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“Raise My Taxes” Really Just Means “Raise Others’ Taxes”

As has happened during every recent presidential campaign that might result in higher taxes on “the rich” (i.e., every one with a Democratic candidate), some of the 1 percent (or the .1 or .01 percent) have come out in favor of “taxing me more,” in the name of paying what they think is their fair share and generating government funds to address poverty, wealth inequality, or the latest in progressive proposals.

While the list of supporters changes, whoever is among the latest “raise our taxes” promoters get widely lauded for their altruism. However, there have always been serious problems with their “sainthood” story.

First we must question how the rich got that way. What if they did so by force, fraud, or deception? If so, they got rich by harming others. In that case, which reveals government failure to do an effective job of protecting their citizens against predatory actions, the appropriate response is to compensate those harmed and prevent similar harms in the future. It is not to pay government more in taxes. That doesn’t make those harmed whole. In fact, it may do nothing for them. And, however utopian the beliefs about how the government would spend the money, in fact, government will spend the resources however it chooses (and remember, the “other” party will also be in charge part of the time). Further, we must take into account the long record of government failure to do anything efficiently and effectively, not to mention the harm its policies often impose on those not at the top (e.g., licensing laws, supply restrictions, and import barriers), which makes it a poor mechanism to actually achieve something more like utopia than dystopia.

Alternatively, what about people who got rich via voluntary arrangements without force, fraud, or deception? They benefited by making others better off, not at their expense. Further, since the market provides a premium reward for finding ways to benefit large numbers of others, to get really rich often means benefiting millions. And the benefits to others can easily dwarf the benefits captured by their creators. Yet while income and wealth data count the market wealth increases of producers, it omits the wealth (or well-being) increases to the benefited consumers, allowing mutual gains to appear as the rich benefiting at the expense of others because their share of measured income or wealth rises (this is also only one of many measurement misdemeanors behind inequality rhetoric and promises to fix it). The core takeaway, though, is that when one earned more because he or she benefited others, there is no harm to society or unfair burden to others that needs to be atoned for with higher taxes in order to pay one’s “fair share.”

In either of the cases above, paying more taxes to government is not a solution, much less an effective or justified one. Therefore, “fair share” rhetoric often reduces to “more for me” desires by those who expect more for themselves from the arrangement (including far-from-poor government employees who will administer the bureaucracies behind the utopia-to-be). In addition, it represents envy on the part of those who wish to punish the successful. But not only is relying on one of the seven deadly sins a poor basis for governing that either defends our unalienable rights or our general welfare, we must remember that punishing the successful means giving them far less of an incentive to use their assets to improve others’ lives as the means to improving their own, which is a highly questionable way to help those others.

The inadequate logic of the “fair share” claim is reinforced by the fact that the group being accused of violating that standard in fact bears far greater tax burdens, in total and as a share of their income, than those accusing them. And those far higher taxes aren’t paying for proportionately greater benefits to them. And there is never a cogent reason provided for why someone who has a lower income—whose market efforts benefitted others less–thereby acquires a greater property right to others’ earnings acquired voluntarily, which is the obverse side of “fair share” complaints. And it is not as if the non-rich get no government assistance now, given the trillions of dollars that have been spent on poverty programs and income redistribution in America.

The “tax me more” saints are also mainly proposing to tax others for their purposes.

The small fraction of the highest earners or the wealthiest who claim to be more noble higher tax volunteers are doing so only if others similarly situated are forced to do the same, whether they agree or not. If there are, say, a couple dozen “tax me more” volunteers out of a top wealth or income tier with 70,000 households, it is clear that the volunteers are actually promising to pay very little of the total cost of what they advocate. The main effect is actually to force others, who need not in any way share their views or evaluations of the programs in question, to pay for their favored causes, by exploiting voters’ envy and desires to get something for nothing.

In fact, when viewed over time, current rich tax volunteers would also pay far less than they propose for future generations. For example, if you are rich today at age 80, proposing higher income and wealth taxes would only affect you for a few years, after decades of being able to keep more of your earnings and compound your investments than now proposed. But going forward, someone aspiring to wealth who had to spend his or her entire life keeping far less of their income and investments would be punished heavily for their entire working and investing life. There would be far fewer who end up rich. Now the envious might consider that a benefit. But the heightened disincentives would lead to far less production for others, harming them, and less wealth in the hands of those who would pursue charitable ends, which is likely to undermine the stated intent to do more for others than to achieve it.

In sum, ”fair share” assertions for higher taxes on higher earners are far from compelling, and those who portray themselves as altruistic secular saints with “tax me more” rhetoric are, in fact, proposing that others finance most of what they want government to do, and impose far more adverse treatment of future generations than they propose for themselves. And unlike those who offer them plaudits for doing so would do better to look to F.A. Harper, in his Liberty: A Path to Its Recovery, who reminded us that:

Assistance given voluntarily … is truly charity; that taken from another by force … is not charity at all, in spite of its use for avowed “charitable purposes.” The virtue of compassion and charity cannot be sired by the vice of thievery. … All told, the process of “political charity” is about as complete a violation of the requisites of charity as can be conceived.

SOURCE: MISES