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The National Benefit of Higher Taxes

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“When the household is so far in debt,” the conservatives’ argument goes, “you can’t go printing more money. You have to cut spending.”

The conservatives’ argument likens the nation to a household, and that no household will last long if it perpetually runs up debt. Sooner or later, they say, the level of debt will overwhelm the household’s, the nation’s, ability to pay those debts. What’s more, they believe that many government programs – and especially social programs such as Medicare, welfare, and unemployment insurance are a waste of taxpayer dollars, that they are essentially money pits. They believe in “starving the beast,” that the lower the taxes are, the lower the spending must go, and that sooner or later this will not only force government spending back under control, but will enable the nation’s businesses to keep more of their money so that it can be profitably invested, and that the nation as a whole will benefit.

We can all agree that perpetual deficits are not good for an economy, but when it comes to “starving the beast,” the conservatives are working with a faulty paradigm. Why? Because in the macroeconomic view, the only tax dollars that are wasted are those that are sent outside America’s borders (and even those are not always wasted). Read that last sentence again: any taxpayer dollars that are not sent outside America’s borders are not wasted.

Let’s go back for a moment to the household metaphor I mentioned above. If the nation is likened to a household, then the government is the head of the household, and any money that is spent outside the nation’s borders is gone, just as is the money that the head of the household must spend on utilities and expenses. But, and this is where the conservative paradigm of government waste utterly fails, the money that the government spends within the nation’s borders must then be likened to the head of the household spending money within the household. The money is not wasted at all, but is still there circulating within the household.

Now let’s take this metaphor a step further. When one person who is not the head of the household has a lot more money than the others within the household, there are bound to be ill effects. This can be likened to the fact that the Walton family of Wal-Mart fame has more money than the bottom forty percent of all Americans. Right now, America has greater inequality of wealth than at any time since the 1920s, just prior to the Great Depression, and there are many who think that’s somehow a good thing, a reward for someone’s hard work.

But it’s not a good thing, not at all. A yawning gap between the rich and the poor is a hallmark of third-world nations, whereas, with the exception of certain OPEC nations, high taxes and extensive regulation are found in all first-world nations. Why is that? Because rich people will not invest where they cannot make money, and the less the people have to spend, the less likely it is that rich people will invest in something to sell those people. Rich people may not like to build factories in places where they have to pay higher wages and taxes, but they absolutely love to sell products in nations with strong middle classes, for the middle class, not the rich, is the real engine of prosperity for first world nations.

That is precisely what higher taxes provide: a stronger middle class. They do so by enabling more and better schools staffed by better paid teachers (who don’t need second jobs just to make ends meet), better staffed fire and police departments, and the regulatory agencies necessary for the prosperity of a nation. In other words: big government.

No, I’m not referring to big government in the Soviet sense, for in the days of the USSR, there was no place for it. I’m referring more to the America of the 1950s and 1960s where, for all the troubles and internal strife we faced, our economy was doing quite well despite the fact that the top marginal tax rate was at 70 percent! At that time America had a burgeoning middle class; and much of the middle class was comprised of those government jobs that modern conservatives rail against. And the proof that socialized democracy is the best economic model is all around us, for every single first world nation (except for certain OPEC nations) is a socialized democracy with big government, whereas every single nation that has low taxes, small government, and weak regulation is a third world nation. Whatever one may claim in philosophical arguments, it’s hard to argue with the obvious difference in the living standards of the regular citizens of first world socialized democracies and those of citizens of fiscally-conservative third-world nations.

I’m not recommending that we go back to having a 70 percent top marginal tax rate. I do, however, say that we need to raise taxes, for as long as those taxes do not leave America’s borders, they are not wasted. Instead, they are used to create jobs which build the infrastructure that our private sector so desperately needs to prosper. It’s time for the tax rates to go up, particularly for those who can best afford higher taxes: the rich.

