First... even though the mob can clearly vote itself whatever tax structure it wants... the tax burden is now painful enough to seriously harm the economy. That is, even though the political feedback loop is broken (the majority of voters don’t have to pay the taxes, so there’s nothing to stop them), the economic feedback loop can’t be subverted. So the government has begun borrowing enormous amounts in order to satisfy the demands of the mob. Specifically, the federal government is now spending about $4.4 trillion a year. Income taxes only raise about $2 trillion a year. Thus, even if you doubled income taxes, we’d still run a deficit every year.
Yes, it sure seems true right now. Today, about 10% of the population pays for roughly 75% of all income taxes. Looks like everything is working out the way the voters want. They want more government services... They want free “Obama phones”... and EBT cards that can purchase luxury items and booze... and discounted housing... and cheap mortgages... and free education... and free health care... They want it all. And they will vote for it every time. More and more. By 2011, 49.1% of American households received some form of direct benefits from the federal government. As a result, more than half of Americans now receive more benefits from the federal government than they pay in taxes. Folks who are the recipients of this largesse have developed sophisticated arguments to explain why this is “fair” and “right.” But the truth is, it doesn’t really matter what they say. In a democracy, every argument about what’s legal eventually comes down to the ballot box. And there’s no way the 10% who have to pay can compete with the 90% who don’t when it comes to a vote. And so... since 1960, the average federal-tax burden per family in the U.S. has soared. In real dollars (indexed to 2011), the tax burden in America has gone from $11,500 per household to almost $25,000 annually. Just ask yourself this question... How can the median household, which earned $50,000 in 2011, afford to spend half its income on taxes? Obviously, it can’t. And by having sharply progressive taxation, it doesn’t have to... at least on paper. We’ll come back to this in a minute.
Hank Blaustein | © 2018 Grant’s Interest Rate Observer. Used by permission. www.GrantsPub.com
American Consequences 39
Made with FlippingBook Online newsletter