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Why should “Those who pay no taxes” care about tax rates?

September 23rd, 2012 · No Comments

– Robert Light

Governor Romney, in a rather inept/inarticulate moment, commented that the 47% of American’s who pay no income taxes probably don’t care about the tax rates paid by the tax-paying segment of America.

It was inept because it shouldn’t be true. The non-tax paying Americans ultimately pay dearly for the tax policies imposed on the tax-paying Americans. Here’s how they pay.

Jobs Jobs Jobs
When government takes more and more out of the economy in the form of taxes, that money is not available to be invested in economic activity. Not only does every dollar spent on government take away a dollar out of the private sector economy – but if that dollar is used to create a larger regulatory structure – the single tax-dollar given to government may take a much larger bite out of the economy. When the job-creating sector of the economy is starved, jobs suffer. So Governor Romney is wrong, those people getting food stamps and government welfare due to their desperate financial condition should be very interested in improving their situation by getting a job – even if they ultimately don’t end up paying much in Federal taxes…at least they will be supporting their family and will need less public assistance. If you doubt what I say, ask most people on foodstamps and welfare if they would rather have a job and get off “government assistance”…and they would say “yes, I’d rather have a job…I’d have more money”.

Higher prices
Every dollar that the government takes in taxes has to come from somewhere. An earned dollar is ultimately just a symbol for some amount of time spent by some person doing a productive task for somebody. Goods and services are generated by a lot of those “somebodies”. The government takes tax money from those sombodies to fund its activities. Yes, a certain amount of government overhead is necessary and good and allows all those somebodies to work safely and efficiently….but at some point, if that tax money starts being excessive and wasteful, the extra burden starts to affect the bottom line cost of producing those goods and services and the prices to the public necessarily go up. To see this most clearly, do the following thought experiment – imagine that everyone woke up one morning to find that they had to pay the government $1 for each dollar they earned – they would immediately go to their boss and say, I need a raise otherwise, I can’t feed my family….the boss would then turn around and say that everything his company sold would have to cost much more….prices rise…hurting even those who pay no taxes.

Feeling “Entitled” Hurts
Finally, while it may not apply to all people….most people feel a level of “guilt” in accepting money that they did not earn. If the money came from charity, people assuage this “guilt” by showing appreciation to the person or organization which gave them charity. Many times, the person receiving the charity can give back… helping the charitable organization or being a part of the religious or social community that provided the charity.

The unfortunate reality is that people can’t show “appreciation” to the government…the funds just show up magically deposited in their bank account or on their debit card….and they walk into a store and buy their groceries or pay their rent. The only way the person receiving government assistance can assuage his/her guilt is to feel “entitled”….thinking “I am owed this money”. This “entitlement attitude” simply rots their moral character – allowing the person to look for other ways to suck money from the government. To see this, all you have to do is look at today’s population which ran through their 99 weeks of unemployment “insurance” and then they became magically “disabled” and they started collecting their social security disability payments.

So in short, all of society pays for bad tax policy – some pay in the form of higher taxes, others pay in the form of lost jobs, higher prices and moral decay…. we all pay dearly.

— Robert Light

Tags: Political · Taxation · Uncategorized

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