Right Wing Nut House

I’ve been wanting to write about this for two weeks but didn’t find the time to think it through until the last couple of days.

James Poulos at American Scene (formerly Political Editor at Culture 11), writes provocatively about taxes:

The forceful way in which the tea partiers are putting this conservative resistance at the center of our political debate today should remind us of what went wrong for Republicans during the two Bush presidencies. The Bush presidents, different in so many ways, both turned the GOP toward corporatism in a way that significantly limited their success as candidates and presidents. (Reagan had neither problem. This is the root of Reagan nostalgia.) The lesson is a simple one: first and foremost, the Republican party is supposed to deliver not economic nor cultural but political goods.

The tea partiers, in insisting that economic policy derives from and reflects political principles, and not the other way around, help make this clear. Take taxes. When taxes are too many and too high, the economy suffers. But, as this decade has brutally taught us, taxes do not necessarily enrich the state, but they always aggrandize it. The evil of taxes is not primarily economic but political. When a government learns how to use taxes to coerce, control, and manage the behavior of its citizens, a country is placed on a perilous road — not to serfdom, necessarily, but to tyranny, a tyranny that lords over even the rich and famous, even when they happen to profit from its favor. The GOP is supposed to keep this kind of tyranny at bay, and when it comes near, the GOP is supposed to ward it off.

It’s in this regard that, over the past ten years, the GOP has failed. The trouble with RINOs is that, in their liberalism, they are often either blind to the threat of tyranny or they do not really see it as a problem. This is not because they ‘fail to understand the nature’ of tyranny. Tyrannical regimes can rule over dynamic, exciting societies, over huge numbers of people full of promise and purpose. They can focus resources on big challenges and execute amazing feats of efficiency and publicity. Just ask the growing number of American commentators suffering from China envy.

How does government use the tax code to “to coerce, control, and manage the behavior of its citizens…?” Let me count the ways. The government has declared smoking to be a hazard to your health and taxes the beejeebees out of it to discourage you from taking it up and encouraging you to quit. Coming soon, a federal tax on sugary sodas, salty snacks, fast food - again, trying to control your eating habits to keep you trim, slim, and out of the doctor’s office where you will be a drain on the health care system like other obese people.

Of course, the code is replete with such examples of government encouraging or discouraging - i.e. trying to control - behavior and Poulos, in what I see as some very original thinking, makes a case that real conservatives should oppose such laboratory experiments:

Moreover, liberals of any party seeking primarily to foster or facilitate cultural change typically have little desire to focus their attention, much less their careers, on preventing the government from aggrandizing itself. A government that routinely manages economic behavior through its economic policy is well able to routinely manage social and personal behavior that way. In theory, there’s no reason why lots of Republicans can’t be ‘socially liberal but fiscally conservative.’ In practice, social liberals, of any party, have a vested interest in a government that rules not only by law but by economics.

In fact, tea partiers help everyone understand that ‘fiscal conservatism’ is a misleading phrase. A ‘fiscal conservative’ is for balanced budgets and well-calibrated taxes and against wasteful spending. A tyrannical government, if it has any brains, is for solvency and efficiency too. ‘Fiscal conservatism’ can license the aggrandizement and abuse of government power. It might be necessary to economic conservatism, but it isn’t sufficient. Alone, it isn’t conservatism at all, and under the right conditions, ‘fiscal conservatism’ can actually destroy its namesake.

By granting a homeowner the ability to write off interest paid on their home loan, isn’t the government encouraging a certain kind of economic behavior? Of course they are. And this is where I’m not sure Mr. Poulos’s thesis holds. The macro effect of lots of home buying is a net plus for society in that such a large chunk of the economy is related to the care and feeding of our domiciles. Buying a home helps create a demand for more homes - residences that need to be built, furnished, and maintained. Do the resulting economic benefits outweigh the clear desire of government to “control” our behavior? Or is this comparing apples and oranges - freedom and tyranny?

How about the old fashioned dependent deduction? When it was at $500 in the 1950’s, it could be argued that this sum, realized through savings on a parent’s income tax bill, was subsidizing the feeding, clothing, and education of children of that era because the amount paid for a significant portion of a child’s needs. Coming from a family of 10 kids, I can testify to its efficacy in encouraging child bearing.

I think Mr. Poulos is enough of a realist to see that some of these “targeted” tax schemes aren’t necessarily “tyrannical” in the sense that we trade liberty for security by embracing them. The net effect is that the community is served by writing exemptions and subsidies into the tax code that benefit almost everyone. If a desired end in promulgating this kind of behavior modification is a better community - and the examples above regarding home interest and child deductions would seem to fit that model - whatever danger there is that government is aggrandized is mitigated by the net gain for society.

The problem - and I think Mr. Poulos would agree - is that such beneficence comes from the central government, rather than local political authorities. In a more perfect world, this might matter more than it does. But I think it unrealistic to expect that the desired community improvements can be granted or realized by any political entity save the largest - that being the federal government. If that government aggrandizes power unto itself as a result of these incentivizing measures - and this is true given that the increased employment and business activity brings in additional tax revenue - it is the consequence of consensus within the community of the beneficial nature of these schemes and not a power grab by the feds.

But the president’s tax cut proposals for small business might be a different matter:

The proposal, similar to plans he pitched during the presidential campaign and last year in Washington, would give employers a $5,000 tax credit for every net new worker hired this year and reimburse businesses for the Social Security payroll taxes they pay when they increase payrolls faster than inflation.

[...]

Though all businesses will be eligible, the administration would keep the focus on small companies by limiting the total maximum credit to $500,000 per employer. The payroll tax credit would be based on Social Security payrolls, and wouldn’t apply to wage increases above the current taxable maximum of $106,800.

Start-up firms would be eligible for half the credit, which the White House calls the “Small Business Jobs and Wages Tax Cut.”

Here is an example of the federal government artificially creating a demand for new workers by, in effect, attempting to influence the business decisions of individual firms. It’s not coercion, but is it tyranny? Given the $30 billion price tag, I can guarantee the measures will not enjoy the same level of support in the community as the home interest tax write off. And the chances that the the benefits will be as widespread as the child deduction are very small.

In this case, according to Mr. Poulos’s provocative thesis, you could say that the federal government is indeed aggrandizing power and influence at the expense of the community. In hard economic times, this may be accepted by the majority but that doesn’t make the power grab any less “tyrannical.”

The idea that the way our tax code is written can lead to a kind of tyranny is connected to the kind of society in which we have made for ourselves. Alexis de Tocqueville was quite enamored of our national mania to tinker with everything in order to make it more serviceable or valuable. It is only natural that this idea would find its way to government - that we can tinker with society through the tax code’s incentive/disincentive structure in order to improve the life of the citizen by modifying his behavior, and punishing poor choices.

But almost every time we “target” tax cuts, or incentivize certain behaviors at the federal level, we pay a price by ceding personal liberty and responsibility to government. And government becomes richer, and more controlling because of it. Some conservatives, as Poulos points out, are not immune to proposing these tax schemes. But his point that “economic policy derives from and reflects political principles, and not the other way around” is well taken.

Generally speaking, the tax code should be used for the purpose of raising revenue and not trying to modify human behavior. If Republicans keep that in mind the next time voters grant them the power to govern, we’ll all be better off for it.