Taxing fewer people more is the socialist’s stock answer to all of his plans to control and spend. Fortunately history does not confirm such plans to be correct. In America today we have two major problems now joining forces to threaten our republic – make the rich pay more, and make them also pay our taxes. The growing consequences of these policies are surfacing all around us.
Basically, what’s happening is that our “dependency-creating programs” have now passed the tipping point with the passage of Obamacare. As the creation of such programs accelerates, its hunger for cash induces short-sighted legislators to extract more out of the wealth producers whose natural response has always been to defend their property. These people change their earnings into less taxable forms that reduce government revenues. The opposing dynamics play out over an exploding national debt that every year requires a larger fraction of the federal budget just to pay its interest costs.
Using government data sources, the Heritage Foundation reports that today our per-capita income from dependence-related programs sits at almost $32,000. Adjusted for inflation, it has risen 5X in the last fifty years with the biggest rise occurring since 1990. Bill Beach writes in the 4mar10 issue of Heritage’s The Foundry –
The steady growth of dependency creating program, particularly the so-called entitlement programs, and the equally steady shrinking number of taxpayers who have any financial stake in the government threaten rapid growth in mandatory, dependency programs and our very democracy. Are Americans closing in on a tipping point that endangers the workings of their form of government? If citizens can vote ever greater outlays for their income, health, housing, education, and food support; will the growth of government overwhelm the delicate political balances between those citizens who provide the means for helping other citizens in need? (We all know this as the Peter/Paul Principle – the nemesis of all democracies.)
Meanwhile, on the income side of the ledger we have about 1% of taxpayers paying 50% of the collected taxes. The federal government alone grabs almost 25% of GDP, up from an historical 20%. When the government starts raising tax rates above its historical levels, its revenues have always dropped through the “behavioral responses” of the classes having to pay the most tribute. A legion of studies cited by Alan Reynolds, senior fellow at Cato, continues to show the truth of this effect which economist Arthur Laffer summarized in his famous curve. That little graphic has become one of the staples of the socialists’ comedy central who through their derisive laughter still can’t figure out what makes the feds’ take go up and down.
As Reynolds shows us in ‘The Rich Can’t Pay for ObamaCare’ how Obama and the Dem’s hoped for $1.2 trillion in increased taxes will be whittled to about $670 billion. The rest of the cost of Obamacare will have to come from more overseas borrowing and/or onshore printing. All systems in Washington are tuned to create the desired mega-crisis that will be the necessary precursor for transformational change.