The great untouchable topic

The Self-Expropriation of the Patriotic Millionaires

By Jeffrey Tucker 

Do you want higher taxes? There is an easy answer. Pay more. No one is stopping you. You can overpay to the tax authorities. There is even a check box on the form, as I recall. Give to this charity you find worthy! No government in the history of the world has turned down money that its most “patriotic citizens” want to donate of their own free will.

Alas, that is not what the “Patriotic Millionaires for Fiscal Strength” — this is actually the name of a new organization — are calling for. A tax is not a voluntary contribution. Otherwise, it would be called a donation. A tax is a forcible extraction of private property by the state for the state to use for its own purposes. If it doesn’t involve force, it is not a tax. The use of force defines the tax. That even goes for excise taxes said to be voluntary: Try buying gas or cigarettes without paying the tax and see how far you get.

These many signatories of the Patriotic Millionaires are not just calling for their own taxes to be raised. They are calling for your taxes to be raised. The patriotic among us have ways of making the unpatriotic pay, and it is called lobbying government to loot the population even more than it does now.

The point is that this is not an act of self-sacrifice on their part. They are free to make a sacrifice anytime they want to. No, they are plotting to enlist you in their cause, whether you like it or not.

There is a long history of the rich getting together to call for higher taxes. Andrew Carnegie wrote passionately for a tax that would loot people at their deaths so that they could not pass on the wealth to others. In our own time, Bill Gates and Warren Buffett have earned the respect and admiration of the left-liberal elite by calling on the state to take more of their money.

Why would these people do this? Well, for one thing, it is a nice thing to earn the respect and admiration of the left-liberal elite, who are inclined to forgive any amount of wealth accumulation, provided that the accumulated is willing to sign up to support left-liberal causes. You can a pass this way, a badge of honor to cover what some people otherwise consider your ill-gotten wealth.

There are a myriad of psychological reasons that have been bandied about, too. Maybe these rich people are self-hating and filled with guilt. They need public policy to expiate their sins or otherwise vacuum clean their consciences.

Another theory is that the already rich are perfectly happy to lock in their gains with a policy that will prevent others from joining their ranks. A tax, then, becomes a method by which the wealthy elite fight back competition and entrench their monopoly position.

Or perhaps we should just take them at their word, that they really do believe in reducing the deficit. The truth is that all their wealth wouldn’t make a dent in the deficit. A 100% expropriation of everything that people who make over $10 million per year would barely cover the a few weeks of government spending. A progressive tax up to 70% on incomes over $1 million would barely cover 10% of the deficit. In fact, doubling the taxes of everyone today would not even balance the budget (all else equal).

The problem is not that taxes are too low for everyone; the problem is that government has no institutional mechanism that encourages any spending restraint.

In any case, this whole thing is bizarre. Why would anyone expect that the government would suddenly start restraining itself if it suddenly enjoyed a temporary windfall of revenue? There is absolutely no evidence to support this supposition. What does government do with more money? It spends it, if possible.

There is a much faster and much more sure way of imposing fiscal discipline. The government itself needs to face a market test of some sort. The best way to make sure that there is some sort of penalty for bad financial habits is to subject government debt to the same discipline faced by private debt. The Treasury bond needs a market-based default premium attached to it.

But that cannot happen so long as the Federal Reserve is there to be the lender of last resort for anything that the politicians do. No matter how bad the finance, how high the debt, how egregious the deficit is, the Fed is there with the promise that the money will be there. Funding it might require hyperinflation, but the money will be there. It might, eventually, be worth less than the linen it is printed on, but the money will be there.

The central bank is the real source of fiscal irresponsibility. But the millionaires won’t talk about that. It is the great untouchable topic, the one sacrosanct institution. Our own bank accounts are vulnerable to their lobbying pressure, but the Fed is perfectly safe. That’s what they called “patriotic.”