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About Glenn Contrarian

White. Male. Raised in the deepest of the Deep South. Retired Navy. Strong Christian. Proud Liberal. Thus, Contrarian!
  • A perfect compliment to this article is in The Atlantic by Derek Thomson. The title says it all: “Tax Cuts Don’t Lead to Economic Growth, a New 65-Year Study Finds”

    Money quote: “Analysis of six decades of data found that top tax rates “have had little association with saving, investment, or productivity growth.” However, the study found that reductions of capital gains taxes and top marginal rate taxes have led to greater income inequality. Past studies cited in the report have suggested that a broad-based tax rate reduction can have “a small to modest, positive effect on economic growth” or “no effect on economic growth.”

  • Igor

    Mathematical models invariably show that greatest total wealth results from most uniform wealth distribution.

  • We need higher taxes on junk food and excess or wasteful consumption.

  • Les Slater

    The U.S. prosperity of the 50’s and 60’s had very little to do with any tax policy. It was based on the bankrolling the rebuilding of what was destroyed during WW-II and the manufacturing that went along with that. This was popularly called the post-war economic boom.

    The idea that resources can’t be wasted if they stay within some border is pure nonsense.

  • Glenn Contrarian

    Les –

    ‘Pure nonsense’ based on what, exactly? In the macroeconomic view, any money that remains and is put to use within a nation’s borders is supporting the economy of that nation. It is only wasted if it is (1) sent outside a nation’s borders, or (2) stored somewhere that it is not put to use.

    This is not to say that the money is always put to its best use – of course not! But taxes that are not sent outside our nation’s borders is almost never wasted in the macroeconomic view. It goes to support government jobs (or government contracted jobs) which in turn support the national infrastructure which enables a strong private sector.

    And the proof? As I stated in the article, with the exception of certain OPEC nations, every single one of the first world nations are ‘socialized democracies’ with high taxes, big government, and strong regulation. If the arguments against higher taxes, big government, and strong regulation (in socialized democracies) really held water, then none of the non-OPEC nations would be first-world nations. Instead, the nations that have low taxes, small government, and weak regulation would be first-world nations.

    But they aren’t, are they?

    It’s hard to argue with concrete results, Les. That is, unless you’re like my Tea-Partier brother who thinks that China and India are first-world nations because they now have lots of factories there. But he’s hooked on Fox News, and so doesn’t know any better.

    If you’re going to claim that what I say is ‘pure nonsense’, then at least have the good manners to show how, to give concrete examples of how the tax dollars are wasted…and how the fact that the non-OPEC first-world nations are all socialized democracies somehow has nothing to do with their political/economic models.

  • Les Slater


    My ‘pure nonsense’ statement was not meant to offend you. I deliberately said ‘resources’ rather than ‘taxes’ which you were specifically referring to to try to get closer to the essence of what’s going on.

    When one talks about taxes, they’re talking about money. It is a government compelling a certain use of money to be used for whatever purposes. This is fundamentally a compelling of the use of certain resources to help accomplish some policy.

    Money is nothing but what it enables the possessor to acquire for their own purposes. Someone has had to produce what has been acquired. When these resources are delivered to any entity that has nothing to do with production of those resources then it is not only a waste but can actually hinder that production.

    In that sense, much of what is produced, whether or not it ever takes the form of taxes, is wasted.


  • Glenn Contrarian

    Les –

    Okay, let’s use an example that should address what you see as a waste of resources – bombs. The taxpayer funds are used to pay a bomb-making factory for the bombs. The factory pays the steel mill et al for the needed parts, and the steel mill pays the mine companies for the raw material. The government gets its bombs and blows up some more people (and more of the victims’ families decide to become terrorists).

    Be that as it may, in this economic process, the money – unless it was sent overseas – never left the economy. It served to keep the companies afloat and keep the people employed. Was it a waste of raw materials? Sure, especially since it was not used to build infrastructure (but created more death, destruction, and enemies instead). But just like the greatest taxpayer-funded economic stimulus in history – World War II – the people were kept employed and thus had money to spend…and business prospered. We climbed out of the Great Depression and boomed in the 50’s and 60’s thanks to the manufacturing infrastructure that the taxpayers had funded during WWII…even though our debt at the end of WWII was (relative to GDP) even greater than it is now.

