Why Tax Cuts Are The Morally Right Thing To Do

Why Tax Cuts Are The Morally Right Thing To Do

While a certain amount of taxation is necessary, we shouldn’t kid ourselves about its true nature. It’s a form of coerced taking.
Helen Raleigh
By

The U.S. Senate voted 51 to 49 along party lines to pass a tax reform bill early Saturday morning. No Democrat voted for the bill. Democrats and their media echo chamber wasted no time labeling it a handout to the rich at the expense of the poor.

The GOP and their supporters have made many counter arguments about how this bill will help many middle-class Americans economically. However, no one has yet made a compelling moral argument for why we need tax reform.

Taxation Is a Form of Coerced Taking

I’m no anarchist, so I understand that for government to perform the functions for which we have given consent, such as maintaining a judicial system and national defense, the government needs revenue and thus a certain amount of taxation is necessary. James Madison acknowledged that “The power of taxing people and their property is essential to the very existence of government.”

While a certain amount of taxation is necessary, we shouldn’t kid ourselves about the true nature of taxation. It’s a form of coerced taking. From the founding of this nation until the Civil War, the U.S. government, with very limited functions, was largely funded by tariffs and consumption taxes. In 1861, the U.S. Congress passed the Revenue Act of 1861, which included a tax on personal incomes to help pay Civil War expenses. It was a temporary measure, and the tax was repealed in 1871.

In 1894, U.S. Congress passed the Federal Income Tax Act of 1894, which imposed a 2 percent tax on all income over $4,000 (about $106,784.86 in 2015). In the following year, the U.S. Supreme Court ruled the act unconstitutional. The majority’s opinion rested on their understanding that “all taxes on real estate or personal property or the rents or income thereof were regarded as direct taxes.” Under the U.S. Constitution, direct taxes had to be apportioned by state population, which the Federal Income Tax Act of 1894 failed to do.

Once the progressive movement started to ascend in the early twentieth century, Congress ratified the Sixteenth Amendment, which removed the constitutional requirement of apportionment for income tax. Since then, the federal government has relied on its power of force to take a portion of private property from individuals each year. The growing taxation helped finance the growth of government, expanding its reach to many aspects of our lives and beyond the limits our founders envisioned.

You Work for Five Months to Pay for Government

According to the Tax Foundation, Americans today on average have to work for the first five months of the year to earn enough to pay annual federal, state and local taxes. This is insane. As Calvin Coolidge said, “collecting more taxes than is absolutely necessary is legalized robbery.”

Tax cuts are a way to reduce such legal plunder by returning a portion of what government has taken from taxpayers back to its rightful owners. So the more you’ve paid in taxes, the bigger cut you should get. If you are one of the Americans earning in the top 1 percent of income, who pay nearly 50 percent of this country’s taxes, you should get the biggest cut.

In that regard, the current Senate bill failed by reducing those Americans’ rate only to 38.5 percent from 39.6 percent. If you are one of those 45.3 percent of Americans who don’t pay any income tax, ask yourself, on what moral ground should you get a tax cut? Your financial needs, no matter how great they are, cannot and should not be the reason for the government to legally rob your neighbors.

If You Care About People, Support Corporate Tax Cuts

Another common attack against this GOP tax bill is that it helps corporations more than it does individuals. While I agree that the GOP bill has room for improving its reforms of the personal tax system, I reject the Left’s premise that anything that is good for corporations must be bad for people. On the contrary, corporations are typically all about people.

No great American companies were ever born out of any bureaucrats’ bright ideas. Companies like Apple, Ford, and GE were founded by individuals who were ambitious, driven, hardheaded, demanding, and sometimes a pain in the neck, but willing to risk it all, to work extra hard. Their passions were usually not about solving problems for the super-rich.

As a matter of fact, throughout history, very few companies built their success by catering to the super-rich. Thomas Edison didn’t invent the electric light bulb so his financier J.P. Morgan could keep his library lit. Edison’s General Electric also created the world’s first economically viable system of centrally generating and distributing electric light, heat, and power so ordinary Americans could enjoy life after dark like the rich but at affordable prices.

Like GE, most successful companies became successful by creating something or providing a service that either solves a problem ordinary people face, or enriches the lives of the masses at affordable prices. This goes wrong when corporations turn from this pursuit of service to potential customers to the power of government to give them special favors. But this problem would be much smaller if government didn’t have the power to bestow such favors in the first place.

Corporations employ people. This helps people afford roofs over their heads, put food on the table, send their kids to college, take vacations, and enjoy their lives. Besides the economic effects, many corporations also provide important social stability in the communities where they reside. Their tax dollars help pay for things such as infrastructure to better their communities. They sponsor community events. They donate to charities. Communities with vibrant commercial activities are cleaner, safer, and nicer. Many cities and towns collapse when a major corporation shuts down or moves away.

The Left believes that when corporations receive a tax cut, they just use it to enrich officers and shareholders, while very little will benefit employees in increased wages and better benefits. While it’s easy to imagine shareholders as Wall Street fat cats, it’s far from the truth. The majority of stocks are owned by ordinary Americans, including you and me, through our pension plans, or 401(k), or individual retirement accounts (IRAs), or life insurance plans, or 529 college saving plans.

You probably don’t realize that you and millions of Americans are proud business owners of Apple, Facebook, and GE. So when the Left declares that the GOP tax bill benefits corporations and their shareholders, we should all applaud enthusiastically, because we are those shareholders. I wish at least one Republican politician would have the conviction to declare that his or her party stands for corporations, because corporations are ultimately about the well-being of people: owners, employees, customers, suppliers, and communities in large.

A Step in the Right Direction

Both the current Senate bill and the House bill are far from perfect, but they are a step in the right direction. Our nation didn’t get into this mess overnight, so we should be realistic and not expect to clean the house in one bill either.

The Left suddenly became deficit hawks after the Senate passed its bill. Maybe it’s time to remind them of President Reagan’s words: “We don’t have a trillion-dollar debt because we haven’t been taxed enough, we have a trillion-dollar debt because we spend too much.” So any Democrat who is seriously concerned about our massive national debt should join the GOP’s next initiative: cutting government spending.

Helen Raleigh is a senior contributor to The Federalist. An immigrant from China, she is the owner of Red Meadow Advisors, LLC, and an immigration policy fellow at the Centennial Institute in Colorado. She is the author of several books, including "Confucius Never Said" and "The Broken Welcome Mat." Follow Helen on Twitter @HRaleighspeaks, or check out her website: helenraleighspeaks.com.

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