Repost: A rant on an anti-tax meme

For tax day, I'm reposting the following, which I originally posted on Friday, July, 29, 2011.

One of the favorite anti-tax memes that conservatives use is that "the government thinks it knows better how to spend money than individuals/the people do." I think that meme has it exactly backwards. First, the government in a democratically elected government is the people. Second, what government is doing when it spends is paying salaries of people and contracts to businesses, who then pay it to people. Those people now have more money to spend than they did before. As a result, government spending gives most people more power to make decisions over how they spend their money that they got from the government.

There is one exception to the above. Progressive taxation in support of government spending shows that the government thinks it knows better how to invest money than the wealthiest Americans for the greater good. The justification for keeping the tax rates low on the wealthiest Americans is that they will use that money to create jobs. They generally don't. Instead of hiring people for their own businesses, they use that money to blow speculative bubbles, whether in stocks, bonds, commodities, or real estate. Yes, those bubbles may create jobs while they're inflating, but they destroy jobs when they pop.

The last pair of bubbles was especially pernicious, as it first inflated people's home values then, as they started to collapse, leaving Americans owing more than their assets were worth, inflated commodities, making food and energy cost more just when Americans could no longer withdraw money from the "home ATM." Both of those bubbles harmed people financially even before the panic in the stock market and contraction of the economy threw people out of work. Now we're left with vacant houses, people who can't sell their houses to move to where there are jobs, and a government that has to borrow a trillion dollars a year to maintain the spending it's already doing to pay people the money they need to make more decisions with what is now their own income.

So, I think raising taxes, particularly on the wealthiest 2%, is a good idea. They're not doing much useful with that money other than trying to increase their own wealth by blowing asset bubbles. What the economy needs is demand, and the other 98% of Americans will gladly provide that demand if they have money to spend. Paying them that money shows that the government has faith that individuals do know how to spend their own money!

/rant

Now, today's song, Tax Man by The Beatles. It's an ironic choice, but it does make the point that taxes can be too high. That's not now the case in the U.S., which is suffering from the opposite problem.