    For a different example:

    A single mother picks up a taxpayer-funded welfare check from the government. She spends that money to feed, cloth, and house her children (though welfare checks are hardly ever enough to do all that). The businesses where she spent said money use the revenue to cover expenses (including payroll) and take profit…and pay taxes.

    That money from the welfare check did not disappear down a hole – It keeps recycling in the economy, and the only portion of it that is wasted is that which finds its way overseas, like the portion that Wal-Mart uses to buy its products from China. Otherwise, the money is used not only to keep the single mother and her family from the streets (and hopefully the children from lives of crime), but it’s also used to keep businesses functioning and able to make payroll…and able to pay taxes.

    This is not to say that the government is any kind of panacea – of course not! But a strong tax base is essential to a strong economy – thus the example of ALL the non-OPEC first-world nations, Les. It’s hard to argue with results.

  • Les Slater

    Glenn, we seem to agree on much here but I see the waste as being much greater. And on the other side, to the extent that the Wal-Mart sale goes to produce more product and meet some of the needs of those workers in China, I don’t see that as a waste at all.

  • roger nowosielski

    Exactly. It’s myopic to be viewing the health of the economy from strictly nationalistic standpoint.

  • Glenn Contrarian

    In one way it is certainly myopic to view the health of the economy from a strictly nationalistic standpoint. In fact, that was one of the main points of an article I wrote over three years ago wherein I pointed out that while globalization has been nothing short of disastrous for America’s economy, it’s been a fabulous economic boon for many other nations. Sending so many hundreds of billions of our dollars overseas has kickstarted many economies – but since our economy is still significantly larger than any other on the planet, if we let our economy go down the tubes, we’ll take much of the rest of the world’s economy with us.

    And in order to keep our own economy on an even keel, we must have a sensible tax policy to support our economy and to ensure jobs are available for our people.

  • Les Slater

    Depends on how you define ‘America’s economy’. Some Americans are doing quite well, some are not.

    Right now it is not any inherent strength of the U.S. economy that’s keeping the world glued together; it’s the U.S. military might doing that. But that’s becoming increasingly difficult.

  • Glenn Contrarian

    Les –

    On “some are doing quite well, some are not”, that’ applies to all nations…but the income inequality is far worse in third-world nations…and in America.

    And while the U.S. military plays a definite role in “keeping the world glued together”, what sucks is when we’ve got people in power who do not understand that strength used sparingly is much more effective in its use than strength used any time a neo-con thinks he sees a terrorist.

  • Les Slater

    ‘neo-con’s seeing terrorists has nothing to do with anything. The whole justification for military action is shrouded in a huge web of lies. The military’s main role is to attempt to keep certain international relationships to the advantage of, primarily U.S. capital. This is becoming increasingly desperate and wider in scope.

  • Glenn Contrarian

    Um, Less –

    “Neo-cons seeing terrorists” had everything to do with our invasion of Iraq…and with today’s idiocy concerning Iran.

  • Les Slater

    Neo-cons seeing terrorists had nothing to do with the U.S. invasion of Iraq. The first invasion was that the U.S. considered the Saddam Hussein regime not stable enough to serve as a reliable client. Same also for the second invasion but also to wrest oil contracts from France and force Iraqi oil to be sold denominated in dollars instead of Euros. France was a big loser in that war.

    All the noise about terrorism and weapons of mass destruction was nothing but a ruse to get public, congressional, U.N. and NATO support.

  • Glenn Contrarian

    Les –

    Neo-cons seeing terrorists had nothing to do with the U.S. invasion of Iraq.

    REALLY? Have you heard of A Clean Break: A New Strategy for Securing the Realm? It was a 1996 report that supported “a new approach to solving Israel’s security problems in the Middle East with an emphasis on “Western values”. It has since been criticized for advocating an aggressive new policy including the removal of Saddam Hussein from power in Iraq.

    The author of that report was a man named Richard Perle. In 1998, Perle was a core member of the Project for the New American Century when he other core members of the PNAC – Paul Wolfowitz, R. James Woolsey, Elliot Abrams, and John Bolton were among the signatories of a letter to President Clinton calling for the removal of Hussein. You might recognize some of those names – they are all noted neoconservatives.

