Conservatives and liberals disagree on a lot of things on the proper size and roll of government. Conservatives believe that smaller does better, and liberals believe that bigger is better. However, the fundamental difference that it all comes down to is taxes. Of all the differences between the two, it all comes back to taxes. Liberals want increasingly high taxes particularly on the rich both to fund their government programs that they insist will improve society and to as President Obama during the 2008 campaign said to “spread the wealth around.” Conservatives want correctly to have as low as possible taxes, taking only that which is needed for the proper constitutional duties of government. However, that still leaves the question that conservatives need to do a better job of answering. “What is the problem with high taxes?” There are many problems with too much taxes but the primary thing is that they hurt economic growth.
When economic growth is hurt the so-called wealth pie stops growing and in some cases even contract. This in turn makes the income inequality gape that much bigger and more obvious. Conservatives want fewer taxes because when one has more of their hard-earned money, they tend to invest it back into the economy. That in tern creates more jobs, which allow people to make more money, which they can again reinvest and grow the economy even more. When the economy grows the wealth pie gets bigger with more and more people getting wealthy and the income inequality becoming if not necessary smaller than at least reaching a point too where it hardly matters for everyone is much better off. As Dr. Brian Domitrovic of SHSU teaches in his Economic History course, this is exactly what happened during the hay days of the Industrial Revolution. In a recent discussion with him, he even talks about how high taxes might not even be constitutional for they actually limit revenue. Dr. Domitrovic talked about how during the 1820s and 1830s there were plenty of litigations involving the Supreme Court on the issue of whether the federal government had the power to tax regardless if those taxes created revenue or not, or if the power to tax was particularly for the purpose of raising revenue. Onto the point of the Industrial Revolution, historically during that time in the United States taxes were indeed low and even in Great Britain were in some cases they were high they were mainly regressive and thus the money lost to them where made back in other ways and thus not harmful to the economy or to the raising of revenue.
Actually, this here makes the case that if we must have high taxes then they should be regressive instead of progressive for not only do regressive taxes not harm economic growth but also they would actually encourage it, because it would make it were people would be losing very little if no money at all to the taxes. In other words even if the taxes were extremely high there would be very little tax evasion because the people paying them would hardly feel the pain. So back to why high taxes are a problem, they are a problem when they harm economic growth and necessarily decrease revenue, which is the primary purpose of taxing. It’s not too redistribute wealth or some other grand utopian design but too raise money for the government to do its business, which Dr, Domitrovic points out was throughout the Industrial Revolution only 2% of GDP. So obviously if that is all the government took up of the economy back then, the taxes to supply it were low. What I would not give to have that government today.
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