The Destruction of Taxation

Taxation is destructive.  No, I’m not referring to the physical destruction that results from wars and military actions, though that is certainly related to taxation, and certainly destructive.  Nor am I referring to farmers that literally burn or destroy their crops to keep receiving a farm subsidy, though that exists as well.  The topic of this essay is more subtle.  So subtle that it is nearly invisible to most.  Perhaps you think that to consider taxation as destructive is an exaageration.  I and many others feel it to be accurate.  Let me explain.

The process of taxation may be stated thusly: some group or entity uses coercive means to take funds from an individual, company, or other organization, and distributes it to someone else.  Almost always, the new revenue stream is used to fund a program or agency with the best of intentions: to protect the environment, to protect individuals from a foreign enemy, to provide health care, etc.  We can often see what the money is used for.  In some instances (i.e. CIA or foreign policy in general) that usage is more opaque.

In any case, most people trust this newfound usage for money to be a good thing.  How else could we take care of the environment, or protect our workplaces from dangerous safety risks, or ensure our toys weren’t made with lead paint?

When we get our refund checks, we are happy (or perhaps relieved) to have some of our tax money back.  Most have plans of what to do with the money: buy a new wardrobe, go on a vacation, pay for home repairs, put a down payment on a car, etc.  Rarely have I heard someone say upon receipt of their refund check: “Now I can better fund my favorite government program!” or “I think I’m going to invest this in reducing the federal debt.”  Why is that?  For us as individuals, we have better things we would choose to invest in.  Besides, that’s what taxes are for, right?

Consider if you received more of your paycheck each and every month.  What would you do with the extra cash?  Perhaps you’d patronize an organic grocery store more frequently.  Perhaps you could pay for more home repairs.  Perhaps there’s some book you’ve been wanting to buy.  Maybe you want to put a little more away for that rainy day.  Maybe you’d want to put a little towards your favorite charity.  Again, few, if any, would say, “I’m going to donate my money to the government.  They need it more than I do.”

What’s my point?  Taxation is coercively taken from us.  We’d rather not pay it.  Many people choose not to, actually, which is one of the reasons we have a burgeoning accountant industry, and many tax lawyers scattered about, as well as a well-armed IRS.  What if we didn’t?  Where else would the money get spent?  Each one of us could come up with a list of things we would like if we had more of our money back.  (This is a wonderful daydream, though there are many who wished it was a reality, and not just a daydream.) 

It’s hard to tell taxation coercively taken from us is really “destructive.”  So what is destructive about taxation?

Go back to imagining all of the things you would get or places you might invest in should you have all of your tax money back.  Now imagine smashing them up with a sledgehammer, burning them to the ground, and nuking them out of existence.  Consider that taxes do this: not only are these alternate uses for our money not realized, the very thought of them is annihilated; for most of us, it doesn’t even exist.  Few even consider what they would do with more of their money, should the tax burden be lower.  Fewer still imagine what the world would truly be like if more people had more of their money to spend.

Let’s go back to our thought experiment.  Suppose the income tax was abolished today.  How many people would consider purchasing a new car?  Suppose the number was 25,000.  (Perhaps this is a conservative estimate.)  Suppose the average price of a new car is $20,000.  That may be a little light, but let’s assume that it is.  Add that up, and that is $500 million!  Think of the people that would be employed by this money!  Think of the job creation that could take place!  You can think not only of the manufacturing, design, engineering, and assembly work, but also the marketing, sales, accounting, and financing work as well.  We could imagine the effect of similar “stimuli” to the economy in the housing sector, investing, or in air travel.

With taxation in place, none of these jobs are created.  None of these ends are met.  None of these buildings are built.  Taxation obliterates not just the existence of these alternate uses for our money (they would really be the primary use were it not for taxation), but it destroys even the idea in our minds.  The prosperity we would choose with our own money is denied us.  Worse yet, we do not even consider it.

Instead, we take up our political discussions on how best to spend money taken from us: unwinnable, unconstitutional wars, massive entitlement programs, bureaucratic growth, price controls, secretive defense projects, etc.  We barely even stop to think that our money may have a better alternate use, one that we as individuals dictate, and not one dictated to us by someone else.  This is a very American idea.  It is strongly related to the Revolution.  It kept us free and prosperous for over a century.  And now, we have grown so distant from our roots we hardly understand, much less recognize them.

Taxation is destructive: the existence of, as well as potential for some real quantity of future economic growth and development, along with the jobs, buildings, vehicles, etc., that would accompany such growth is completely annihilated and replaced with a centrally-planned bureaucracy.

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Filed under Austrian Economics, fiscal policy, Libertarian, role of government

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