    In 2001, Richard Perle was the chairman of the Defense Policy Board:

    …the [Defense Policy Board] served a very powerful and influential role in foreign policy in the George W. Bush presidency. Former Chairman Richard Perle was an influence in the decision to go to war in Iraq

    In 2001, Paul Wolfowitz was Deputy Secretary of Defense and was “a major architect of President Bush’s Iraq policy and … its most hawkish advocate.” Donald Rumsfeld said in his interview with Fox News on February 8, 2011 that Wolfowitz was the first to bring up Iraq after the 9/11 attacks during a meeting at the presidential retreat at Camp David.

    Neoconservative thought was one of the main influences – and perhaps the main influence – on the “Bush Doctrine”:

    The Bush Doctrine, and neoconservative reasoning, held that containment of the enemy as under the Realpolitik of Reagan did not work, and that the enemy of United States must be destroyed pre-emptively before they attack – using all the United States’ available means, resources and influences to do so.

    This is further reinforced by Donald Rumsfeld’s speech at the Army War College where he decried those who want America “to go back on the defensive”.

    Perhaps most telling of all is this 2007 Vanity Fair article containing interviews and quotes from the neoconservative pantheon where Richard Perle regrets pushing the invasion of Iraq, and where other leading lights of the neocon movement blame each other, ‘disloyalty’ within the Bush administration, and especially Bush himself for Iraq becoming a ‘failed state’ in the wake of the invasion.

    So…yes, the neocons DID bring you the Iraq War, Les. And Dubya simply wasn’t strong enough to resist their influence – indeed, as the article on the Bush Doctrine shows, he embraced their influence.

  • Les Slater


    You should re-read my 13 and 15. I never said that self, or otherwise, described ‘neo-conservatives’ were not influential in policy matters. I was objecting to the oversimplification ascribed to them ‘seeing terrorists’ as their motivation.

    In my opinion, it was the first Bush’s failure to take Baghdad that cost him the ’92 election. None of the calculations going forward had anything to do with terrorism.

    Again, with Iran it has nothing to do with terrorism or even primarily, the threat of developing nuclear weapons. The concern is with the prospect of Iran becoming the most important regional economic power and the political influence that comes with that.


  • Glenn Contrarian

    Les –

    Call it an ‘oversimplification’ if you like, but the fact remains that it was the neoconservative philosophy – and neocons within the administration – that Bush embraced and accepted – that drove us into the Iraq War.

    It didn’t help that Bush truly desired to be a ‘war president’, according to ghost-writer Mickey Hershkowitz, who was working with Bush on his memoirs – and Hershkowitz was not just another ghost-writer, having written and published the memoirs of Reagan aide Deaver, former Texas Governor and Nixon Treasury Secretary John Connally, newsman Dan Rather, astronaut Walter Cunningham, and baseball greats Mickey Mantle and Nolan Ryan. Read the article – if it doesn’t tick you off at his irresponsibility, nothing will. According to Hershkowitz, “[Bush] told me that as a leader, you can never admit to a mistake. That was one of the keys to being a leader.”

    Contrast that to Romney’s book “No Apology”, and the fact that Romney has apologized for precisely NONE of his gaffes to date.

    And what does this have to do with the neocons? Seventeen of Romney’s twenty-four foreign policy advisers served in the Bush administration. Same no-apology attitude, same foreign-policy advisers…Les, do we really want to go down this road again?

    You said:

    In my opinion, it was the first Bush’s failure to take Baghdad that cost him the ’92 election. None of the calculations going forward had anything to do with terrorism.

    You’ll find that other than concerning Iran-Contra, I’ve said precisely ZERO bad things about Bush…and it was NOT his ‘failure’ to take Baghdad that cost him the election – it was “it’s the economy, stupid”, as almost all presidential races are. The current race between Obama and Romney is an exception to the rule – by rights Obama should be losing badly, but the Republicans (and Romney) have gone so far to the right that they’re off the rails (like no abortion even in cases of rape or incest). A moderate Republican candidate would have plastered Obama in this election – which was why Jon Huntsman was the ONLY candidate that really worried the Obama campaign.

