From the incomparable Thomas Sowell
Democrats’ insistence that the “rich” pay more in taxes is rivaled only by Republicans’ apparent inability or unwillingness to engage them on this specific issue. In the following excerpt from testimony submitted to the Senate Finance Committee, economist Thomas Sowell attempts to fill that void.
At various time and places, particular individuals have argued that existing tax rates are so high that the government could collect more tax revenues if it lowered those tax rates, because the changed incentives would lead to more economic activity, resulting in more tax revenues out of rising incomes, even though the tax rate was lowered.
This is clearly a testable hypothesis that people might argue for or against on either empirical or analytical grounds. But that is seldom what happens.
Even when the particular tax-cut proposal is to cut tax rates in all income brackets, including reducing tax rates by a higher percentage in the lower-income brackets than in the upper-income brackets, such proposals have nevertheless often been characterized by their opponents as “tax cuts for the rich” because the total amount of money saved by someone in the upper-income brackets is often larger than the total amount of money saved by someone in the lower brackets.
Moreover, the reasons for proposing such tax cuts are verbally transformed from those of the advocates — namely, changing economic behavior in ways that generate more output, income and resulting higher tax revenues — to a very different theory attributed to the advocates by the opponents, namely “the trickle-down theory.”
“Trickle down” is not an economic theory.
No such theory has been found in even the most voluminous and learned histories of economic theories, including J.A. Schumpeter’s monumental 1,260-page “History of Economic Analysis.” Yet this nonexistent theory has become the object of denunciations from the pages of the New York Times and the Washington Post to the political arena, and has been repeated as far away as India.
It is a classic example of arguing against a caricature instead of confronting the argument actually made.
Please read it all
There is another part of this that Dr. Sowell doesn’t touch on. That is, that taking wealth out of the private sector, for use by government entities, leaves less wealth, per time, for the creation of more wealth. Essentially, it takes money away from the producers of wealth, and sends it to an entity that doesn’t produce, but merely consumes.
@johngalt, #1:
When the private sector begins building dams, bridges, roads, interstate highway systems, educating most of America’s children, providing comprehensive retirement and healthcare plans for America’s elderly, taking care of the blind and disabled, providing income to displaced workers, protecting the nation’s air and water, assuring the safety of food and drugs, and doing all manner of essential things that are not motivated by a desire for short-term profits, then perhaps I will decide that it’s best that all wealth remain in the private sector. Profit is not life’s greatest good. It is not the highest attainable end.
@Greg:
Several points here;
-One, I never advocated for keeping all wealth in the private sector. My point still stands, even if one could agree on every single example of government spending you’ve listed. Taking wealth out of the private sector removes it from the part of the economic cycle of those who produce, and create wealth, and sends it to those who only consume. As the bureaucracy grows and grows, and more and more people are employed by government funded jobs, more and more wealth from the private sector is required to pay for it all, leaving less and less for the part of the economic engine that creates the wealth.
-Two, some of those items you listed can, arguably, be attributed to required duties spelled out in the Constitution. Most cannot.
-Three, some of those items you listed are under government agencies that have extra-legislative powers they were never meant to have, and use them to effect economic change(damage) under the auspice of “the good of the people”.
It is no surprise that you expanded on my comments and attributed to them an argument that I never made. That you fail to see the point I was making is indicative of your ignorance concerning economics. I don’t suppose that you actually read Dr. Sowell’s piece, did you?