A Voice in the Wilderness In Defense of "Mere Conservatism"

Sowell: Americans are “slaves to words”

Few people can dissect the passing cultural, political and economic scene quite like Dr. Thomas Sowell.

I'd get sick of citing his work if he ever got sick of penning the most lucid, discerning columns in America.  His effort this week focuses on the problem most Americans have when it comes to being able to look past the lofty (but utterly empty) rhetoric of politicians and pundits.

We could definitely use another Abraham Lincoln to emancipate us all from being slaves to words. In the midst of a historic financial crisis of unprecedented government spending, and a national debt that outstrips even the debt accumulated by the reckless government spending of previous administration, we are still enthralled by words and ignoring realities.

President Barack Obama's constant talk about "millionaires and billionaires" needing to pay higher taxes would be a bad joke, if the consequences were not so serious. Even if the income tax rate were raised to 100 percent on millionaires and billionaires, it would still not cover the trillions of dollars the government is spending.

More fundamentally, tax rates-- whatever they are-- are just words on paper. Only the hard cash that comes in can cover government spending. History has shown repeatedly, under administrations of both political parties, that there is no automatic correlation between tax rates and tax revenues.

Dr. Sowell continues:

When the tax rate on the highest incomes was 73 percent in 1921, that brought in less tax revenue than after the tax rate was cut to 24 percent in 1925. Why? Because high tax rates that people don't actually pay do not bring in as much hard cash as lower tax rates that they do pay. That's not rocket science.

Then and now, people with the highest incomes have had the greatest flexibility as to where they will put their money. Buying tax-exempt bonds is just one of the many ways that "millionaires and billionaires" avoid paying hard cash to the government, no matter how high the tax rates go.

Most working people don't have the same options. Their taxes have been taken out of their paychecks before they get them.

Rich people need an incentive to put their money back into the economy.  At the heart of the Left's weak-spot on this issue is the categorically false assumption that wealthy people owe it to the rest of us to use their capital for society's benefit.  They don't have to do anything with it.  They can bury it in the back yard, stash it in their freezer, or, if we play our legislative cards right, they can be presented with an incentive to re-invest their dough back into the economy.  The Left fails to grasp this, and when they are control the purse strings and tax rates of the nation, we all suffer for it.

Back in the 1920s, Secretary of the Treasury Andrew Mellon pointed out that people with high incomes were simply not paying the high tax rates that existed on paper, because they were putting their money into tax shelters.

After the tax rates were cut, as Mellon advocated, investments flowed back into the private economy, producing higher output, rising incomes, more tax revenue and more jobs. The annual unemployment rate in the next four years never exceeded 4.2 percent, and in one year was as low as 1.8 percent.

Despite political demagoguery about "tax cuts for the rich," in human terms the rich have less at stake than working people. Precisely because the rich have so many ways of avoiding taxes, a high tax rate is likely to do them far less harm than it does to the economy, on which millions of people depend for jobs.

If Americans began to refuse to envy those with more and refused to cease helping (and giving to) those with less, our financial woes and all of the sickening class warfare would end.  To afford and (somewhat) sustain the collectivist dreams of progressive liberals you need Christian birthrates, a Protestant work ethic, and free market enterprise.

But what if our "collective" goal became once more to promote liberty, an entrepreneurial spirit, personal responsibility, and civic duty instead?  We wouldn't need to over-tax any group of people and progressive liberalism would go gently into that good night it belongs.