., as rapacious governments there not only are raising tax rates in pursuit of ever-elusive revenues but are addicted to taxes on almost every conceivable object. I submit that both these tendencies are evidence of incompetence or knavery or both.
Liberal Democrat politicians (and their Republican enablers like Gov. Arnold Schwarzenegger), when they propose tax increases and new taxes to make up the government’s revenue shortage, are acting on the assumption that these measures will actually produce more revenue. But they ignore the depressing effect which their high tax and spending policies have already had on domestic consumption and especially business enterprise.
The best evidence of this effect is the startling discovery, only a month after legislative leaders and the governor agreed to a hodge podge of spending cuts, tax increases and borrowing to cover the $40 billion shortfall, that they were short an additional $8 billion. Now the voters are being offered a six-part package May 17 that includes a two-year extension of the sales and income tax rate increases.
Until control of the government changes to a new, more fiscally conservative political party, we are not likely to see anything but a series of stopgap measures featuring a lot of posturing by political leaders but no permanent solution to the "revenue problem."
In truth, revenue is not the problem; unrestrained spending is. As long as that is the bad habit of those who make our laws and administer the government, there will never—repeat, never–be enough money to support the government. Not only does raising taxes not work but the existence of so many taxes on so many items is evidence that the government’s appetite for revenue is insatiable.
From time to time friends email me lists of the number and variety of taxes which our governments impose these days. They include taxes on income (individuals and corporations), sales, property, fuel, estates and inheritances, liquor, cigarettes, luxuries, telephones, highway usage and much, much more.
Our governments have gone far beyond constitutional limitations. The federal government was authorized to provide for the common defense and to promote the general welfare, which consisted in maintaining armed forces, regulating trade, collecting taxes and enforcing its own laws. State governments had broader powers, but even those originally did not include providing cradle-to-grave security or even public schools.
California government spends upwards of $100 billion each year, and the federal government spends $3 trillion–with no end in sight in either case. No taxes will ever be enough when there is, in principle, no limit to the number and variety of objects on which that money can be spent.
When Americans trade their labor or supply a product in return for money, they are enterprising. When governments increase taxes, they are greedy. Are you as tired as I am of hearing government spokesmen say that people who make lots of money in the marketplace are greedy but that those who tax us heavily are compassionate?
It is not surprising that improvident or unsuccessful individuals and corporations are encouraged to seek bailouts, for that is what our governments do whenever they commandeer more and more of our money. Too often taxes are not intended to defray the costs of legitimate functions but to bail out governments that can’t control their fiscal appetites.
On Wednesday, all across America, citizens are holding TEA (Taxed Enough Already) parties to protest out-of-control taxing and spending by our state and federal governments. You will probably not learn about this in our major media, but then the apologists for the king of England were not interested in the colonists’ complaints either
Public outrage is building, as it ought to, and we will be fortunate if it overturns the modern Leviathan and restores constitutional government to our country.