“Hey, I gotta uncle that lives in Taxes.” – Duck Soup
They just put in a new speed bump at Pugsley’s school. I mean, I hope it was a speed bump.
What is a tax?
Most people think about taxes are money siphoned off from people and businesses. Admittedly, the best kind of a tax would serve the public good, and also be in proportion to use of that public good. A gasoline tax that’s used to fund the construction of roads certainly passes that muster. The more a person drives, the more gas they use, and the more they pay. Of course, it’s not perfect, but it’s hard to find a perfect tax. However, from their perspective, the Taliban have created the perfect tax: Americans pay, the Taliban get all the stuff. We even deliver.
There are plenty of other things that function as a tax.
Unions function as a tax. They take a market commodity, labor, and make it artificially scarce. This increases the price. In theory, unions can provide an assured level of labor quality, in stereotype they provide lowered profitability. In practice, I’ve seen both. Jeff Bezos is so against them that he got rid of his wife because someone told him marriage was a union.
Gameshows Jeff Bezos avoids: Who Wants to be a Millionaire?
Child labor laws were instituted for the same reason – to lower labor competition. Oh, sure, in 2021 we tell ourselves that it’s for the benefit of the children. Keep in mind that when these laws originally went into effect, 10-year-olds were working 12 hour days in mills. And those were the good jobs. “Nippers” as they called them, were young boys handling explosives and getting into situations that were too dangerous for adult male miners. So, you need a minor miner for major danger.
Child labor laws act like a tax.
The body of regulations that businesses face likewise act like taxes. Some of them are pretty reasonable, but when OSHA named that new regulation after me? That was tough – it was for wearing too much aftershave. They called it a “fragrant breach of regulations.”
If you hold a hardhat up your ear, you can hear the OSHA.
Other regulations are just meant to bring prices up, like the 42 page standard that the USDA has for lemons, which specify that they all are within 6/16ths of an inch in diameter in any given box. There are thousands of pages of regulations on fruits that cause many to be discarded. I’m raisin awareness. But regardless, it lowers the amount of fruit that farmers can sell and people can eat.
It’s a tax.
Bad taxes take money from one person and just give it to another.
There are certainly plenty of those schemes. Based on its current productivity, NASA is just a wealth redistribution scheme. It used to have a mission of getting people into space, but now apparently has the mission of (I kid you not) making braille books for blind kids about eclipses. At least they’re better at making books than launching humans into space, since putting people into space is something they haven’t done in over a decade, and I’m willing to bet they won’t do for years. But, hey, books for blind kids, right? It’s a bad tax, but it’s just dysfunctional.
With NASA, the sky is the limit! Because they can’t go higher than however high Southwest® 737s fly.
NASA isn’t alone, but if they’re dysfunctional, stuff just doesn’t happen and we have to wait for Elon Musk to rescue us. What happens if people listen to government idiots and take them seriously?
Up until the ‘Rona hit, the CDC was pretty good about doing next to nothing – sending out silly warnings at Christmas about “don’t eat cookie dough” that absolutely every human worth talking to ignored. The precursor to the CDC got rid of malaria. Since then? Everything they focus on gets worse. So, the cookie dough thing was something they could do and not screw stuff up too badly.
Yes. People are losing their jobs because liberals are taking the word of a government agency that would make eating raw cookie dough illegal if it could . . . seriously. It’s the ultimate in government incompetence turning into a pure evil tax.
High energy prices are a tax as well. They touch every physical item in the economy. If it has to be moved, energy is what moves it. It’s a tax on people who have to commute. It’s a tax on people who have to eat.
Don’t ask for whom the Toll House tolls. The Toll House tolls for you!
Shortages are a tax, too. A shortage increases the cost by limiting supply. But let’s look at the shortage of pickup trucks. Why are they in short supply? Because of a shortage of computer chips there are a limited number of trucks that can be made. Does that make Ford® happy? No. The shortage tax doesn’t help them. About the only people that the tax makes happy?
People who have extra cars to sell.
Finally, the ultimate tax: inflation. It’s a tax on every dollar you’ve ever saved, making it smaller, day by day. The early effects of inflation make people happy (ish), if they have something to sell. Inflation, though, always ends in tears.
High taxes result in lowered freedom. In (almost) every case, the taxes don’t produce anything but envy. As an example, historically low energy prices equate to higher freedom, and higher energy prices equate to lower freedom. I’d extrapolate that to most of the other taxes I’ve mentioned above.
To make the opposite argument, the interstate highway system was made with taxes, but it is an anti-tax. It lowered the cost of goods and services across the country and paid for itself many times over. Let’s compare to the “war on poverty” where we’ve spent trillions, and taken exactly zero people out of poverty since the poverty rate was dropping before the “war on poverty” started.
I beat The Mrs. at Scrabble®. Now she is sending me threatening letters.
