The Tax Issue

With all the talk about raising and lowering taxes, I figured I'd explain taxes...at least from the conservative standpoint.

I know it can be rather boring stuff, but as I try to tell my wife, to no avail, it's important to understand because it's one of the primary differences between liberals and conservatives....and heading into this election, could be the difference between socialism and capitalism.

I'll go into detail below, but basically it boils down to believing in capitalism. Capitalism is a force into itself. Everyone contributes. If you honestly believe that 95% of the population can live on wealth of 5% of the people, you're living in a dream world. Those 5% will eventually leave because they refuse to carry 100% the burden.

In capitalism, you have the right to fail. In fact, if you aren't prepared, or if you're too greedy, the system will make you fail. If you become a success, then you are rewarded for your hard work. Conservatives believe in not punishing success by keeping taxes low. By keeping taxes low, business can expand, invest, and grow, whereby creating more jobs and contributing to a fully functioning society. The sky is the limit, and anything short of cheating(such as creating monopolies) will be rewarded. Liberals, however, believe that once you've obtained success, you're obligated to give back...so they force you to give back via taxes. It's borderline socialism because the successful are the rich, and the taxes on the rich go to the less fortunate aka the poor. In capitalism, when you punish success via taxes, businesses don't grow, they contract. They stop expanding and investing....and they lay off workers. OR, they move their companies to India who will gladly take the business and contribution to society in exchange for low taxes. In short, and quite possibly a slanted view, conservatives believe in rewarding the successful....liberals believe in punishing success.

How do you figure, you say? Well, if you're really interested, read on, as I expand a bit on what I just stated.

This is a nation founded on personal freedoms and freedom in business...free market forces, ie. capitalism. Just as with personal freedoms you can do as little or as much as you want, likewise as a business you can work as little or as hard as you want. To those who put hard work into their business, the rewards can be limitless.

The reason I have quickly turned to business owners is because, as you can imagine, those that work hardest, become the wealthiest. Unless you're a child of a billionaire, nothing comes for free in this country...at least that's how things were designed to work. You want something, you have to work hard for it.

Now, there's only so much a single person can accomplish. There's only so many hours in a day, so many appointments that can be kept, so many jobs that can be done. So eventually, if one wants to make more money, they need to hire people to help. This is, of course, good. To provide a good or service is one thing, but to hire someone...to contribute to creating a productive society, creating jobs is very good.

Of course, you can't be an idiot and be a boss in charge of a workforce, so you have to add a new skill set, which falls under the working hard category. So if you're successful enough, you make more money.

So if you're with me so far, and I mean this with no amount of condescension, you work hard, you make money. You become successful, you create jobs, you add to society, you make more money.

Now in the early days, you got to keep all the money you earned from working so hard and being successful. But then along came the 16th amendment, which allowed for income taxes so that the United States could pay for the Civil War. Before that, Government raised money by tariffs on imports. They[the government] didn't need much money, because they designed their role as being minimal. But the military was one of their roles, and much money was needed to fight in the Civil War, so a tax was decided upon. Initially, it was meant to be temporary.

So these days...you work hard, you make money, you become successful, you are forced to give a portion of that money to the government. Everyone accepts this as a given these days, so they must account for taxes as they work hard to make money. No one likes to give their money away, of course, but business owners particularly. They are the ones sacrificing, risking capital, creating jobs. But as long as taxes are low, since taxes are a given anyway, business owners are willing to take on a little extra risk, work even a little harder, and keep creating jobs in order to make money.

But what happens as taxes begin to raise, as you are forced to give away more money for your hard money and success? You become less willing to sacrifice for that money. You are willing to risk less for that money. After all...you've lived the American dream. You're successful...you've had to work hard, though. Had to sacrifice, take risks...only to give away half of your earnings?? Initially, you will likely simply pass those tax increases along to your customers. So in essence, the tax isn't just happening to the rich...the new taxes are making it all the way down to the consumer.

But eventually, particularly for the small business owner, you'll begin to curtail your business. It no longer becomes worth it to pay that much for Social Security taxes on each employee...so you start to lay off employees to keep your profit margin up. Laid off employees means less contribution to society.

Plus, now, since you're making less money, you're spending less money. That means less job creation elsewhere. You're not paying for housing renovations or upkeep, so painters, contractors, roofers, construction workers, they all are less apt to find work. Less work, means less employment, less employment means less investment (in savings, capital, investments, etc), less investments means recession.

Now this is the part I'm confused by. It's the whole...those who fail to learn history are doomed to repeat it. You'd think that there should only be a few recessions in history for people to realize that high taxes are bad. How is it confirmed that high taxes are bad? Well...to get out of a recession, aside from tinkering with interest rates, it usually takes tax cuts to fix the recession.

That's the primary fix...lower taxes. Democrats agree...during a recession anyway...otherwise they wouldn't have voted countless times to lower tax rates during rough times. Barack Obama himself said that he wouldn't raise taxes if the economy was bad. So why is it, once times aren't so rough, Democrats are eager to raise taxes again. It leads to the same cycle people!

Actually, I know why. It goes back to the fundamental idea of taxing success. Democrats believe that once someone is successful, they are fundamentally obligated to give up those earnings and pass them on to the less fortunate. That's not the way capitalism works folks.

Truth be told, many wealthy people give plenty of their money to charities, organizations, foundations, etc. Their belief is that they know how to maximize their money and they want to be certain that their money is getting the best return. They also know, that the government rarely gets a fair return for the money spent. They also generally believe that money shouldn't be a handout, rather going to help people help themselves.

So if many people are giving money to worthy causes, and to boot they are helping people help themselves, ie contributing more to society than a mere handout, why not let capitalism run the way it's supposed to run. Do we need some oversight? Sure. But minimal oversight. Trust me...capitalism always punishes those that deserve it in the end.