    George H.W. Bush made a wise decision not to go to Baghdad – and if his son had paid attention to the book his dad wrote, he would have noted the warning that “there was no viable exit strategy”. In my opinion (Iran-Contra notwithstanding), Bush 41 was a good president. It was the economy and nothing else that sunk his chances for reelection.

    You said:

    Again, with Iran it has nothing to do with terrorism or even primarily, the threat of developing nuclear weapons. The concern is with the prospect of Iran becoming the most important regional economic power and the political influence that comes with that.

    Um, yes…and no. Iran’s already on the way to becoming the dominant power in the region thanks to the Iraq War (which is now not much more than a puppet state for the Shi’a rulers of Iran). What you’re forgetting, though, is the prime importance that religion plays in the region – the schism (and resultant hatred and mistrust) between Shi’a and Sunni is significantly deeper than that between Catholics and Protestants.

    Those who really understand what’s going on there know that the reason Shi’a Iran WILL have nuclear weapons has nothing to do with America or Israel, but everything to do with nuclear-armed Sunni Pakistan. Al-Qaeda’s one-time second-in-command Zarqawi once told his followers that “we will continue the fight against the Zionists (Israel) and the Great Satan (America), but never forget that the real enemy are the apostate Shi’a. Al-Qaeda is a Sunni organization.” That’s not an exact quote, but the meaning is precisely the same. It’s from The Shi’a Revival by former U.S. Naval Postgraduate School professor Vali Nasr. The book’s a real eye-opener – and was on the recommended reading book list for U.S. Naval officers.

    The neocons got us into the Iraq war – and if Netanyahu had his way, we’d be invading Iran, too…and there are indications that he is determined to attack Iran before the U.S. elections.

    The many links between neoconservatism and Israel’s national interests are well documented. Romney has quite a few Bush-administration-era neo-con foreign advisers on his staff. Romney just visited Israel and – on stern ‘advice’ from Netanyahu – cancelled a scheduled meeting with the political opposition.

    In other words, I’m having a really difficult time differentiating Romney’s foreign policy goals from the disastrous Bush policies. Or his domestic ones (“take two tax cuts and call me in the morning”) for that matter.

  • Les Slater


    So, you’ve backed off on this ‘neo-con seeing terrorists’ thing; that’s good. We disagree on much else though.

    I’m beginning to see where you’re coming from. You’re putting persons associated with a certain perspective, held at a particular moment, however long that may be, as the driving force, at least in some foreign policy arenas. No, the U.S. ruling class has a broader perspective. They just let the most useful to come to the fore as the conjuncture dictates.

    We’ve had this debate before. You see Romney as representing the least repentant of all evil, and Obama, God help us, maybe, not quite so.

    Also, you give religion way too much credit for being a source of various aspects of political determination. And that goes for Israel too. Israel is the U.S. junior partner in the region, not the determinate, of U.S. Middle East policy.


  • Glenn Contrarian

    Les –

    I really think you didn’t understand what I said. Bush did not have ‘a broader perspective’ when it came to Iraq, as you’ll find if you read the references I gave. The neoconservatives haven’t gone away, which is why I pointed out that most of Romney’s foreign policy advisers are holdovers from the Bush administration?

    I never said anything indicating that Romney is the least repentant ‘of all evil’. I simply pointed out that he – like Bush – refuses to ever admit that he is wrong about something. Maybe you think (like Bush) that a refusal to apologize is a good trait for a leader, but I will never think so. I remember in one of Kerry’s debates with Bush, he asked Bush “is there anything you did in your first four years as president that you think was a mistake?” Bush DID NOT answer. The refusal to ever apologize is the purest iteration of pride. Again, maybe you think that’s a good thing…but the ability to apologize sincerely and publicly is a hallmark of humility, and Obama’s shown that he is capable of doing so. I would much rather have a leader who has a clue about the importance of humility – history has too many examples already of what happens to a nation when the leader is too prideful. Obama has his faults, absolutely! But at least he’s man enough, humble enough, to admit them, and to admit when he was wrong. It’s not a matter of good or evil, it’s a matter of pride and humility, of right and wrong.

