The Tax Rate Scandal

When Republican presidential candidate Mitt Romney casually estimated that his
effective tax rate is around 15 percent, progressives immediately pounced on
the issue. To this ideological minority with its Ahab-like obsession on
[4]class warfare, a rich American paying an effective tax rate of "only" 15
percent is, a priori, a scandal of the first order.

Yes, this story is a scandal (actually, a series of scandals) but not the one
that progressives think it is.

It is scandalous that so many journalists and commentators have gotten their
basic facts wrong. They have conflated average "effective" tax rates with
statutory rates. Under our complex and convoluted tax code, no American pays an
effective rate that is as high as his top marginal rate (the statutory rate on
the last dollar of income). As it turns out, Romney’s effective tax rate of 15
percent is [5]higher than the effective tax rate of approximately 97 percent of
taxpayers.

An even greater scandal is that Romney’s tax rate is as high as it is. Most of
Romney’s income comes from his investments, i.e., from capital. Of course,
those still influenced by the defunct labor theory of value and Marxian
[6]class envy think that taxing capital makes sense. They deride investment
income as "unearned" income, as if capital doesn’t contribute anything of value
to economic production, when, in fact, we owe our wealth almost entirely to
capital.

Capital, far from being the cruel exploiter of labor, is labor’s major
benefactor. Human labor and natural resources are found around the world, but
the rich countries are the ones in which the productivity of human labor (and
therefore wages and standards of living) have been multiplied by capital.

Americans’ relatively high standard of living exists because, according to the
opponents of capitalism, greedy capitalists have "exploited" us more than
people in poor countries. Well, we should be thankful for this type of
so-called "exploitation." Taxing capital diminishes its supply, thereby
crimping labor’s productivity and lowering workers’ standards of living. Any
tax on capital above zero percent is scandalously stupid and perversely
anti-labor.

A third scandalous aspect of the Romney tax-rate story is that [7]the very
people making the tired, tedious complaints that America’s income tax code is
"unfair" are those who are primarily responsible for the unfairness. Fairness,
or justice, means equal treatment before the law. In taxation, that presents
two options: Either tax everyone the same amount or tax everyone at the same
percentage rate. There is no principle that defines the "right" degree of
progressivity in tax rates; such rates are essentially arbitrary, determined by
who holds political power—a "might makes right" calculus devoid of ethical
content.

Finally, the most egregious scandal in the story about Mitt Romney’s tax rate
is that the discussion about taxation is distracting us from what is, by far,
the major problem our elected officials in Washington need to address:
out-of-control federal spending. Granted, a flat tax, if not a consumption tax,
would be a huge improvement over the current monstrosity that is our
72,000-plus-page tax code. However, we can survive our flawed tax code for
decades, whereas runaway federal spending threatens our country’s financial
viability in the short run.

Uncle Sam is racing toward a fiscal train wreck that requires a massive cutback
of the 75-percent increase in federal spending that has been added over the
past dozen years, but neither party is talking along those lines. The
Republicans are willing to trim around the edges, whereas the Democrats are
digging in their heels against even those token cuts.

Here’s an experiment you can try: Ask any candidate running for federal office
this year how he or she would cut $1 trillion in spending. They won’t have a
clue. That’s the real scandal of Election Year 2012.

— Dr. Mark W. Hendrickson is an adjunct faculty member, economist, and fellow
for economic and social policy with [8]The Center for Vision & Values at Grove
City College.

© 2012 by The Center for Vision & Values at Grove City College. The views &
opinions
expressed herein may, but do not necessarily, reflect the views of Grove City
College.

[9]www.VisionAndValues.org | [10]www.VisionAndValuesEvents.com

References

1.
mailto:[email protected]?subject=Publication%2Fcitation%20notice&body=1.%20Submission%20title%3A%0A%0A2.%20Publication%28s%29%2Fmedia%20outlet%28s%29%3A%0A%0A3.%20Tentative%20publication%2Fcitation%20date%28s%29%3A
2. http://www.visionandvalues.org/2012/01/the-tax-rate-scandal/
3. http://www.VisionAndValues.org/
4.
http://www.visionandvalues.org/2012/01/readying-romney-for-the-class-warfare-machine/
5.
http://newsbusters.org/blogs/noel-sheppard/2012/01/19/media-myth-debunked-97-percent-americans-pay-less-romneys-15-percent
6. http://www.visionandvalues.org/2011/09/the-democrats-deadly-sin/
7. http://www.visionandvalues.org/2009/04/two-americas/
8. http://www.visionandvalues.org/
9. http://www.VisionAndValues.org/
10. http://www.VisionAndValuesEvents.com/
This message was sent by: Grove City College, 100 Campus Drive, Grove City, PA 16127

Manage Your Subscription:
http://app.icontact.com/icp/mmail-mprofile.pl?r=8433220&l=12516&s=YP67&m=1634344&c=617533