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Article posted Jul 03 2011, 10:45 PM Category: Commentary Source: Anthony Gregory Print

The Topsy-Turvy Liberal View of Taxation

By Anthony Gregory, The Independent Institute

Obama insists that the United States can’t afford to maintain corporate tax cuts. As with all modern liberals, when he says the U.S. can’t afford it, he means the government can’t afford it without cutting spending. With nearly four trillion dollars of expenditures a year, I suppose it’s very understandable that the president, as most of his ideological ilk, view tax cuts -- signifying where the government is refraining from taking privately owned money in the first place -- as a reasonable “cost” to “society,” that ought to be phased out, long before the empire, police state, and trillions of dollars in domestic goodies are trimmed back more than a nominal amount.

It is not only liberals. Some conservatives also spread this myth that tax cuts are the same as subsidies -- an area of government spending, rather than an area where the government is seizing less than it potentially could -- as we saw a few months ago, when a dozen conservative lobbying groups signed on to a petition demanding the end of tax credits for certain energy interests. This is an unfortunate and retrogressive retreat from the early American conception of taxation, an ideal that animated a revolution over 330 years ago and that is ostensibly being celebrated this very weekend. Taxation, after all, is the government using force and the threat of force to exact revenue from the private sector. It is warmed over tribute, a practice embraced by the ruling classes going back at least to ancient Egypt. The American colonists resented tax rates that were miniscule by today’s standards. And at their best, they saw taxation as an instrument of tyranny, rather than something to ensure was never lifted because society could not “afford” it.

Some will argue, validly, that corporate interests do in fact benefit from state intervention -- various monopoly privileges, direct subsidies, regulatory advantages, preferential treatment, government contracts, protections from common law liability, and so on and so forth. But then the answer should be to eliminate these advantages, not counter them with tax increases. Indeed, if Obama thinks corporations have it too easy, and also wants honestly to deal with the deficit problem, he should work to eliminate or prevent, now and in the future, the vast agricultural subsidies that distort the market and mostly end up in the hands of rich corporate farming interests, the cushy contracts doled out via the military-industrial complex, the enormous bailouts and moral hazard pervading the financial sector, the stimulus spending that goes to favored businesses, the energy subsidies, the auto bailouts, the grossly over-zealous federal enforcement of patents, and the hundreds of other ways that the federal government actively redistributes money from the poor and middle class to the politically connected rich. Some of the left would even join him in much of this endeavor.

But he has no interest in that, and neither do most mainstream liberals, or most conservatives for that matter, because cutting tax credits, rather than eliminating corporate benefits, expands the power of the state. Ridding of corporate welfare and privilege would mean scaling back state power and diminishing the ability of politicians to play favorites, secure campaign assistance, and attempt to centrally plan the economy.

Taxation is a process whereby the government actively confiscates wealth that it didn’t earn. Even most of the somewhat corrupt businesses that, in our mixed economy, do not make all their profits due solely to free market principles but with the help of state intervention, are paragons of moral virtue and economic efficiency compared to the state itself. The state’s taxing power and thus its budget should be scaled back as much as humanly possible, for every dollar it takes without any ethical claim to it, it uses to solidify its own power and, in most cases, spends inflicting mayhem on the economy and social order. The liberals of the early American era -- classical liberals, of the Jeffersonian sort -- recognized these basic truths, and in their more honest moments, opposed the taxing power as a matter of principle, and did so in defense of the common man. Today’s liberals have turned the great American tradition -- identifying taxation’s immorality and opposing the institution -- on its head, calling tax breaks an instance of government spending that “we” cannot “afford.” Don’t be fooled by this sleight of hand. Taxes are one of the major prices we pay to see government wreck civilization, and reductions, cuts, exemptions and credits, although often implemented for disingenuous reasons, are nevertheless islands of freedom in a sea of tyranny.

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