    You said:

    Also, you give religion way too much credit for being a source of various aspects of political determination. And that goes for Israel too. Israel is the U.S. junior partner in the region, not the determinate, of U.S. Middle East policy.

    Sorry, Les, but if you think religion is anything but the main driver of political determination in the Middle East, you’ve got a lot to learn. First, don’t get me wrong – I’m every bit as much against mainstream “Christianity” as I am against Islam. That’s why I referred you to the book by Vali Nasr, one of our nation’s foremost scholars on Shi’a Islam. Yes, money is important to them, as are national pride and food and education…but we are talking about theocracies where religion means more than anything else – where religion has a hold on government that American evangelicals can only dream of having. The very foundations of their legal system is based on Sharia, whereas here in America it’s controversial to post the Ten Commandments on government property.

    In other words, Les, do not make the mistake of thinking our “freedom from mandatory religion” is universal – it’s not.

    Les, the United Arab Emirates is one of the most liberal of the Islamic nations – women don’t have to wear scarves, but kissing in public can and does land you in jail. I attended the Worship Service of the Church of which I’m a member twice in Dubai – but it’s in a secret location. Why? Because all non-Islamic religions are required to be in a certain compound not far from the local port named Fallujah. We refuse to be part of that compound because if things turn bad – as they might – all the non-Islamics would be trapped in that compound. And this is in one of the most liberal Islamic nations!

    Religion permeates everything they do, Les. To think that religion is not the main determinant of their political and social policies is to evince rank naivete of the region.

  • Les Slater


    Going to have to respond after I get back home. Don’t feel comfortable with ‘smart’ phone for this sort of thing.


  • Glenn Contrarian

    I know how you feel….

  • Glenn, you can have your own opinions, but you can’t really have your own math or your own facts.

    Raising taxes on the wealthy or even the higher parts of the middle class cannot possibly raise enough money to address our current deficit in any meaningful way. The only way for tax increases to really work is to tax the poor and the middle class as well. Is that what you’re proposing, because taking money out of the pockets of consumers as well as capitalists can only be disastrous for the economy.


  • Income inequality is, of course, a myth. It assumes that there is a basis for comparison between income from wages and income from investments when there is no such basis. It’s like comparing apples and oranges. It’s the equivalent of saying that I am richer than you are because you earn $50,000 a year and I have 3 cars. It’s pure nonsense tailored to serve a divisive political agenda.

  • Zingzing

    So some income is not income? Your #23 makes some sense, Dave, but #24 is ridiculous.

  • Igor

    @24-Dave: what nonsense this post is filled with!

    Income inequality is, of course, a myth.

    You can’t seriously say that my perceived income inferiority to Romney is mythological! Does Mitt have just a mythological 5 car garage on a California beach?

    It assumes that there is a basis for comparison between income from wages and income from investments when there is no such basis.

    Of course there is, and the IRS tax laws go to great lengths to specify that comparison, as well as extensive case law, and, BTW, to legislate in favor of investments over mere work.

    It’s like comparing apples and oranges.

    A perfectly valid comparison. Five apples is the same quantity as five oranges. Repeating a brainless metaphor does NOT improve it’s veracity!

    It’s the equivalent of saying that I am richer than you are because you earn $50,000 a year and I have 3 cars. It’s pure nonsense tailored to serve a divisive political agenda.

    A silly example. In our capitalistic society 3 cars may well be worth more than $50,000, both because their liquid value may easily be several times higher, and our capitalist economy has many ways to amortize time-dependent incomes to make exactly such comparisons possible. Late night TV is full of ads from guys willing to exchange your lottery winnings for hard cash.


  • Income from wages is obviously different to income from investments.

    Money put into investments has already been earned and taxed before it was invested.

  • Clav

    Money put into investments has already been earned and taxed before it was invested.

    Bears repeating.

    Over and over again…

  • Glenn Contrarian

    Chris and Clav –

    Money put into investments has already been earned and taxed before it was invested.

