A Taxing Mentality

Tensions have been mounting as the White House and congressional leaders have failed to agree on a package to resolve the impending debt-limit crisis.  Republican leaders, including House Speaker John Boehner, House Majority Leader Eric Cantor, Senate Minority Leader Mitch McConnell and Senate Minority Whip Jon Kyl, have all resolutely stood firm in opposing any tax increases as part of a deal to raise the debt-limit.

The GOP leadership is absolutely correct in their obstinacy.  While ultimately some short-run tax increases may be necessary to pay-off the monumental heap of debt this country has imprudently managed to accumulate, the Democrats seemingly do not understand the need to spend less than the federal government takes in.  Until the Democrats show an understanding of what taxes are for - namely to pay for the essential services required by this country - no tax increases should be considered.

Mona Charen highlights the backwards thinking of the left in an editorial at NRO.

It is becoming a verbal tic — the tendency on the part of the president to tell wealthy Americans (“people like me,” he’s always careful to add) that they have made more than enough money and will have to cough up more of it for the government. Speaking for himself on July 11, the president offered that he had “hundreds of thousands of dollars that I don’t need.” 

The president is of course welcome to donate as much of his extra money as he likes to the federal treasury. He knows Timothy Geithner personally and can probably get a guarantee that his check will be cashed without delay. And since the president is so ready to impute unpleasant motives (like greed) to those who oppose tax increases, perhaps we should impute some sort of moral failing to him for not having thus far contributed his spare change to the government.

The government should never be in a position to determine who has "enough" and thus claim a moral right to take "excess" from an individual.  The government's place is to provide a set of essential services - military, police force, infrastructure, and arguably some minimal safety net (to minimize social disruption).  The need for taxes should be based not on some arbitrary definition of "enough" but on the predetermined needs of the state to properly function.

The Democrats' reliance on the notions that the government can take because people have to much and that the government should provide because people want, shows a flagrant disregard for the purpose of government and taxes.  Tax reform may be necessary (loopholes should be closed), but it cannot succeed (and shouldn't be part of a "grand bargain") until this country's approach to spending and taxes is reevaluated.

Class Warfare and the Social Yard-Stick

Class warfare is becoming a full-blown storm on Capitol Hill. It is not really anything new – a time-tested strategy frequently relied upon by the left, but also used by the right. President Obama’s latest deployment was during his announcement of the bipartisan tax deal with Republicans.

Presumably, such a cross-aisle deal is a time to rejoice at actually finding middle ground in the exceedingly divisive Congress. Instead, the “class card” was thrown about. Obama likened the deal to one made with hostage-takers [Can a deal really be enforceable if made under duress?!]. He stated, “I’ve said before that I felt that the middle-class tax cuts were being held hostage to the high-end tax cuts. I think it’s tempting not to negotiate with hostage-takers, unless the hostage gets harmed.”

Now, the merits of Republican tactics aside, the interesting issue is the continued desire of American politicians, particularly on the left, to sow the seeds of class warfare. The storyline is familiar – greedy fat cat CEOs, those over $250k not “paying their fair share,” and “tax-cuts for the rich.” Republicans feed right into this game, defending the economics of high salaries and bonuses (needed to incentivize performance), arguing for low tax rates (high rates stifle economic growth), claiming that some “rich” just really are not all that rich, and pointing to all the good that some wealthy do for the community.

All of this is probably true and these arguments need to be made. However, they miss the fundamental point and allow the political game to be dictated on far-left terms. The left loves class warfare. It plays into a multitude of arguments defending wealth redistribution and increased government involvement in the lives of private citizens. But it rests on a fundamental misunderstanding of what income’s purpose is.

The left looks at income as a sort of social yard-stick, a tool to measure one’s value to society. By this logic the more one makes, the more good they should bring. However the argument goes, there is quite a bit of injustice in the system! Greedy CEOs do not help the country and yet they get rich, while struggling laborers barely make ends meet! The natural solution? Take from those who undeservingly make a lot of money and give to those who deserve it, but do not get it.

Implicit in this argument are at least two assumptions. The first is the particular standard regarding who deserves what. The left has come up with some arbitrary criteria of what is “deserving” and thus how wealth needs to be redistributed. Enter the Republicans – who try to challenge the left’s definition of “deserving.” This is where the class warfare is generally fought. Republicans, for instance, argue that CEOs, for better or worse, do deserve at least some of their recompense.

However, by playing the game of “what social value do [insert: CEOs, top 5% of income earners, those who make over $250k, etc] have,” Republicans are tacitly acknowledging the deeper assumption in this leftist [daresay socialist] argument – that there is even a relationship between social value and income.

The fact of the matter is that income is a measure of one’s services in a given line of work. It is the market’s determination of what value an individual provides for a certain occupation. Income, like the price of nearly every other good, is motivated by a host of factors, including, of course, supply and demand.

However, it is not – and should never be – a measure of one’s value to society. This is too arbitrary of a claim. Society – government in particular – has no right to pass judgment on an individual’s value or their associated income. [Beyond the issue of right – government simply has no, non-arbitrary means to determine value outside of the market-mechanism.] The rich are no more or less deserving of their wealth, than the poor are of their dearth. “Deserving” just simply is not a concept that the government is fit to act upon.

It is time to cut the class warfare. It is far too divisive and harmful for our country. Not only does it lead to strife between individuals and groups, but it creates an environment where the government feels even more compelled to meddle in the private affairs of citizens. One may not like that someone else makes more than him, but that never justifies arbitrarily taking it from him. Why should it be any different for the government?