As is always the case, the economics debate would be quite a bit more reasonable if it were understood that all money transfers reflect the transfer of goods and services.
We work in order to get things. The dollars we take in for our work represent our demand for the goods, services and luxuries we need, and sometimes desire. Savings are what’s left over after individual needs and desires are met. Very important here is that savings don’t signal a lack of consumption as much as they signal a shift of consumptive power to someone else, or to an entrepreneur or business accessing the savings of others with an eye on expansion, innovation or both.
With taxes paid to governments, we’re transferring the consumptive or savings worth of our work to politicians. As opposed to workers getting to fully enjoy the fruits of their labor, or private borrowers, or private businesses seeking to expand or innovate with our unspent wealth, politicians attain spending power.
Which is why government spending is such a burden on economic progress. Every dollar that reaches the U.S. Treasury is an extra dollar of control over the economy that politicians have. U.S. politicians don’t take in our tax dollars to stare lovingly at them; rather our dollars represent a growing economic role for politicians whose swagger and prestige is wholly a consequence of the production of others.
It sadly doesn’t stop there. When politicians levy rates of taxation on us, they’re arrogating to themselves an ongoing portion of our income.
That they’re able to legislate access to the production of others is particularly notable in a country like the United States that is populated by some of the world’s most enterprising people. Savers around the world see this, and logically line up to lend to a country that legislatively “owns” a portion of the earnings of such productive people.
As a result, U.S. politicians aren’t just economic participants care of our current earnings. With the world’s savers confident in our future earnings, they make it possible for the political class to borrow extensively from around the world based on the certain presumption that American workers will be extraordinarily effective long into the future, and as a result, swimming in dollar income that the U.S. political class will help itself to a healthy portion of.
Those with a free market lean and an odd focus on deficits continue to claim that Congress has a spending problem; thus the deficits. No, Congress has a revenue problem. Too much revenue, now and into the future. Expectations of soaring revenues make the U.S. an attractive country to lend to. If you want lower deficits, the paradoxical truth is that you must substantially lower federal revenues. This truth is lost on the chin scratchers on both sides of the ideological debate.
For now, and for the purposes of this piece, it should just be said that federal spending is a huge tax on growth, while a focus on debt and deficits is a distraction. The problem yet again is that politicians have too big of a claim on our present and future income. That they do means that politicians like Nancy Pelosi, Chuck Schumer, Mitch McConnell and Kevin McCarthy get to allocate trillions worth of privately produced resources annually. That they have so much power over private production logically means that Jeff Bezos, Fred Smith, Peter Thiel and Warren Buffett have fewer resources to allocate. Spending burdens us now.
Which brings us to Donald Trump and the alleged “scandal” about taxes paid. The perpetually offended are up in arms that a billionaire allegedly only paid $750 in federal income taxes just a few years ago. It’s supposedly a sign of a “broken system” that favors the rich. Really, try to be serious. Do you the reader really think the U.S. Treasury is the biggest borrower in the world at the lowest rates in the world all based on its ability to fleece the middle? Think again. Lost in all the emotion about one rich person’s taxes is that the top 1 percent of earners account for over 40 percent of federal income tax revenue. If the “system” is supposed to pick-pocket the rich, then it's doing just that. Too bad it is.
Back to Trump, he should be celebrated if he only paid $750. Think about it. If so, it means his tens or hundreds of millions in annual income has long gone untaxed. Untaxed income once again doesn’t sit idle; rather it exists as capital for businesses and entrepreneurs. Some will reply that Trump’s just not rich, that there’s no major income. That he’s a failure. Ok, so which is it? Did he seriously underpay or do his business activities not rate much taxation? If the latter, stop complaining. Really, stop complaining either way. You're advertising your ignorance.
Indeed, aggressive tax avoidance redounds to us all, particularly when it’s the rich doing the avoiding. They generally can’t spend it all in one place. That they can’t means that short of hiding their millions and billions in coffee cans, the unspent wealth of the rich is frequently directed toward the creation of new companies, along with the expansion of existing ones.
Conversely, tax overpayment or a lack of aggressive avoidance burdens us all for it resulting in Pelosi and McCarthy having more control over the most dynamic economy in the world. Imagine if they had less. Government spending is yet again a tax. That it is will hopefully cause the overly emotional to wise up. Tax avoidance is heroic. We need more of it.