    By the same train of illogic, ALL money has been earned and taxed before anybody (after its first possessor after it was minted) got their hands on it, and so there should never be any taxes, ever (which y’all will probably think is a great idea, never mind the glaringly obvious difference between the socialized democracies with high taxes as compared to the the ones with low taxes, small governments, and little or no regulation)! Y’all really need to learn when your excuses hold no logical water whatsoever.

    What is taxed, people, are earnings, whether those earnings belong to the guy who earned a paycheck busting his butt as a fry cook, or ‘earned’ dividends belonging to the guy sitting on his can on a beach in the Mediterranean.

    Comments #27 and #28 are not sound reasoning – they’re excuses and nothing more.

  • Glenn, when it comes to illogic, few can ever even hope to match you.

    Perhaps when you come down from your weird flights of excessive exuberance and total irrationality, there will be some hope of a sensible or at least practical conversation. I’ll let you know if and when y’all manage to sober up…

  • zingzing

    well, he’s right about the “earnings” bit, chris. there’s no real reason why hard work should be taxed more than letting your money make money. seems kinda counterintuitive. (and yes, i have investments.)

  • I’m not sure what the point being made here is.

    Income from already taxed money is somehow different than income from earning a wage? The income from the already taxed money has not yet been itself taxed, therefore it is no different. It is all income.

    Say I spend 100k of money that gets earned and taxed to get an education as my investment toward earning a wage, I buy a car and gas and insurance to get to said wage earning facility, I buy suitable clothing, pay for day care, all to enable me to earn income, all paid for with taxed funds–then what?

  • If I invest my already taxed money in a farm or a business, I am still investing taxed money to generate income. Yet, I will not be taxed at a lower rate than a wage earner on that profit.

    Even if I save all my money and start a corporation, and that corporation earns a profit, that profit will be taxed much like a wage-earner, not like capital gains. I have seen no IRS rule stating that because I opened my corporation using post-tax money, its earnings will be subject to limited taxes.

    I say, if I invest money into my grandson, giving him food and shelter, so that he may survive to work at the deli–likewise, my investment is made in post-tax dollars.

    To arbitrarily claim that capital gains income deserves a special treatment, is just that, arbitrary. Why not interest income? Do you not lend money that is post-taxation earnings? Why then does interest income get taxed at an earnings rate?

    The post-earnings, post-tax argument seems capricious at best and not at all in line with other treatment practices for income on post earnings, post-tax investment.

  • (In fact, it actually smacks of political lobbying for preferential treatment by the wealthy.)

  • On one hand commentors complain of government interference in “free market” via policy, and on the other argue that certain forms of income, e.g. inheritances and capital gains, should be treated differently than other forms of income such as W2s.Robert duPrey

  • Igor

    @27,28 Chris and Clav: ALL money is multiply taxed! Get over it.

    Every dollar paid by an employer has already been taxed against the people who previously handled it, whether investors or customers, for example.

    Look anywhere in the economy and you can see where transactions are multiply taxed. It’s an essential ingredient of our modern economy, which is dynamic, not static. All rentiers draw fees from transactions, from money moving in time.

    IMO it’s a confusion in the Calvinistic mind of westerners that only a virgin dollar can be taxed, just as only a virgin spouse can be wed.

    But there are few virgin dollars, just as there are few virgin spousal prospects, and really, what difference does it make?

  • Glenn Contrarian

    Igor –

    “Virgin dollars” – Nice turn of phrase! Useful, too….

  • Igor

    Economics seems to be hopelessly entangled in morality and religion. From the beginning cats like Adam Smith, David Ricardo, etc., have been employees of The Church and have devoted all their effort to proving that the Status Quo (church rule sanctioned by the powerful) was right and just and immutable.

    Thus, we find that economic rules are not chosen for their efficacy in promoting the General Welfare, but rather to make sure they properly punish miscreants, i.e., the poor, and properly reward the virtuous, i.e., the rich, for surely we have proven that wealth and poverty are Gods judgements on the sinners and the virtuous, so it must be so.

  • Les Slater

    Capital, to the extent it has a free hand, determines not only economics but the whole system, including the political, that operates at its behest.