Democrats today, in addition to their nonsensical attitudes towards impeachment and President Trump, display an almost unbelievably incomprehensible attitude towards taxes and government spending. They think that somehow forced wealth redistribution and insanely high government spending, funded by an unconstitutional wealth tax and carried out through socialist policies, will somehow grow the economy. They’re so wrong, and their incorrectness is evidence that they don’t understand why higher taxes are bad for the economy and society.
Luckily, there are some people out there who understand why higher taxes are bad for the economy and society. Steven Horowitz of Libertarianism.org is certainly one of them and he does a terrific job of explaining just why the current tax-scheme regime is hurting America.
In his recent article, “The Social Harms of Taxing Private Wealth,” Horowitz does a great job of defending capitalism and the current private financial system and he explains why the Democrats are so misinformed about wealth and what a wealth tax would mean for not only our nation’s billionaires but also every other productive member of society.
Read Horowitz’s article here: The Social Harms of Taxing Private Wealth
Summary of “The Social Harms of Taxing Private Wealth”
First, Horowitz begins by pointing out that the wealth of the most successful members of society isn’t really what Democrats seem to imagine it as and that the inequality that they lambast is really just a natural outcome of markets. The left’s hatred of free markets comes not from true problems with the market but rather from basic misunderstandings or ignorance of economic concepts. They need to learn those economic concepts, namely that higher taxes are bad for the economy.
Similarly, Horowitz notes that most of their wealth isn’t “cash,” whatever one means by cash. The wealth of billionaires, millionaires, and generally people with money that they acquired legally is not cash. It is investments, real estate, and assets. These are people, like those in The Automatic Millionaire, that understand the importance of investing and would not leave their money sitting around as cash in a bank account.
So, when the looters on the left talk about imposing a wealth tax, they are talking about taxing non-liquid assets. That would be difficult, if not impossible, because many of those assets don’t have a set value. Additionally, it would force those with investments to sell them to pay taxes, which would hurt the economy by stifling investments, which is further proof that higher taxes are bad for the economy. Billionaires don’t just have cash lying around. investments would have to be liquidated, which would be horrible for the economy.
Next, Horowitz points out that a wealth tax would be hugely deleterious and wealth-destroying for all of society because it would cause billionaires and millionaires to have to sell such a large portion of their investments each year. That would pull money out of investments and deposit it into the gaping pit of vanishing resources that is the treasury. Or, in other words, Horowitz is saying that higher taxes are bad for the economy because it forces the rich to liquidate their investments and, in effect, transfer them out of the private sector and into the unproductive public sector.
Then, he supports that point by describing how the money of the very rich is often used to create economic growth. Their money is what drives investment forward, which is, in turn, what drives the economy forward. Loans and investments mainly come from the rich and their banks, so higher taxes are bad for the economy because they drain those potential investments from the economy. Nearly all of the funds that rich people put into banks and other financial intermediaries make their way into the hands of people putting that money to work in the service of economic progress.
Horowitz concludes his article by describing just how a wealth tax would destroy American economic growth by empowering the Federal government to waste more money, thus showing that higher taxes are bad for the economy. A wealth tax would destroy investment and impoverish everyone, as is usually the case with socialism. Higher taxes are bad for the economy, there is no other way to say it:
“A wealth tax is a certain path to impoverishing not just the rich, but the rest of us for whom economic progress depends crucially on the ways in which the rich actively put their wealth to use to finance new and existing businesses.”
My Take on Why Higher Taxes Are Bad for the Economy and Society
To me, it seems quite obvious that higher taxes are bad for the economy. Not only do they disincentivize those who would be the most productive, but they also mean that the government can spend even more money. Both of those side effects are negatives. So, it seems like anyone in favor of economic growth would support tax cuts such as President Trump’s hugely successful ones. That’s what the magic formula of economic success has always required and will always require.
Unfortunately, the looney left isn’t logical or reasonable, so it will never understand that higher taxes are bad for the economy because they decrease economic growth by draining money from the productive private sector and placing it in the grubby hands of incompetent bureaucrats that spend it without restraint. And the left certainly doesn’t understand economics, just as it doesn’t understand that Americans should desire liberty rather than welfare. Instead, they want to implement an unconstitutional wealth tax to pay for their socialist policies.
In the past, those policies were at least somewhat limited. For example, Galbraith’s Affluent Society might have been a paean to government spending, but at least it wasn’t as radical as Warren’s Medicare for All or Bernie’s free college. Original Democrat plans would lead to deficits and an ever-larger national debt. The plans of current Democrats, however, will utterly crush the American economy because the implementation of their plans will mean that fiscal responsibility is gone forever.
Furthermore, it’s increasingly obvious that the Democrats don’t even have a vague grasp of what reality their plans will create. Everyone who has learned the importance of saving and investing and so far sacrificed to prepare for the future and weather the coming retirement crisis will instead have to sell off their retirement fund to pay for socialist policies. And anyone who would be one of those “dirty” capitalists and create immense value for society will instead be able to do little because of a crushing tax burden placed on them by a government that doesn’t get that higher taxes are bad for the economy.
Conclusion: Higher Taxes are Bad for the Economy
Well, if you didn’t believe me at the beginning of this article, hopefully you do now. Higher taxes are bad for the economy; there’s no way around that salient fact.
In his article, Horowitz did a great job of showing why; they lift money out of productive and innovative hands of capitalists and pour it into the money-grubbing, inefficient hands of lazy bureaucrats. It’s not being greedy to want to keep the money you have earned, as Thomas Sowell pointed out, so don’t feel bad about pointing that out. It’s simply the truth and as such is unavoidable.
If you agree with this, you’re a Republican or, even better, a libertarian. If you didn’t and for some reason still support high taxes and out of control government spending, then you’re likely a Democrat. Hopefully, everyone will soon understand why higher taxes are bad for the economy. Until then, we capitalists will just have to keep fighting against the socialist left and try to do whatever we can to educate them on the basic facts of economics.
Just tell them, every time they start jabbering about raising taxes to pay for social welfare programs, that higher taxes are bad for the economy because they drain money from the private sector and mean that it is instead spent on useless programs by and incompetent government. That’ a fact.