You know, when the interstate highway system was just getting going? Huh, I wonder why we didn’t build the Taliban one of those? Well, Biden still has three more years.
John, the difficulty is that no economist is discussing economics as you just have. You lay out the case quite clearly. If it were laid out this way everywhere, we might actually have fruitful discussions.
One of the more interesting items I have heard in conversation (from a European) is that higher taxes were more acceptable to them because of the perceived benefits they received from the taxes (perceived a chosen word there, of course). I think the normal assumption in the US now is that tax increase do not make my life better in any way, only supporting specific groups and the great bureaucracy (which always takes a cut).
Exactly – it’s either a trade or a grift (sometimes both). But most things today? A grift.
Isn’t the Duck Soup quote the following?
“I’ve got an uncle that lives in Taxes: Dollars, Taxes.”
I remember only because I was about seven when I saw it, and thought it was the funniest thing ever, as a Texan.
That is the full quote! I still remember being a kid and wanting to get home early from a trip (I think I was 12) so I could watch that movie . . .
(Trying again. Fingers beat my brain)
Well said John. If economics were discussed this clearly in real life, we would have actual economic reform.
In discussing higher taxes with a European acquaintance once, they commented that they had less problems with higher taxes due to the perceived benefits of those taxes (perceived word intentionally mine and chose). I think in the US, we assume that any tax will not benefit those being taxed, only special interest groups and the great bureaucracy.
In a perfect world, taxes would be completely voluntary, all societies would recognize what’s most important, and only what is most important would be used for taxes. Since there are no perfect societies, taxes generally are the reason for mass murder, the corruption of officials, complete destruction of thriving economies, and the loss of liberty…and not necessarily in that order.
Generally the downward spiral starts with a derelict brother-in-law, with derelict children, and they all need a job that pays well, but doesn’t require any labor. That, or a buxom blond, that needs a raise, can’t make it in the private sector, and makes “good coffee”. That’s bad enough, but a second person has to be hired to do her job.
Taxes done wrong are evil writ large. You describe it very, very well.
As a numbers geek, I love delving into the gears behind the scenes in Federal taxation. It is mind boggling.
First you’ve got a national population of 330 million people. Of those, only 260 million are adults. The labor participation rate of the adults is 61.5 percent (see https://d3fy651gv2fhd3.cloudfront.net/charts/united-states-labor-force-participation-rate@2x.png?s=unitedstalabforparra&v=202110081235V20200908 ) so “only” 260 * 0.615 = 160 million Americans work at a job. The bottom half of income workers, or 80 million, pay only 3% of total Federal income taxes collected (see https://d3fy651gv2fhd3.cloudfront.net/charts/united-states-labor-force-participation-rate@2x.png?s=unitedstalabforparra&v=202110081235V20200908) .
So, bottom line, 80 million Americans pay 97% of the taxes for the other 250 million.
Soak the rich? The top 1% of income earners, 800K people, pay 40% of all Federal taxes for the other 329.2 million of us.
Is this “enough” taxes? Apparently not. The money we’ve borrowed because we’re not paying enough taxes is bad…
https://www.aviationanalysis.net/wp-content/uploads/2020/08/Who-Bought-the-Gigantic-45-Trillion-in-US-Government-Debt.png
…and getting worse, up a trillion-and-a half in just the past year to its current $28.5 trillion…
https://www.statista.com/statistics/273294/public-debt-of-the-united-states-by-month/
And that’s before adding in the trillions in the BIF and BBB bills that Manchin and Jayapal are arguing over, which are ONE TIME COMPLETELY SEPERATE EXPENDATURES from the additional THREE TRILLION dollars we have got to borrow to cover the “baseline” federal budget of $6.8 trillion dollars for 2021….
https://www.cbo.gov/topics/budget
… and Brandon gets to do three more years of budgets like this if we are able to raise the debt ceiling next month. (Spoiler alert…we will.)
Can you say “Screwed”? Don’t worry, Kamala’s day is coming, she’s an expert.
Ack. That second identical link up there shoulda been : https://www.dailysignal.com/wp-content/uploads/FBIP-SOCIAL-04.jpg
Excellent analysis. Thankfully, most of the 80 million productive people own 200 million guns.
You can achieve 133% of the yum for 20% of the energy by eating the cookie dough raw!
It’s true!
Follow me for more delicious recipes!
Yeah. Next the CDC will want to outlaw hugging grandma at Christmas . . . oh. Too late.
One of the biggest changes in tax policy of late is that we no longer even pretend that Federal spending is based on tax revenue. If we bring in $4 trillion in taxes, we have $4 trillion to spend. Nope. The tax side and the revenue side are completely distinct. Taxes are used to pick winners and losers in the economic system while spending is just make-believe money. If you need to spend more, you just do it and don’t fret about where the “money” is coming from.
