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The Truth About Taxes, or, the Work of 1000 Leeches

January 7th, 2013 - 10:17 am

“Tax policy” is one of those phrases that has a curiously amphibious effect. On the one hand, for most red-blooded individuals it cannot but act as a soporific: “Ah, tax policy, eh? Pardon me while I get the snifter refilled.”

On the other hand: for anyone in whom the instinct for self-preservation is still intact, the phrase must also act as an existential tocsin, eliciting for many something akin to the storied “fight or flight” response. In the age of Obama, “tax policy” is both a weapon and an excuse: a weapon in the war to create a more egalitarian — i.e., more impoverished and centrally regulated — society; an excuse to undertake all sorts of policy experiments in order to bring about this “People’s Republic” of utopia.

One of the most poisonous arrows in the quiver of the Obamacrats’ armory is the word “fairness.”

Steve Moore, in his brilliant new book Who’s the Fairest of Them All? The Truth about Opportunity, Taxes, and Wealth in America, says everything that needs to be said about the dishonest deployment of “fairness” by eager redistributionists who think political leadership means punishing success. And Cliff Asness, writing for the American Enterprise Institute’s online magazine The American, has weighed in to explain precisely what the Obama administration’s redistributionist campaign will mean for the rest of us. “The rest of us” — the 98 percent of those who will be affected by the new tax policies. “We Are the 98 Percent,” as Asness puts it in his title.

Read his column. It’s not just that Asness understands “the current tax rates cannot support the promises made to middle-class Americans.” Nor is it just that “you cannot pay for the Life of Julia, or any vision of a cradle-to-grave welfare state, without massive and increasingly regressive middle-class taxes.” All that is true, and Asness is right to remind us of it. At the center of the debate, however, is something that partisans of both sides tend to neglect when they do not seek actively to conceal it. Namely, that behind the back-and-forth about taxes is a deep question about who we are, about what our values are as political beings.

“The central issue of our time,” as Asness puts it, “is the debate over the size and scope of government.” That is to say, it is a debate over the size and scope of individual freedom, which is residuum left over after government has exercised its prerogatives.

Traditionally, what set America apart from the rest of the world on such issues was its explicit commitment to limited government. The powers vested by the Constitution in the federal government, wrote James Madison in The Federalist, are “few and defined,” concerned mostly with “external objects” like national security and foreign commerce, while those accorded to the individual states are “numerous and indefinite,” encompassing “all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State.”

The reason for this division and curtailment of federal power, Madison argued, was that limited government and individual liberty went together. We wanted the liberty. Therefore we had to limit the power of the state.

It might seem as if I had strayed far from tax policy. I haven’t. The power to tax, said Chief Justice Marshall, is the power to destroy.  Even more, it is the power to control. When we ask about what sort of tax policy we want, we are asking what sort of polity we want, what sort of lives we want for ourselves and our children. Again, Asness sees this with admirable clarity:

“Many progressive pundits are moving away from their traditional complaint that America’s tax code is too regressive, favoring the rich. They are starting to tell us, albeit only after an election mainly contested on these issues, the truth: to fund the European-style social welfare state which they advocate, we must tax everyone more.”

“A European-style social welfare state,” i.e., a government by appointed, not elected, bureaucrats who are accoutnable to no one but themselves and who preside over an atheistic, soft-totalitarian regime that is financed by debt and addicted to political correctness. Is this what we want? “Yes, obviously, for we just re-elected the most radical President is our history, someone who first came to office telling us he wanted to ‘spread the wealth around’ and that he didn’t like all that talk about ‘American exceptionalism.’ What else did you expect?”

Well, I am not quite sure what I expect. I do, however, know what I want. And I know that Asness is correct about the choice we face:

 The choice the country faces is simple. We can have big government and the Life of Julia (at least for a while, but that is another essay), with everyone paying through the nose and the middle-class share of taxes rising not falling, or we can return to the American tradition of limited government, with everyone paying a smaller burden to the state, with relatively limited services for, and relatively light taxes on, the middle class.

Again, what we’re talking about is not just a matter of arcane tax policy. At bottom, it’s about freedom. “As a byproduct of this growth in the state,” Asness points out:

… [we] also suffer a terrific erosion of liberty, free-enterprise, and individual responsibility and initiative. … [A]fter we become fully addicted to the latest increase in big government, the bill will ultimately be presented to everyone including, and in all likelihood over-emphasizing, the middle class and the poor. The people who were promised they would be untouched will see the largest proportional hikes. That’s exactly what has happened in Europe. We have seen this movie before, but this time we don’t need subtitles.

In other words, if we told everyone the ultimate destination right now, the country would likely reject it. But if built up in this piecemeal manner with benefits up front and the bill presented later, it can become reality.

Friedrich von Hayek took a line from David Hume as an epigraph for The Road to Serfdom. It is seldom, Hume pointed out, that freedom of any kind is lost all at once. The policies of the Obama administration are like a thousand leeches scattered over the skin of the body politic. Each leech extracts only a small amount of blood. But put them all together and you have the recipe for serious enervation if not collapse.

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