The Wealthy Already Pay Far More Than Their “Fair Share”
Are you ready for the happy news? If we stick to Obama and Warren’s “essentials only” budget, we can eliminate all taxes for 99% of Americans, and even lower taxes for the top 1%, and still have enough to pay for defense, transportation, public safety, education and all the rest. How? Because the top 1% of all taxpayers — the wealthy elite businesspeople who benefit from roads and schools and firefighters — pay about 37% of all federal taxes, far more than enough to cover the essentials, plus interest on the debt and plenty of extras besides.
Clonk. That’s the second leg hitting the floor.
Kicking Out the Third Leg: Education, Public Safety and Roads Are Covered by Local Taxes, Not Federal Taxes
The final component in Obama’s thesis is far and away the weakest, but for some reason few pundits have noted it. Obama and Warren have intentionally conflated local taxes with federal taxes. In most localities across the country, public education, police and firefighters, and street repair are primarily paid for by property taxes, local sales taxes, and state taxes. Federal grants can supplement local funds, but rarely is a school district or a police department propped up entirely with federal money.
So if we revisit Obama’s and Warren’s speeches, they’re actually making an argument for increased local taxes. And yet they and their audiences somehow imagine that the arguments given are a legitimate rationale for increased federal taxes.
As I said at the beginning of this essay, Obama has just unintentionally proved the conservatives’ case for limited government, and for decentralization and local control.
The stool is now in pieces on the floor. But I just can’t stop kicking.
Obama’s Fallacy that the Goal of Government Research Is to Benefit the Private Sector
“The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.”
Now, everybody agrees that a great number of scientific and engineering breakthroughs have happened as a result of “government research,” primarily military research: not just the Internet but nuclear power, GPS systems, jet aircraft, and many more. But Obama is sorely mistaken in claiming that the Internet was created “so that all the companies could make money” off it. Actually, the Internet was created to facilitate defense-related research as well as to strengthen military command-and-control capabilities. It was most definitely not created “so that all the companies could make money,” as a very early ARPANet handbook explained:
It is considered illegal to use the ARPANet for anything which is not in direct support of Government business….Sending electronic mail over the ARPANet for commercial profit or political purposes is both anti-social and illegal.
In this instance as well as almost every other instance, government-funded engineering or scientific breakthroughs were originally and exclusively for military purposes; it was only much later that entrepreneurs came along and found a profit-generating and society-benefitting civilian use for military hardware.
Similar contravening facts undermine other aspects of Obama’s and Warren’s emotional arguments. Take transportation, for example. Prior to 1956, the vast majority of roads and highways and rail lines in the United States were built either privately, by local communities, or by states. It was not until the arrival of the Interstate Highway System in 1956 that the federal government became deeply involved in building roads — and even then, as with the Internet and most other massive federal projects, it was originally for defense, not for commerce.
But the highway system is by now already in place. And the cost of maintaining it and building whatever new highways are needed is a tiny fraction of our federal budget, far less than even 1%. And the business owners who benefit from roads are already paying more than enough taxes to cover their cost.
Progressives have been so intoxicated first with Warren’s speech and now with Obama’s that I’m not so sure they’re even aware that anyone has presented a criticism; progressives probably think that conservatives just avoid this whole topic because the entire arc of Warren’s and Obama’s line of reasoning is so convincing and devastating that it’s best to change the subject. But I predict that the pushback against this speech will grow so large that eventually word of it will reach the far left, and when that happens they may come back with the following retort:
Warren and Obama were just presenting a few examples, not a comprehensive list of public benefits from taxation. These were just off-the-cuff speeches, not policy papers. There are many other federal programs from which business owners benefit and toward which they should therefore contribute.
If so: Let’s see that list. Let’s get down to the nitty-gritty.
Did businesses benefit when in cities across the country HUD built massive housing projects which instantly turned into pre-fab ghettos?
Do businesses benefit when the EPA awards itself unilateral power to impose its interpretation of environmental laws, with no hearings and no warning?
Will businesses benefit when they are forced to abide by byzantine, onerous and expensive Obamacare regulations?
The progressive stance might be: “But we all benefit when everyone is healthy, when global warming is stopped, when children have high self-esteem, when no American goes hungry!”
But by this stage we’ve already passed from measurable physical benefits like roads to fire-fighting to vague claims about intangible potential benefits for which there is no proof. Obama said, “Somebody invested in roads and bridges” because the audience could understand a concrete example; he didn’t get up and say “Somebody invested in high self-esteem” because it would expose the slippery slope underneath this line of reasoning.
Should businesses pay enough taxes to support the nation’s basic physical infrastructure? Yes. Of course. And they already do. But should they pay taxes to fund every progressive social fantasy? That’s open for debate, and that’s not the point Obama and Warren were making. Overtly, at least.
We should thank President Obama for finally revealing the central justification for his economic policy. Now that we see what’s at the heart of his fiscal philosophy, we can demonstrate that he has only ended up proving the opposite of what he intended.
Others Debunking Obama’s Speech
This wouldn’t count as a comprehensive takedown if I didn’t note and link to some of the other pointed critiques of Obama’s speech. Here are some of the best, many of which cover points I didn’t even mention here:
- LauraW at Ace of Spades HQ
“[Warren and Obama] completely discount risk (and hard work). Risk is nearly the whole game. The whole thing, this entire American enterprise, rests on people who are willing to take a risk.”
- Paul Ryan
“As all of his big government spending programs fail to restore jobs and growth, he seems to be retreating into a statist vision of government direction and control of a free society that looks backward to the failed ideologies of the 20th century.”
- Rick Moran at PJM’s The Tatler
“The notion that it takes a village to build a business ignores the idea of a voluntary community and smacks of forced altruism. To Obama, we are all cogs in a machine with individual rights and achievements taking a back seat to a collective sense of worth imposed by a soulless government.”
“And it’s completely a straw man argument as if conservatives and Republicans are arguing to disband the fire department and the police department so we could all individually do it on our own. The idea that infrastructure is necessary and good is as old as the republic. It’s older than that. The Romans had the Via Appia, and that wasn’t exactly a new idea.”
- Mitt Romney
“The governor notes that the money that created those roads and bridges came out of the pockets that Obama is now looking to pick in the name of fairness.”
- Richard Fernandez at the Belmont Club
“The key ideas are familiar. Spread the wealth. Tax people so that they may “give something back.” Limit incomes at the top to maintain fairness….If no business can exist in a vacuum, neither can any politician’s talking points. It is perfectly understandable that Barack Obama’s economic and political philosophy are not entirely of his own making. Most of it is derivative.”
“I challenge anyone to find more than a small handful of highly successful businesspersons who have actually said the equivalent of ‘I got there on my own’ in first-person singular….Obama and Warren aren’t mad because successful people are out there saying ‘I did it on my own’ — because they’re not. They’re mad because these successful people aren’t saying ‘I did it because the government helped me.’”
“The[se] are the arguments that kings have made for enslaving the people in all ages of the world. You will find that all the arguments in favor of king-craft were of this class; they always bestrode the necks of the people, not that they wanted to do it, but because the people were better off for being ridden.”
“Obama has declared the un-Constitution, one that holds that all men are created dependent, with their only inalienable right being their continued obligation to support the governing system into which they are born. This is the antithesis of what our Founders sought to create, and it runs counter to the contract between government and people that we know as the Constitution.”
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