When Taxes Are Not Seen for What They Are

In mainstream discussions, taxation amounts to little more than the unpleasant burden that comes from government spending, no different from having to earn money so as to buy stuff in any normal household. Politicians make spending decisions, which become public policy and commit government to fund what was promised, and the funding comes from taxes. No other source of revenue is even considered.

A recent meeting of top government economists and policy makers at the Washington-based Brookings Institute was addressed by several mainstream thinkers, and their message was that unless taxes are increased, or at least the Bush tax cuts are rescinded, the American government will be in serious trouble. It will not be able to spend what it is legally required to spend unless it borrows heavily and prints extra money, which spur rising interest rates, inflation, and eventually leads to the diminution of confidence in the American economy from investors abroad.

OK, none of this ought to have come about. But that is a bit moot now. However, there is an option that seems to be entirely ignored by mainstream policy wonks in these discussions of public finance. Instead of raising taxes, which will have its own devastating impact on the American economy, the federal government must begin to do what many private firms do when they find themselves in economic troubles. They can sell assets.

Doesn't that make just the best of sense? If you have overspent but are still committed to spending more because of promises you have made -- say, to send your kids to college, to pay for life, car and health insurance -- you need to sell stuff. Get rid of your expensive home and buy something more modest; get rid of your gas-guzzler and henceforth drive an economy car. Sell that vacation or time-share condo, and quit that membership in the fitness or country club. This is a no-brainer for most of us.

Yet, in mainstream discussions of coping with the results of bad government economic policies no one seems to suggest that the time has come to sell off government assets. This despite the fact that there is absolutely nothing peculiar about this -- the governments own millions of acres of land, massive amounts of resources, all kinds of buildings, equipment, and various overhead facilities. Why is it never, never considered -- not even so much as mentioned -- that government should obtain revenue by selling what it could sell without any great difficulty? In all the discussions at the municipal, county, state and federal levels of public finance, this perfectly sensible option is completely disregarded. But why?

The reason is a basic assumption underlying mainstream public policy discussions. This is that the wealth of the citizenry belongs to the government jus as soon as that wealth is required for funding government programs. The idea is that citizens hold their wealth merely as a grant of privilege and if the real owner needs it for various purposes, then it may be reclaimed from the citizenry.

Sure, presidential candidate George W. Bush made reference to how the wealth taken by government is ours and tax cuts amount merely to returning some of that wealth to its rightful owners. Does President Bush actually believe this? No, based on his actual spending plans. For if he really believed the bit about it being our money, not that of the government, he would not agree to massive spending plans such as the recently enacted plan to have the government fund the new prescription drug program or all the subsidies handed to farmers.

No, in fact mainstream politicians and their academic groupies do not believe that when the government taxes us, it is taking -- indeed, extorting -- our wealth. For if that were the thinking in the mainstream, then there would be a very serious difference between a policy of taxing us and selling off government assets. Just imagine your own domestic economic situation, the one I described above. If you believed that going to your next-door neighbor and dipping into his resources would be a proper way to cope with your financial shortfalls, you would not even consider selling off your assets to help yourself out of your dire straits. But because you know that that is no option for a decent human being, selling off of assets will be the correct choice to make.

In short, mainstream public policy rests on the morally obtuse conviction that extorting wealth from the public is perfectly OK. That mainstream belief, however, is just as wrong as the belief that citizens of a country are subjects or that workers are serfs. Such was reasonable in a feudal system but not in one in which each citizen, not the government, is sovereign.

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Tibor R. Machan's picture
Columns on STR: 70

Tibor Machan is a professor of business ethics and Western Civilization at Chapman University in Orange, Calif., and recent author of Neither Left Nor Right: Selected Columns (Hoover Institution Press, 2004).  He is a research fellow at the Hoover Institution, Stanford University.