The spending is picking winners as well. Ask Musk about the e-car incentives in the “infrastructure” bill.
Not just money – people’s time, and restricting *how* they can invest are just other taxes.
I have dealt with unions for 40yrs. They have never been a positive. I even joined one for a while. Interestingly, after we voted the thing out, we all got better raises. The company was smart enough to use the excuse “your raise is what the union agreed to.” My brother pointed out that unions do not support strikes because their income comes directly from paychecks. On strike, no paycheck, and most pay out a tiny salary. And if it is not a pay increase, the union will not support anything other than protecting the dead-weight, because most of the union reps are the dead-weight.
For most of my working life, I have worked with different offices of NASA. I was lucky enough to work with some of the offices with people who were very good and interested in advancing tech. However, in my recent years, I have dealt with 2 more offices. They are the opposite. Filled with lazy idiots that have no understanding and, frankly, have no interest in launching any more manned flights. Why? Successful programs lead to not needing nearly as many people and so layoffs. And, of course, they are filled with “equality” candidates.
Interestingly, NASA is the most trusted government program. And it has a mess like this.
If you want something built, task the military with it, especially the Air Force and Navy. Although, I do not have much experience with the other branches. The military will start a development program and generally finish on time and produce a working product. The costs might grow a bunch, but something results from the effort. NASA, don’t get your hopes up unless it is a satellite and you are not in a hurry.
Gas taxes: generally my preferred tax since it is a use-tax. However, California decided they needed to boost their general fund. So for a decade, the gas tax has just gone into the general revenue bucket.
Last night, the election in Virginia proved that things living in the metropolitan areas like and want more taxes and bigger government. The counties and small towns overwhelmingly voted for the republican while the metros voted to retain the black-face demon-cratic governor. I’ll bet a lunch that the welfare payouts match the voting in each area.
I’m sure you’re right (welfare matching votes). I have had multiple positive union experiences – both on quality and productivity. Saw one Teamster who drove like a banshee.
The Navy can’t build anything useful these days. The Air Force went all-in on the F-35, which says a great deal. Of course, the Navy did too.
Been away for a while. Still been reading just to busy to reply. Thanks you for what you do.
Tariffs are a tax on the people as well. When trump tariffed many things like canadian lumber what happened. Supply went down and Domestic supply immediately raised their price to just below the import price. Who pays for this higher price lumber? Who collects the tariff monies, yep the goober mint.
Tariffs on china did little to them but we the people saw what happened over time in the lumber industry. I bought a 1 x 6 board this week. Plain jane, over 12 bucks. First piece of lumber purchased in months because I had to have it and bought only the minimum I needed. No big projects needed in my future thank goodness.
Thank you for coming by!!!!
Yup – the higher price takes money from people . . . just like a tax.
Tariffs are a way to fix bad dealings with another country. China heavily tariffs US goods imported. The US did not tariff Chinese goods. So the smart move was for companies to locate in China. They avoid Chinese tariffs and there are no US tariffs.
Even though we had a free trade agreement with Canada, they still applied heavy tariffs on US goods. So the fix is either ban imports or apply retaliation tariffs.
If you want jobs in America, we have to fight the inequities around trade. Of course Joe is in the pocket of the Chinese and is trying to remove tariffs without fixing the foreign tariffs.
I get what you’re saying, but I question the value of defining a tax as “anything that increases the price of X” as you seem to be doing here.
For example, I don’t accept that shortages are a tax. A shortage of asparagus due to feral cats eating the crops in order to make their pee smell better isn’t a tax. It’s weird, but it ain’t a tax.
If a shortage is created as a result of government bureaucracy and incompetence (BIRM), then you could maybe get away with arguing it is a tax. But to what end? How does it help solve the problem of bureaucracy and incompetence by calling the result a tax? To my mind that shifts the focus away from the real cause (bureaucracy and incompetence) to something less granular. If the point of it all is that “Government makes everything more expensive” then, yeah, you’ll get no argument from me, but that seems a trivial, tautological point.
I think calling all government meddling a “tax” doesn’t really make sense in a practical way.
I accept that maybe I’m missing your point, being full of muddled thinking today having spent the night curled into a ball because my mastiff wanted most of my side of the bed. In other words, I’m suffering from a shortage of mattress and sleep.
It’s another tax!
I agree. Also, “inflation” is not a tax just because it makes things more expensive. Inflation is a tax because it is the result of Federal borrowing new money into existence, which diminishes the value of saved money, without explicitly requiring the tax-payers to send money from their savings accounts. For something to usefully qualify as a tax, the wealth has to be redistributed, which inflation does, but a bad drought (which raises food costs) does not. (Some commodity speculators might come out ahead, but only by an amount which is a fraction of the damage, as with any other natural disaster.)
