Taxes And The Business Cycle 101

From this essay by Penn Jillette, we get this little snippet:

“It’s amazing to me how many people think that voting to have the government give poor people money is compassion. Helping poor and suffering people yourself is compassion. Voting for our government to use guns to give money to help poor and suffering people is immoral self-righteous bullying laziness. People need to be fed, medicated, educated, clothed, and sheltered. If we’re compassionate, we’ll help them, but you get no moral credit for forcing other people to do what you think is right. There is great joy in helping people, but no joy in doing it at gunpoint.”

–Penn Jillette

It’s amazing at how many people take offense at something like this. They truly believe that the government’s role is to tax people and give it to others who are less fortunate, than the ones who are taxed. Since the initiation of Johnson’s Great Society, the goal for government has been to wipe out poverty. But sad to say, it hasn’t been able to it.

Here’s why:

If government truly took money from Biff Anderson CEO and President of Entrepreneur Inc. and gave it to Ms. Molly Coddle who has nothing in the way of skills and cannot seem to hold a job, it would be one thing. I might even be persuaded to rethink my position just a little. But this is not what happens.

What really happens is, the government taxes Mr. Anderson and puts it into the Treasury. The Treasury funds a government department that has throngs of employees, with salaries larger than their counterparts in the private sector–better benefits too. The department is run by a political crony of someone who is in office (because that person was owed a favor for helping someone get elected). He/she usually gets a healthy salary, and expense account to go with it.

Many of these government employees are in unions that demand more from the Mr. Andersons of the world and the skilled workers that he hires. The union leadership gets their cut from the union members. So when the government employees get their checks, the union gets theirs before the employee. On top of that, the employees must pay taxes. Union dues out of the employees’ checks and taxes are in many ways, a double dip for the unions.

So let’s look at this from another angle.

Progressive government lovers will identify a problem. Ms. Molly Coddle is in need of a program to give her money so she can survive.

Government goes along with it. It sets up a department that requires money from the Andersons. We know it takes money to run the department that sees that she gets it. The union gets their cut. The government employees get theirs. The companies that do business with the government supplying the offices get a cut, so do the utilities that must heat the building, provide the electricity, and phone support. Ms. Molly Coddle gets her money after everyone else gets theirs.

So what if we eliminated the bureaucracy and red tape for money to transfer from Biff to Molly? What if we let Biff give to a private organization that will help Molly get skills and help her pay her bills while she gets them?

He can write it off on his taxes. And without the extra expense of higher tax rates to fund a wasteful government entity, he will have some money to invest in his business’s growth. About the time he can accumulate the necessary funds to do this, he realizes he will need to hire some people to help his business get bigger. And wouldn’t you know that Molly is about to complete her course work, which now gives her the skills to perform one of those jobs that Biff needs filled?

What about those government workers who will lose their jobs?

Biff and all of his CEO friends will need more help than Molly. With interest rates low, the bank is not going to help them make money in CDs. So the best way for them to make it is to invest in business expansion. This will mean openings in the private sector. Less government + more private sector jobs = more freedom.

Molly comes home tired at night. But she knows that she is not dependent on anyone else for her well-being. So on payday, she can pay her bills and treat herself to some fun once in awhile, instead of watching the mailbox for that check. That’s freedom.

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Filed under Economics, Food For Thought, Local Government, State Government

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