Most of the debate over Bush’s proposed 1.6 trillion dollar tax cut has revolved around the question of who would benefit the most from a reduction in taxes. As was expected, the Democrats have made a big deal of how rich people would benefit the most from a Bush tax cut. The Republicans have correctly countered by pointing out that since rich people pay most of the taxes, it is only natural that they should benefit from tax cuts.
Indeed, it important to keep track of where the tax revenues are coming from, but who pays the taxes are just one side of the equation. Much neglected by the talking heads, is the question of where tax revenues go after they are paid into the treasury. In the eighteenth century, knowing where tax dollars were going was just as important as knowing where they were coming from. If a project paid for by a tax was illegal, then the tax itself could not be legal either. It was important that government justify both the source and the destination of tax dollars. In the modern era of one and two trillion-dollar budgets, it is impossible to trace tax dollars from tax source to tax supported project. We do know, however a lot about where the revenues are being spent in general.
We know that tax dollars support the military operations that bomb innocent civilians in far away lands. Those same tax dollars support federal tax investigators who harass Americans at home and around the globe. They support federal officers who raid the homes of Americans and spy on them by satellite and by email. And, they support the federal prosecutors who meddle in the affairs of every business from Microsoft down to the local dry-cleaners. The army of federal tax-men, lawyers, regulators, and bombers is vast. They are supported by the tax dollars paid by every American, but mostly by the tax dollars of the wealthy. In the end, who pays the price of the tax funds that come from the rich? The wealthy can afford to comply with government regulations and to pay lawyers to defend them from justice department lawsuits and IRS investigations. Middle class Americans and small entrepreneurs, however, simply don’t have the capital to absorb costly regulations and to escape the litigious wrath of abusive bureaucrats. By defending a “soak the rich” policy, average Americans will simply create an ever more powerful and watchful government that few average people have the resources to combat. When government grows in wealth, it grows in power, and opposition to power is meaningless without stemming the life-blood of those government programs and the government agents they support. This is precisely why all Americans who value their own autonomy should support tax cuts regardless of who directly benefits from a smaller tax bill. When the arbitrary power of a distant and arrogant government is brought to heel, all Americans will benefit. As long as there is a sprawling national government to subsidize the ventures of corporate interests on the government dole, the rich will stay rich regardless of their tax bill. All the while, ordinary Americans and true entrepreneurs will groan under the weight of an ever-growing government.
If one wishes to lessen the regulatory burden on Americans, one must look not only at the regulations themselves, but the source of bureaucratic funding: tax revenue. Cutting programs sounds great during a campaign, but the reality is that it rarely happens. It’s just too much political trouble. Bureaucratic agencies dig in their heels, and go all-out defending their programs. Little ends up happening. Government programs don’t need to be eliminated to cease functioning, though. They only need to be de-funded. When the IRS endured budget cuts in the mid-nineties, they had to scale back operations and eliminate the random audit program. Every time a departmental budget is cut, local sovereignty and freedom increases. Every time a regulatory agency can’t afford to hire new personnel, another small business is spared a costly hassle. It’s a simple equation.
So sure, high taxes may take a lot of money from the wealthy, but those high taxes are used to increase the power of big government over all of us, rich and poor alike. When federal marshals raided the Indianapolis Baptist Temple in an unprecedented seizure last month, they were financed by tax dollars paid largely by wealthy taxpayers. The parishioners weren’t wealthy, but they certainly paid indirectly for allowing such massive wealth to fall into the hands of the federal government in the first place.
March 14, 2001
Ryan McMaken lives in Denver, Colorado. He edits the Western Mercury.