The Political Inquirer

The Politico ran a story today on how the Democrats are planning on creating a trillion dollar tax increase over the next few years. Some details are explained, such as how the government is set to actually lose about 800 billion in tax revenue with the elimination of the Alternative Minimum Tax, so if I read it right it appears the true “tax increase” will only come in at 200 billion.

Regardless, what justifies taxes? What gives the government to steal from Peter to pay Paul? Even if you don’t have welfare in that sense, what gives the government the right to take my money in the first place? There is a large divide between anarchists who believe in capitalism and those who believe in syndicalism but their overall premise is the same: What gives government the right to take anything from me against my will? This question is possibly the most important part of the taxation argument and should be looked at every time the question of taxation comes up. It questions the fundamentals of taxation. It may be right to tax, it may not be, but we should still ask the question before we ever raise taxes…but I digress.

The Bush administration has been notorious for its outlandish spending in the past eight years. Some conservatives who part ways with the Bush administration have been saying that it’s pretty bad when the Democrats are more fiscally conservative than the Republicans. The worst part is the Democrats are at least honest about their dealings here.

Government spending can primarily be financed in three ways: Taxes, borrowing, and inflation. Usually it is difficult to increase taxes, so governments in the past have stayed small. In the early 20th century this all began to change as fiat money came to dominate the monetary sphere. With easy paper money, inflation became commonplace. The economist John Maynard Keynes, influential in international economics, convinced most governments that inflation couldn’t just be rampant but had to be controlled, else the economy would collapse (An obvious answer, but the inflationists needed someone on their side to convince them they could still inflate, only at a slower level).

With inflation now controlled, governments had taxes and borrowing. The largest difference in Republicans and Democrats on the federal level in the past 25 years is the Democrats have wanted to tax, the Republicans have wanted to borrow. Both accept the premise that government must spend madly.

The result of borrowing, inflation, and now easy money and rule changes in the late 1990’s to allow subprime mortages has led to major trouble in the housing market. Today alone the AP is reporting that foreclosure filings have nearly doubled in the same month as a year ago.

Taxation puts a grip on the economy and reduces productivity, while borrowing and inflation allow for temporary economic upswings. The Republicans have convinced themselves that the economy can only be helped by less taxation, yet they don’t reduce spending. This is economically unfeasible and will lead to an economic downturn in the future.

Perhaps with the Democrats now wanting an increase in taxes, it will either cause the American people to force the government to reign in spending, or in the long run reduce spending if the Democrats stay with in their means, as opposed to the Republican’s drunken sailor spending habits.