The Once and Future Peasants

Here's why you should worry about living in a country where increasing numbers of people can live without working.

Filing our tax returns last week, I deplored government having confiscated 29.7% (effective rate) of my and my wife's joint 2013 income (Federal, 21.7%; state and local, 8%).  That seemed scarcely worse than medieval lords confiscating one-third of peasants' crops.

Speaking of lords, both the President of the United States and the Mayor of New York (et uxores) paid 2013 income taxes at lower effective rates than mine and my wife's (20.4% for the President and a measly 8.3% for the Mayor).  Maybe there's a tax penalty for living in tract houses clad in middle-class vinyl and plywood instead of public mansions made of government granite and marble.

But here's the real rub: every governmental levy at every level functionally taxes our income.  And, if you're anything like me and my wife, your functional rate of income taxation far exceeds the rate at which any 10th-century lord ever confiscated his peasants' labor.

Consider these examples:

Corporate and business income taxes.  These tax your income because producers raise consumer prices to offset their business income taxes;

Capital gains taxes.  The income you use to buy capital assets has already been taxed once, but yet any asset gain is again taxed;

Sales taxes.  Likewise, the income you use to buy stuff has already been taxed once, but yet it's taxed again when you buy the stuff;

Property taxes.  These are also additional taxes on goods you've bought with already taxed income;

Excise taxes (e.g., fuel, telephone, hotel, etc).  These too are additional taxes on stuff you buy with already taxed income;

Tariff taxes.  Same as above, but only for imported stuff you buy;

Inheritance taxes.  The dead already paid taxes on the income which was the source of whatever they leave to the living;

Payroll taxes.  These still tax your income -- even if you might have someday gotten something back were your government not robbing the Social Security Trust Fund to blow your retirement "safety net" on things like paying people not to work, bailing out big banks, sending Michelle and the kids to Riverdance, buying booze for the State Department, and making lobbyists multimillionaires;

Licenses, permits, tolls, transfer taxes, and all other user fees. These also reduce your income -- and for services you might have expected our government to have otherwise funded from the income taxes you've already paid;

Regulatory tax.  Regulation increases the cost of all goods and service you buy with income government has already taxed.  Indeed, this increases the cost of the stuff we buy by about $1.9 trillion annually (or about $15,000 a year for each household); and

Inflation tax.  This reduces the purchasing power of any past income -- already taxed in the serial ways above -- which any of us might ever have managed to save.  It's a consequence of the fiat money which allows government (let alone banks) to increase the means of exchanging production faster than production itself increases.  Simplistically, you may regard governmental deficit spending (now close to $1 trillion in the Federal Government) as functionally taxing the purchasing power of all your past, present, and future income.  This makes, for example, the stuff you could have bought for $100 in 1980 cost you almost $300 when you buy it now.  And the cumulative inflation rate since 1913 (when the Federal Reserve System began) now approaches 2,300%.

However bureaucrats might define the term, "income" is functionally no more than what fiat money now allows your labor to buy.  In Adam Smith's idiom, the value of what a brewer brews allows him to buy what a baker bakes or a butcher butchers; and when government (in whatever way) confiscates more of the value of what a brewer brews, the brewer can buy less of what a baker bakes or a butcher butchers.

Our standard of living exceeds a 10th-century peasant's not because government now confiscates less of our labor than the peasants' lords did 1,100 years ago, but only because the industrial revolution so greatly increased our productivity during the interim.  And every decrease in production today makes us all poorer tomorrow.  Indeed, if government now confiscated the value of our labor at a rate no higher than a medieval lord once confiscated his peasants' labor, at lot more of us would be lords today.

Far from elevating us to lordship, however, the greater likelihood is the effect (already long and guilefully postponed) of government's ever accelerating confiscation may eventually reduce our children and our grandchildren to peasanthood. 

Consider, for example, the islanders 90 miles across the Straits of Florida.  Cuba's prophet of fundamental transformation once said, "I am Fidel Castro, and we have come to liberate Cuba."  More than half a century later, Fidel's now older and wiser brother, Raul, now says, "The notion that Cuba is the only country in the world where you can live without working must be erased forever."

We too must pay the Cuban price for the profligacy of our own fundamental-transformation prophets.