This time of year, Americans are thinking primarily about two things: basketball and taxes. As the NCAA Men’s Basketball Tournament gets underway, millions of fans are filling out their brackets. The winner of each game is easy to determine. Whoever has the most points wins the game.
Taxes are a bit more complicated, because of the thousands of tax regulations put in place by both state and federal governments, and because of all the misinformation on tax policy. Here are three myths about taxes:
1. We need the income tax to pay all the costs of running our federal government. No, the current income tax is a huge premium we pay for the services and the meddling we receive from our government. Only for the last 100 years have we had the 16th amendment, which permits an income tax. Before that we supported our government through taxes on imports, taxes on whiskey and tobacco, and on the sale of federal land. That was it. Even with that limited tax base, our leaders usually spent money wisely, and we had budget surpluses most years before 1913. We actually cut our Civil War debt in half. We learned this lesson: When our politicians had little money to spend, they rarely went over budget.
2. We need a large income tax to give more needed social services to the American people. No, the greater the flow of cash into the government, the greater the waste and the worse the social services. In the 1800s, people in need got help from churches and local charities. People helped people directly; almost no one depended on federal bureaucrats and welfare checks. In the late 1800s, various entrepreneurs and community leaders began the Red Cross, the Salvation Army, humane societies, and orphanages across the country. In 1885, President Grover Cleveland vetoed a bill to give seeds to drought-stricken farmers in Texas because he wanted people, not government, to help bail out those in need. Charities throughout the U.S. rushed to help their fellow Americans; more money was sent to the needy farmers than was provided in the bill Cleveland had vetoed.
3. The rich ought to pay proportionately much more income tax than everyone else. Wrong again. The rich already pay much more than everyone else–and taxing them even more only causes them to hide their wealth, or take it elsewhere. The 14th amendment promises equal protection of the laws to all citizens, and if we discriminate against the rich, the door is open to pass laws discriminating against blacks, women, and old people. When President Franklin Roosevelt began taxing the rich at rates of 80, 90, and 94%, he discovered that their wealth vanished from sight. When that happened, he could have let the rich keep more of what they earned. But he chose to keep taxes high on the rich, and instead he hiked taxes on the middle class and poor to make up for the revenue lost because rich people were now sheltering their income through various tax dodges. Should we be following FDR’s example today?
With all of the government red tape and waste in using tax money, it’s easy to see why Americans probably prefer to think about basketball these days. At least everyone knows the real score.