The View From 1776
Friday, May 02, 2008
Higher Taxes Don’t Work
In liberal-progressive-socialist theory, taking your money via taxes and cycling it through Washington, DC, magically makes the economy more efficient. Historical experience doesn’t support that thesis.
To justify their proposals for socializing health care and health insurance, Senators Clinton and Obama proclaim the repeatedly disproved socialist argument that government is more efficient than private enterprise, because private business is driven by greed and overcharges the public to make a profit.
For a counter argument, read this opinion piece from the Washington Times:
?May 1, 2008
By Richard W. Rahn
Have you ever wondered why so many people see higher taxes and more government as the solution to every problem, despite the empirical evidence that more government reduces economic efficiency and growth and diminishes our liberties?
As will be shown, the arguments from the big government advocates are usually based on a combination of economic and historical ignorance, including an inability to think beyond Stage 1, envy, and just plain delusional thinking.
The New York Times editorial page has long been a bastion of this delusional thinking. On April 24, the paper produced one of its classic inane editorials in favor of higher taxes on labor and capital, which contained this gem of a sentence: “Memo to McCain: 401(k) savers get no benefit from a low capital-gains [tax] rate.”
Everyone who has ever taken basic economics should know a lower tax rate on an investment (i.e., the capital-gains tax) will lead to a higher rate of return, and hence the investment will be worth more. Other things being equal, lower capital gains tax rates will lead to higher stock prices, and all who hold stocks will benefit, whether or not they pay a particular tax on that stock. Though this concept is not difficult for most people to understand, it seems beyond the knowledge and reasoning ability of those who write editorials for the New York Times.
Unfortunately, the Times has plenty of global company when it comes to economic ignorance, envy and delusional thinking. We find it among many politicians in almost every government. International organizations, such as the United Nations, and even the Organization for Economic Cooperation and Development and their dependent allies, are filled with those who advocate higher taxes on capital and labor, all in the name of “tax harmonization.”
The following are only some examples of what those who advocate higher taxes on capital and labor either do not understand or willfully choose to ignore: