Perpetually Progressive Confiscatory Taxation in America
Here's a troubling fact. According to data from The Open Syllabus Project, the most frequently assigned book "relating to economics and money" in college curricula over the last decade is Karl Marx's Communist Manifesto.
The book is often taught as "social theory," so the story goes. But that's an incorrect description of the content. It's social theory that requires a specific economic prescription to finance the social vision, which Marx simply describes as a "heavy progressive or graduated income tax."
America adopted this communist prescription long ago. But don't take my word for it. Speaking of America's highly progressive income tax, Ronald Reagan said in 1961:
We were once told the income tax would never be more than 2%, and only on the rich. In our lifetime, this law has grown from 31 to more than 440,000 words. We have received this progressive tax direct from Karl Marx, who designed it as the prime essential of a socialist state. ...
We have a tax system that, in direct contravention of the Constitution, is not designed solely to raise revenue but is used, openly and admittedly, to control and direct the economy and to equalize the earnings of our people.
He is right about it being "in direct contravention of the Constitution" as intended and adopted by the Founders. Even Alexander Hamilton, who had liberal views regarding taxation among the Founders, argued in Federalist 35, after discussing a need for "indefinite" powers of taxation when it comes to consumption taxes:
Nothing remains but the landed interest; and this, in a political view, and particularly in relation to taxes, I take to be perfectly united, from the wealthiest landlord down to the poorest tenant. No tax can be laid on land which will not affect the proprietor of millions of acres as well as the proprietors of a single acre. Every landholder will therefore have a common interest to keep the taxes on land as low as possible; and common interest may always be reckoned upon as the surest bond of sympathy.
If one considers wealth property (which it surely is), the principle here should be entirely clear. Confiscatory taxes could ensure the practical service of the "common interest" only if they were uniform in nature, thus allowing citizens to have equal interest in compelling representatives to keep confiscatory taxes, as a whole, low.
Our deviation from that simple principle has cobbled the path we walk today.
With income earnings broken down into quintiles today, the bottom two quintiles (up to $48,000 annual income) not only pay no taxes, but collect additional income from the coffers filled by the other three.
But we just had a tax cut passed, remember? In the wake of that tax cut, we find that those bottom two quintiles collect more from the coffers. The next two quintiles do not collect more, though they pay less. The top quintile of earners (over $150K annually) will provide a full 87% of the revenue to the federal coffers, up from 84% this demographic represents in revenue this year.
In what sense has the principle of uniform property rights and representative liberty, as described by Hamilton, been upheld? We now have Republican Congress and a Republican president, yet in spite of that, the share of profit versus liability in exchange for votes among the economic classes, as it relates to tax policy, has become more steeply progressive. This ensures that the "common interest" can become only less likely to be "reckoned upon as the surest bond of sympathy." For if 80% of Americans are either paying less or collecting more, what reason might they have to protect the property rights of the other 20%?
This is all by design, make no mistake. We have become an ever more redistributive nation, with a government creeping toward Marx's vision.
We like to pretend we have a "mixed economy" – that we can embrace those good things about progressive taxation and socialism, as Marx described, to find that ever elusive "third way" between the economic principles of economic liberty and government interventionism without forthrightly abridging the foundation our Founders prescribed.
That's pure fantasy. And Marx knew it. That's why he prescribed the heavily progressive income tax in the first place.
As Ludwig von Mises writes in "The Anti-Capitalistic Mentality":
When Marx and Engels in the Communist Manifesto advocated definite interventionist measures, they did not mean to recommend a compromise between socialism and capitalism. They considered these measures – incidentally, the same measures which are today the essence of the New Deal and Fair Deal policies – as first steps on the way to full communism. They themselves described these measures as "economically insufficient and untenable," and they asked for them only because they "in the course of the movement outstrip themselves, necessitate further inroads upon the social order, and are unavoidable as a means of revolutionizing the mode of production."
We opponents of socialism and government interventionism now find ourselves in a curious position. Republicans, who have run on the premise of reducing spending and government intervention, have been elected. Yet still, it is mandated that those who earn more must fill the federal troughs with an increasing amount of their wealth, only to have everyone else fill it with less or take more from it.
As happy as we may be about the tax legislation, it is clear that the fundamental problem has gone unaddressed.
Reagan had it right, and to his credit, during his tenure, he made great strides toward economic liberty by significantly reducing the progressive nature of confiscatory taxation. Reagan said in 1961:
Governments don't tax to get the money they need. Governments will always find a need for the money they get. ...
Here is the main battleground. We must reduce the government's supply of money and deny it the right to borrow!
Government obligations have become so bloated that we've reached a point where to discontinue borrowing is tantamount to collective economic ruin. And our government's insatiable appetite for our money can be conveniently, and selectively, satiated by our heavily progressive tax structure, even via broad "tax cuts" that widen the gap of property confiscation by the government among the low-income earners and the high-income earners.
It's safe to say we have a tough row to hoe in deviating from the path to communism cobbled in America for over a century. When you consider that our youths are sent to state-sponsored universities to be taught that the values of communism are morally greater as a social and economic principle than the values of economic liberty, it becomes increasingly hard to find reasons for optimism for the future.