 merrie says: But the income tax is big and visible, so it's a problem that a growing number of people don't pay, but get benefits from those who do. Frederic Bastiat, the great 19th-century French economist, defined the state as "that great fiction by which everyone tries to live at the expense of everyone else." I don't know if he envisioned one half of the population living off the other half. It's important not to confuse the interests of the taxpayers with the interests of the politicians and other tax consumers. Yet that is done all the time. When the government bought toxic assets (of zero market value) from the banks, it said taxpayers would profit when the economy recovered and the assets once again commanded a positive price in the market. Even if we make the dubious assumption that the government is savvy enough to buy low and sell high, it's not the taxpayers who would benefit from any profits. The politicians will spend every penny, rather than cutting taxes. The built-in unfairness of the tax system has prompted a range of tax-reform proposals, such as a flat tax and replacing the income tax with a sales tax. These alternatives are better, but they have their drawbacks, too. For that reason, there is something more urgent than tax reform: spending reform. The true burden of government, the late Milton Friedman said, is not the tax level but the spending level. Taxation is just one way for the government to get money. The other ways — borrowing and inflation — are also burdens on the people. The best way to lighten the tax burden is to lessen the spending burden. If government spends less, it takes less. And if it takes less, the tax system will... |
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