Here Come the Taxers!

Ladies and gentlemen, grab your purses and wallets, here come the Tax Attacks.

President Barack Obama proposes more than $1 trillion in tax increases over the next 10 years to further expand history's most expansive government. Californians' elected overseers in Sacramento reflexively turn again to their remedy for all things fiscal: raise even more taxes.
In coming weeks and months, whether, and if so, how much, to raise taxes will take center stage. The campaign will be framed, as always, as if it's for your own good. It will be "for the children." It will be your civic duty. It will be, and this should rankle the most, the price we pay for democracy.

Tax advocates misrepresent and lie to justify taking more of your money. First and foremost they insist it's not really your money.

They will call it almost anything to avoid calling it what it is. They will call it "revenue." They will call it "funding." They will call it "necessary." Perhaps most egregiously, they will call it "an investment." What they never call it is what it is: your money.

In California, Gov. Jerry Brown and Democrats running the Legislature are pushing renewal of two-year temporary taxes we were told in 2009 would fix the state's massive budget deficit. Now Brown and Co. tell us just give them five more years of these higher taxes, another $60 billion or so, and this time it will fix the state's crushing budget deficit. Meanwhile, in Washington, Obama punitively seeks to increase taxes on any couple earning $250,000 or more a year.

If tax-a-holics prevail, it will worsen the economy, not improve it, and likely not come close to fixing the budget problems they ostensibly intend to fix.

These counterproductive results are because tax advocates don't consider the real effects of what they do. It's a good bet that they don't care. It's all about getting your money for their purposes, and as much of it as they can get away with. Unfortunately, the power to tax, a Supreme Court justice long ago noted, is the power to destroy.

Let's examine eight of the misrepresentations and lies taxpayers will hear.

Claim No. 1. Corporations don't pay their fair share of taxes. This is a clever claim. In reality, corporations don't pay their fair share. That's because corporations don't pay taxes. People pay taxes. When a corporation is taxed, it passes the cost on to people. A tax on a corporation is an increase in consumer prices, or employee paychecks that don't get increased. Or, worse yet, a job that disappears, or is never created. Ultimately, if people refuse to pay corporations' pass-through costs, corporations go out of business.

Claim No. 2. Corporations' taxes have decreased but individuals' taxes haven't. This is a misleading claim based on Californians paying a little more than 4 cents in taxes on every dollar in personal income earned in 2008, up from 3 cents in 1981. That compares to corporations' income taxes, which declined from about 10 cents on the dollar to about 5 cents over the same period. The short response to this claim should be, "So what?" The fact anyone paid a smaller percentage of income tax in 2008 than in 1981 ought to be celebrated. But if the complaint is that individuals' effective tax rate increased while corporations' decreased, it's worth noting that corporations still paid a higher percentage. Nevertheless, all this fuss is misplaced. See No. 1. Corporations, at whatever rate they are taxed, don't pay taxes. People do.

Claim No. 3. Sometimes authorities liken taxes to tithing. This is misguided. Tithing is explained in the Bible as paying tribute to a superior, as Abraham did to Melchizedek. Unfortunately, ancient governments ran with the idea, at least until about 1776. That's when governments momentarily understood they aren't superior to people, and tithing, therefore, is inappropriate. Taxes, as our founders understood, are how we finance legitimate government services. They are not tribute unto kings. Taxes are not the price of democracy, which was a notion the founders frowned on and purposely avoided. They are the costs of defending God-given rights, which bear little resemblance to the appetites of democratic majority-rule.

Claim No. 4. "Soak the rich!" This class-warfare battle cry sadly resonates with people who envy, resent or just detest others because they have more or earn more. The dollar threshold varies, according to personal animus. For the current president, the threshold is $250,000 a year in income for a couple. Obama wants to extract those folks' "fair share." For previous California demagogues the threshold was $1 million a year. Those are the people assessed the state's "millionaires' tax" to pay for mental health services. The result was some rich people fleeing California for tax-friendlier environs. Obama's result will be countless people stuffing their money into tax-exempt investments.

Claim No. 5. "Soak the rich because... ." This more sophisticated argument makes the case that the more one earns, a larger percentage of income should be taxed. This brand of theft can be traced to the progressive income tax, which burst on the scene in the most notorious class warfare victory this side of the Russian revolution. A progressive income tax was declared unconstitutional in the 1800s because it was. Only rewriting the Constitution in 1913 made it kosher. Even so, it began at a puny 7 percent. To show how much animus "democracy" is capable of, the top tax rate reached more than 90 percent for 15 years of the income tax's 98-year lifespan. They'd do it again, if they thought they could get away with it.

Claim No. 6. Higher taxes bring more "revenue" to "invest." By invoking Orwellian language ("revenue" instead of "your money" and "invest" instead of "squander"), tax advocates hope to obscure the truth. The truth is, there is little evidence higher taxes reliably bring in more money. In fact, economists have known since the days of Calvin Coolidge that reducing taxes stimulates the economy, which inevitably provides greater tax revenue.

Claim No. 7. It's unfair that poorer people are more burdened by taxes. We grant that sales taxes and other regressive flat taxes fall disproportionately on the poor. But so does everything. That's a motivation not to be poor, not a justification to punish those who aren't. The fact the rich pay a smaller percentage of their income in tax is a red herring. They also pay a monumentally larger amount in taxes. If you want to talk fairness, consider this analysis by George Mason University's Mercatus Center: the top 1 percent of Americans paid 38 percent of federal income tax. The bottom 50 percent of the income spectrum paid 2.7 percent. More than one-fourth of Americans who earned $20,000 or less a year paid zero.

Claim No. 8. It's the government's money. You won't hear this out loud. But it's the mindset behind tax attacks. There is a presumption that the money you earn belongs first to the government, not to you. That's the ultimate rationale for taking it from you. But nearly every year the government arbitrarily adjusts how much to take. Obviously, there is no timeless, authoritative claim to your money if the amount fluctuates. It's entirely arbitrary. And the amount is determined all too often not by the person who earns it, but by the people who want it. When the government decides how much you can keep, in amounts and percentages adjustable at the government's whim, you don't really own it. You are being allowed to use it. Well, some of it.