Let's Explode Some Tax Myths to Ring In The New Year!

(I wrote this on January 1, 2011).

The Dems got dem ol' cosmic class warfare blues again, mama! But wait -- isn't this the time we vow to turn over a new leaf, to better ourselves and our society? Here's to the future -- based on an enlightened, spiritually-based and refreshing individualism -- uniting freedom and the imperative to look out for each other. So let's not get drawn into these fraudulent zero-sum tax games. We can ALL prosper in the New Year. But first we should dispel the myths and jettison the baggage of stale economic theories that have held us back!

1. Tax cuts "cost" the government money (recently parroted by NBC's David Gregory, and demolished by Dr. Ron Paul). This comes from the erroneous perspective that the feds own us or what we create. But tax cuts are NOT government spending! A tax cut simply allows a creative individual to rightfully keep the product of his or her labor and genius. So it's simply allowing freedom and REAL capitalism to work. May those liberating powers ever increase in the New Year!

2. Tax cuts mean lost government revenue. In the short (or long) run this may occur, depending on the rates and their adjustments. But if it is done properly (with optimal rates), as the economy expands it will lead to greater revenues. American Presidents from Coolidge to JFK to Reagan definitely proved this -- Reagan was able to double revenues through tax cuts (but spending unfortunately increased too much).

3. You can build the poor man up by tearing the rich man down. Even income tax-enactor Abe Lincoln stated the opposite of this one. There are certainly plenty of government programs that send checks (now, electronic funds transfers) to needy individuals. But bureaucracies are more likely to grow -- and recipients may get about a fifth of the whole budget. It's like feeding corn to a cow and expecting to get fed back from the opposite end! The gun you hire in government to pick the rich man's pockets, will definitely be used on yours! There are simply more poor and middle class people than rich. And aren't the rich people the ones who hire / provide jobs / goods and services?

4. Government is a countervailing force against big business, the wealthy, etc. (I believe this is similar to a principle by John Kenneth Galbraith). But history clearly shows that large money interests tend to gravitate toward government, learning to "pay to play" the game. And wasn't Marxism actually created by banksters -- to fool commoners into thinking it was for their benefit? Now look at the big bank bailouts, versus how long it took the 9-11 First Responders to get some compensation. So if you want to reduce this undue and imbalanced influence, CUT TAXES!

5. Most citizens don't pay any income taxes. This is a bizarre one perpetuated by some conservatives. But if you work for an employer (or even yourself), you pay income taxes. In the employer situation, they certainly pay -- so what is left is a smaller slice for you. And Social Security / Medi-taxes are supposed to be split with the employer. So it was helpful that those rates were recently reduced. But it is still something of a shell game, born of illusions. What's the solution? End ALL withholding -- so you get paid instead of it going directly to the state! After all, isn't it high time that Milton Friedman's wartime relic is retired? Maybe that will also improve his image and shine a light on his better ideas (like giving parents more educational options)!

6. If you increase taxes you will help lower the deficit and debt. Steve Forbes probably skewered this one better than anyone. He said, "if you put a jar of honey in a forest with bears, you will get bears." Likewise, if you leave a pot of money in Washington, they will spend it and ask, "where did it go?" Remember the day before 9-11-01, Don Rumsfeld held a news conference saying that trillions of Pentagon dollars were missing. Could that be why 9-11 really happened?!

7. Cutting taxes increases the gap between rich and poor. Actually it tends to do the opposite. Reducing taxes increases economic mobility. With higher tax rates, the wealthy are more likely to bottle up their money in shelters. With lower rates, it's easier to pay them so investment increases. And if rates are high enough, the productive will move out and go away. So let's reduce and eliminate rates to maximize freedom and prosperity!

8. It's magnanimous of the wealthy (especially the familiar ones doing news conferences) to voice their support for higher tax rates. No it's not! They are perfectly free to pay any additional money they want to the state. But supporting higher taxes overall is a recipe for what Murray Rothbard called "economic destructionism" -- because high rates destroy or reduce economic activity. Actually the tycoons are just trying to look generous -- and messing with their competitors to tax them down a bit more. If they want to help the economy, expand your own business. And what's the best way to do that? Lower taxes!!

9. Taxes are the price we pay for being a civilized society. Actually just the opposite is true. High taxes encourage widespread parasitism -- a culture based on theft and deception (as well as influence peddling). As Frederic Bastiat put it, "The State is the colossal fiction by which everyone attempts to live at everyone else's expense." I personally look forward to a day when taxes are retired to the tar pits of history, as a relic of a less-civilized age. Certainly we should get rid of the direct taxes on income, which even Albert Einstein couldn't understand! There may be a role for indirect taxes, like the Constitutionally-prescribed tariffs and duties, to provide some revenue and manage trade. Even something like a gasoline tax may have a place, as long as revenues remain local and used only to fund roads and related expenses. But wouldn't it be great to live in a society where only criminal transgressors pay the costs of protection, through full restitution?

10. The Fair Tax is the solution to our tax woes -- or, the value-added tax or "Henry George" tax, etc. The only truly fair tax is one that isn't levied. The much-touted Fair Tax would just end up saddling us with another (national sales) tax, tracking every single economic transaction, and turn middle class Americans into de facto welfare recipients. The real solution is to scrap the tax code and replace it with nothing -- that is, nothing but the original Constitutionally-limited tariffs and duties.

11. Paying taxes is patriotic -- it's your duty to your country! Based on the clear majority of contemporary government functions, it's far more patriotic to NOT pay taxes. That is, unless you prefer endless wars for drugs and oil, suffocating bureaucracies and omnipresent-surveillance police states. Oh, and did I mention the new Tasers that can shoot three people at the same time? Let's resolve that Jude Wanniski was right -- 'The Way the World Works' is with low taxes, and withholding our support for the evil state has become a moral imperative.

12. Because we give government bailout bucks to banks / corporations / businesses -- this gives us the right to take it back. Yes, but only if that means reducing or preferably ending the corporate welfare! The ethos promulgated by media and movies is that rich people are evil and even sociopathic. But wait -- isn't it often the opposite? If someone becomes wealthy it is generally due to hard work, genius and serving his or her fellow human beings. A great example is 'The Pursuit of Happyness' -- based on a true story which is an amazing rags-to-riches odyssey. Low taxes make advancement more reachable. Look at our nation's past history and how our economy soared before the income tax and Federal Reserve came along to short-circuit it.

This is a golden time for America and the world, when we rediscover the basic principles of liberty and prosperity. There is really nothing we can't achieve when we reach deep within for our own unique insights, reach out to others through our labors and talents -- then spark the future through free enterprise. To paraphrase Ronald Reagan, "This is the place where ordinary people can achieve extraordinary things!"