Monday, August 20, 2012

Beware of the Tax Zombies

I have a Miniature German Schnauzer named “Midnight”. One characteristic of this breed is its ravenous appetite.  Midnight wolfs down every meal and constantly begs for more.  If you gave him all the food that he wanted, he would literally eat himself to death in a short time. He has an almost insatiable appetite for food.


And like Midnight, there are people in this country that have an insatiable hunger for tax money.  They want more taxes continuously.  They spend time thinking of new ways to get it.  They make emotional pleas for it.  At times, like Midnight, they even beg for it. 

They are “Tax Zombies” who seek to bite open your wallets and eat up all the cash.  They exist both inside and outside of government. A commentary in last week’s New York Times argued that higher taxes are the solution to all our problems.

But how much taxes would be enough for the Tax Zombies?  Just like Midnight and food, I don’t think there are enough taxes to satisfy them. They would just develop more and more programs and more and more ways to spend the money and then ask for more.  It’s like a spendaholic with a credit card.  No credit limit is high enough because they will always spend all the available funds and then want more.

If allowed, the Tax Zombies would take every dollar you earn and then give some it back in food stamps, housing allowance, and other credits.  Therefore the power to tax is the power to control.  The more you are taxed, the less freedom you have.  An increase in taxes results in a decrease in freedom.  Some taxes are necessary, but nations that figure out how to provide “Public Goods” with the lowest tax rates are rewarded with stronger economies.  Remember that every dollar removed from the private sector in taxes is one less dollar available to fuel economic expansion.  Higher taxes will not solve all our problems – it is the problem.

The Affordable Care Act (aka Obamacare) includes 21 new taxes or increases (7 hitting the “non-rich”).  This is expected in order to be able to cover people who are currently uninsured.  But the problem is how government will manage your tax “contribution”.  Fraud is so rampant in Medicare that it can’t even be accurately estimated.  A sample audit found fraud at over 30% in one location.  There will be much fraud with the government managing the ACA and this is not factored into the cost estimates.  This means the ACA, even if the costs estimates are accurate (and you know they are too low), the program will cost 25-30% more due to fraud.  After you make promises to people and you come up short on funds, how are you ever going to pay for it?  Here come the Tax Zombies again!

Both Illinois and California have huge deficits because they spent way more money than they collected in taxes.  The solution? Even though they already have very high tax rates, both states plan to raise taxes even higher.  The Tax Zombies strike again! My friend Mike just ran (moved) across the border to Indiana to avoid the monsters.

Our enormous tax code is composed of thousands of ways for the Tax Zombies to get your money and thousands of ways you try to keep ahold of it.  We are in dire need for tax reform because running and hiding from the Tax Zombies results in too much cost and inefficient use of resources. 

Economic theory says that collective money (taxes) is necessary to pay for public goods (roads, bridges, security forces, education, etc.)  But the government didn’t create these, it merely manages the process. (Think about it, the government didn’t build the bridge, a private construction company did)  And when you factor in the fraud and inefficiencies of government processes, it manages your tax money very poorly. 

The government cannot generate any revenue on its own, it is dependent on taxes and fees) collected from people who earned income in jobs that were created by entrepreneurs who took personal risks.  These business owners also paid corporate and personal taxes along the way.  So what about those “ungrateful” business owners?  Because of their successful efforts they created jobs that provided the tax money for the “Public Goods” to be produced. Yes they did build their businesses and they helped build those roads and bridges too.    

1 comment:

  1. Right on - I agree with every word so that means you are right. :)