It Is Dangerous to Be Right When the Government Is Wrong - Andrew P. Napolitano [131]
229
Nonetheless, the government insists that our current system of taxation is justified by social justice, or public necessity more generally. However, this is and always will be a deeply flawed claim. As for social justice, consider the sales tax, which applies both to luxury items and to those goods which are essential to the maintenance of life, such as food and shelter. Everyone pays the same tax on a gallon of milk, irrespective of one’s total assets. Thus, the burden of that tax will be much heavier on the poor than the wealthy, because it takes up a higher proportion of their disposable income.
Moreover, taxes on the businesses which produced those goods also raise prices, as do taxes on the materials that went into making them. Thus, the effective tax paid on a good is much higher than the sales tax we see printed on a receipt, especially when considering the numerous hands through which a good will pass before it reaches the end consumer (think of a snowball increasing in size as it rolls down a hill). Ironically, how much of that tax is passed on to consumers is a function of how “essential” the good is. If consumers cannot do without it, such as is the case with food and medicine, then producers can raise prices to reflect the increased cost of doing business without fear of lost sales. This serves to compound the inequitable effect of taxes on the poor.
More fundamentally, the sales tax is a direct affront on the natural right to trade. How can we be free if the government can impair that right? How can we survive in anything more than a hunter-gatherer society without a right to trade? Without this right, the rocket scientist could not trade his services for food, the actor could not trade his services for health care, and the banker could not trade his services for clothes. Infringements upon the right to trade, such as the sales tax, are a substantial impediment to economic development; they reduce the incentive to work hard and trade the product of that labor for other goods and services. In sum, when the middle and lower classes claim that they are being squeezed to death by the skyrocketing cost of living, they should look first to taxation. And lest you think American taxpayers are getting those revenues right back in the form of welfare programs, recall our friend MESSD-UP and its reallocation of wealth abroad.
230
Furthermore, welfare programs themselves, financed by taxation, so often denigrate the poor more than they help. Consider public housing. Public housing imposes a maximum limit on the earnings of individuals who wish to benefit from use of the program. Thus, once your earnings exceed this level, you are no longer eligible to live there. Not only does this give people a disincentive to earn as much as they can, it also ensures that the poorest members of society will all be living in close proximity to one another with limited opportunities and motivation to escape. In other words, it discourages socioeconomic integration. The natural trend of these large apartment complexes is that families lucky enough to be successful will move out, and the majority of residents who remain will likely be single female heads of households. This leads to large concentrations of poor teenagers,