The real reason is because (in nearly every case) the additional cost is due to a government policy, and it is a policy we can change if we so choose. So, calling it a tax changes the perception of people so that they realize it’s “not the way the world has to be” but instead it’s a choice.
But there was no porcupine tax, right?
“Mises For the Masses!”
Brilliant! 5 stars!
High praise! Thank you!!!!
the interstate highway system was made with taxes, but it is an anti-tax. It lowered the cost of goods and services across the country and paid for itself many times over.
Please show your work of how you calculated the interstate is a net benefit. In particular, document the value of good things which would have been built and invented using the wealth available to spend if it hadn’t been taxed away to build roads. Your calculation requires totaling up data you can’t get. Central planning can’t produce the good results it promises, not even with one of the largest civil works projects in history.
The interstates were built with taxes, but not with extra taxes.
There was nothing that “would have been invented”, because that money was going to be collected inevitably already.
But we have some lovely parting gifts for you…
Meanwhile, as to what the absolute economic benefits of the interstate system were:
https://www.youtube.com/watch?v=K_DnRn9hyFU
And McDonald’s. Carl’s Jr. Taco Bell. KFC. Coke. Pepsi. Dr. Pepper. Howard Johnson’s. Holiday Inn. Winnebago. Airstream. Goodyear. Interstate trucking. Breaking the railroad monopolies on passenger and freight. Every food item you could imagine on anybody’s dinner table, anywhere, within 72 hours of hitting the ports, which meant not having to live in Texas or California to eat a taco, and not having to go to Boston to get good clam chowder, nor live by the coast to get fresh seafood. Tens of billions annually in tourism, everywhere from the national parks to Six Flags and Disneyland/World. Drive-ins by the tens of thousands. Every candy and popcorn and chip maker on the planet. Las Vegas. Key West. Atlantic City. Professional and collegiate sports by the metric f**kton. Every musical act you can think of. Which all led to everyone wanting to travel more. Which got you air travel, and shifted everything above into 5th gear.
That’s a fractional sample.
“But other than that, what have the Romans ever done for us?” – People’s Front Of Judea
A similar argument would be for a rapist to claim their rape was a net benefit for the victim, because the victim wanted a child. The person whose opinion of value should be measured is the taxpayer, not the tax collector.
It doesn’t matter what the allocation of tax money to programs was previous to breaking ground on the interstate, that isn’t part of the interstate net benefit calculation. Spending on interstates displaced some other economic activity, and you can’t know what the result you lost would have been.
That’s a million calculations, and what-ifs. If you look at net GDP, real GDP before and after the interstate? It is a boon.
It lowered costs for decades, and created space for millions of jobs. Plus? Stuckeys.
You aren’t addressing the question I asked, which was, what economic results did you not produce by instead spending that money on roads? Do you think every nickle would have been wasted on beer and cigarettes unless the noble government takes it away at gunpoint and spends it building roads? Why only tax at 50%, why not instead recreate the USSR and tax at 100%? How do you calculate the optimal tax rate? Why do you believe any taxation at all whatsoever is a benefit?
Taxes paid for the rail system. Then we let them rot away so more taxes could pay for their less efficient replacement of transporting goods. Okay, yes, great for building up the military and imperial colonization. That got us an extra forty years of life suckling off Saudi oil. But just from an economic standpoint, it was all wasted money. Rail for long haul, motor vehicle for Last Mile.
What I mourn are the thousands of miles of urban rail that were ripped up. Great systems for super cheap transport that I’d be taking today if it were still there.
I have recently come to realize that, not only is inflation due to government spending without explicit taxation an implicit tax on savings, but it that spending also gives the Federal government a tremendous amount of power relative to state and local governments. When your city and state need to raise taxes (or sell municipal bonds, which just post-pones the bill), to fund their desires, their ability to control is limited by their ability to tax, then spend. But the federal government can “ride to the rescue” any time it wants to, with newly created money. That risks making local institutions, with local control, decreasingly relevant.
And that is the beauty of governments that are required by law to be fiscally responsible.
Unlike the Feds . . . (sigh)
re — user-taxes
.
If somebody — we can call her ‘Karen’ — wants a new government agent — we can use ‘dog-catcher’ in this example — Karen is solely responsible for funding the position, paying for required buildings and vehicles, furnishing uniforms, kibble, bowls, and anything else needed to fulfill her wishes.
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If somebody else — we can use the name ‘Karen’ — thinks that newest government agent (aka ‘dog-catcher’) is unqualified to be ‘off-leash’ as it were, Karen is certainly justified in demanding (using F.E.M.A., aka ‘Federal Emergencies Managers And Administrators’, as a model) a manager and an administrator to over-see the incompetence…
…Karen is solely responsible for paying them, plus buying all the staples and paper-clips required to efficiently manage and administer.
.
I think user-taxes are a rational response to demands for more government agents.
Yup. Roads are a great example (in most states).