The tyranny of progressive taxes
But in all cases, when those who lay the tax upon others exempt themselves, there is tyranny.
—Joseph Priestley. An Essay on the First Principles of Government and on the Nature of Political, Civil, and Religious Liberty, 1771.
Progressive taxes are inherently tyrannical, because they entail the majority laying a tax on the minority and exempting themselves from that tax. To single out the wealthy for higher taxes is to behave like a mob rather than a nation of self-governing individuals—it is to surrender to the “might is right” argument rather than to govern a country according to justice.
The rich must be left unmolested
True and impartial liberty is therefore the right of every man … to labor for his own pleasure and profit, and not for others who are idle, and would live and riot by pillaging and oppressing him.
—Thomas Gordon. Cato’s Letters No. 62, An enquiry into the nature and extent of liberty; with its loveliness and advantages, and the vile effects of slavery, Saturday, January 20, 1722.
Socialist politicians claim the rich should pay their fair share. These words sound reasonable; however dollar for dollar, the rich paying flat taxes would be paying many times the average contribution. What they really mean is that the rich, because they are rich, should be plundered. This is the same rationale used by burglars to choose the houses they will break into. It has nothing to do with justice and everything to do with expediency. Yet it is false expediency, because you cannot plunder the rich without injuring the poor. The rich are the fount from which all the jobs and investments come, their skill and entrepreneurship makes the general prosperity possible. If you remove their money, you remove their command of resources and create general poverty. Thus, both under the natural law and the wicked utilitarian principle of the greatest good for the greatest number, the rich should not be plundered.
The economic folly of progressive taxes
The large gains of the successful innovator meant … he would soon be able to back his judgment with larger means. Much of the individual formation of new capital, since it is offset by capital losses of others, should be realistically seen as part of a continuous process of redistribution of capital among the entrepreneurs. The taxation of such profits, at more or less confiscatory rates, amounts to a heavy tax on that turnover of capital which is part of the driving force of a progressive society.
—Friedrich Hayek. The Constitution of Liberty, 1960.
In the battle for market share, there is constant competition to offer a better product or service. The winners are rewarded with the command of more and more resources. Thus, the controllers of mankind’s resources are those who are the best managers. However, when progressive taxes remove profit from the successful businessman, giving him the same return as the barely competent, then the system is undermined. Capital must flow freely in order for capitalism to deliver its bounties.
When the U.S. government collects the bulk of its taxes from the rich, it harms the poor as well as the rich by preventing the efficient management of the nation’s resources. Whereas the United States experiences an average of economic growth rate of 0 to 3 percent, China enjoys 10 to 15 percent growth rates. Thus, the poor of China are improving their lot in life by leaps and bounds, while the poor and middle class in the United States experience virtually static living conditions.