Pop quiz: When a progressive is confronted with a problem, what will they invariably propose as a solution? If you said, “higher taxes,” congratulations! You’ve been paying attention.
President Barack Obama’s State of the Union address was a perfect example of this, with calls for $320 billion in tax increases over at least five different collection programs. Here are five reasons why tax increases are the wrong answer to a question nobody asked.
President Barack Obama delivers his State of the Union address to a joint session of Congress on Capitol Hill on Tuesday, Jan. 20, 2015, in Washington. Vice President Joe Biden and House Speaker John Boehner of Ohio, listen in the background. (AP Photo/Mandel Ngan, Pool)
1. We have a spending problem, not a tax problem.
Tax receipts have increased every year that Obama has been in office, and last year tax revenue hit an all-time high, yet we continue to run budget deficits totaling hundreds of billions of dollars. No nation in the history of the world has managed to tax itself into prosperity, and yet the president refuses to consider even the smallest cuts to spending as a means of deficit reduction.
We don’t even need to cut spending that much to get the budget under control. If we could just hold spending flat for a few years, the increased tax revenues from a booming economy would quickly overtake outlays and start to pay down the national debt. The Office of Management and Budget predicts that revenues in 2017 will exceed 2014 levels of spending. All it takes is a little restraint.
The deadline for the Obama’s budget is fast approaching. He could easily free up resources and jump start the economy, while at the same time reducing the budget deficit, by presenting Congress with a budget that actually balances in the foreseeable future, instead of continuing to demand his pound of flesh from the nation’s producers.
2. Taxes provide the wrong incentives for economic activity.
The higher taxes become, the lower the reward for honest work. If I know that the government will seize half of every extra dollar I earn, the motivation for me to work harder, be more productive, start my own business, or invent something will be greatly diminished.
High taxes make work less profitable, and are therefore detrimental to economic activity. It’s a strange avenue to pursue for a president who is simultaneously boasting about the continued sluggish GDP growth and stalled job market. Small businesses and entrepreneurs are the most important elements of the 21st century economy, and yet without the capital to spend on hordes of tax lawyers and K St. lobbyists, they are the ones that tax increases hit the hardest.
3. The IRS is Broken
If there’s one thing the last several years have proven, it’s that the IRS is a hopelessly partisan agency defined by scandal, corruption, and a lack of accountability. From its blatant targeting of conservative groups in the run up to the 2012 election, to its illegal implementation of Obamacare, to its plans to regulate non-profits out of existence, to its propensity for draining money out of innocent people’s bank accounts, the IRS is the last agency that should be given more power over taxpayers.
4. Taxes divert resources from more productive uses.
It’s easy to forget that every dollar the government collects has to come out of a real person’s pocket. While the president can boast that he is spending a lot of money on programs he likes, it is important to remember that every dollar of public spending comes at the expense of private spending. And whereas private spending constituted the goods and services we value as a society, public spending is usually directed at politician’s pet projects, which more often than not end in waste and failure.
5. Taxes are an end, not a means.
The president has worked hard to present himself as a pragmatist, not interested in ideology, but only in “what works.” With this in mind, surely his support of tax increases is the result of a sincere desire to increase government revenues and close the budget deficit, right? Actually, if we take the president at his word, no.
In a presidential debate in 2008, Barack Obama was confronted with the well understood economic fact that sometimes higher taxes lead to lower revenue, as evasion increases and the incentive to work decreases. Rather than deny this, Obama reaffirmed his commitment to higher taxes even if the result would be lower revenues and a worse economy. His explanation? Fairness.
I agree! We do need a tax code that treats everyone fairly. But if the president wants a truly fair tax code, why not do away with all the loopholes and deductions and implement a low, flat rate that is the same for everyone? What could be more fair than that? There is nothing fair about preferentially crafting the tax code to reward some people at the expense of others.
A certain amount of taxes are necessary to fund the essential features of government, but the tax code should never be used as a tool for social engineering. Beyond basic revenue requirements, everything else is merely fodder for corruption.
Adam Brandon is the executive vice president of FreedomWorks, a non-profit organization that mobilizes grassroots activists nationwide. Follow him on Twitter @adam_brandon
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