The Immorality of Democratic Voting
Monday, November 07, 2011 by Kel Kelly
[ The Case for Legalizing Capitalism]
Businesspeople, if they are successfully "greedy," become rich by providing their fellow citizens (i.e., consumers) with things that make them better off. In other words, they have to earn it. But many who espouse that people don't need more than a basic level of existence, in their own greed, constantly vote for politicians who will take money from others and give it to them. They, just like the businessman, want more than they currently have. But instead of earning it as the businessman or capitalist does, the socialists steal it from those who have more. The businesspeople's actions are moral (unless they earned their money by theft or by being given privileges by government), while theirs are not.
The sad fact is that this is exactly what our political system democracy is all about. It is a system where the masses, those with less money than the minority group that has great wealth, vote for politicians who offer to take money from the wealthy minority and redistribute it to them in return for giving the politician their votes.
Voting wealth out of the pockets of those who have it is socialism, because it is done for the "common good," for the benefit of helping that part of society that earns less. This is why democracy has been likened to two wolves and a sheep voting on what to have for dinner. This is also what is known as "social justice." Politicians are simply people who learn to be good actors in order to win your vote. They ultimately care little about real progress for the country or the lives of individuals; they care about their political careers.
Wealth redistribution, therefore, is theft. It is the taking by force from one group in order to give to another. Force is involved because anyone who fails to pay assessed taxes -- confiscatory taxes that mostly go directly into someone else's pockets -- will be put in prison. People from whom money is taken have not usually voted for this action,[1] but those who wanted to receive others' money usually have voted to take it from them. Many socialists will dispute this and argue that most people want to pay the amount of taxes they pay. This implies, for example, that when the government doubled the tax rate during the Great Depression, people, coincidentally, simultaneously wanted to voluntarily pay double the amount of income tax. It implies that when marginal tax rates reached 90 percent, people truly wanted to work and hand over 90 percent of their marginal earnings. The argument is too weak to take seriously. Besides, if most people want to pay all the taxes they pay, socialists will have no problem switching the payment of taxes from being required by law to being voluntary.[2]
Wealth redistribution does not involve only social programs such as welfare, Medicaid, and Medicare. It involves any occurrence of one party receiving money, physical goods, or services, that they did not pay the full cost of, but that another party did, on their behalf. For example, public transportation involves wealth redistribution because most who use it did not pay for the bulk of the cost. Even though they contribute by purchasing their tickets, the ticket is highly subsidized because wealthier taxpayers fund most of the cost.
Similarly, National Public Radio (NPR) is a wealth-redistribution program (mostly from the rich to the middle class). Many who listen to it paid taxes toward it, but many of those who do not listen also pay for it and often pay more. If NPR is a viable business that would have enough people wanting to use it, it would be profitable on its own without government funding. If NPR could not survive without the government, it is a loss-making enterprise that is consuming wealth. That wealth could instead be used for profitable ventures, which would better serve society. We can see from this last example that only by having profit-and-loss statements can we determine whether a product or service is something consumers really want to have. There are never any profit-and-loss statements associated with anything the government operates, so we do not know which services are really beneficial in economic terms.[3]
Most of the taxes paid in the United States (and most countries) are paid by a small group of people: the rich. In 2005, 53.7 percent of all income taxes in the United States were paid by those earning over $200,000. Those earning between $100,000 and $200,000 paid 28.3 percent of all taxes. This means that 82 percent of all taxes were paid by those earning over $100,000.[4] Those with incomes below $40,000, in total, paid no income tax: their tax liability was more than offset by the tax rebates from the Earned Income Tax Credit. In other words, many receive money (from the rich) "returned" to them for taxes that were never paid.
Further, most taxes do not go towards essential government services such as road infrastructure, parks, education, the legal system, or police and fire departments they go directly into other people's pockets. No more than 10 percent of the 2009 federal-government budget goes towards these essential government services (and most of these services are taken care of with separate state and local taxes). More than 65 percent of the budget goes towards social programs or some other type of income support or assistance. (Most of the remaining portion goes to fund our wars, or, "national defense" as it's called.)
Many claim, without an understanding of what's really happening, that somehow the rich take money from the poor. The facts show it is quite the other way around, considering the following numbers. According to a detailed report[5] by the Tax Foundation,[6] in 2004, the bottom 20 percent of all income earners received $8.21 in government spending for every $1.00 in total[7] taxes they paid (and $14.76 for every dollar of federal taxes paid). The middle 20 percent received $1.30 for every $1 in taxes paid. But the top 20 percent of income earners received only $0.41 for every dollar of taxes paid. (Though they don't give the figures for the top 5 percent of taxpayers, who pay almost 60 percent of all taxes,[8] their receipt of government spending, by logical deduction, must be below $0.05 or less for every dollar they pay.)
In dollar amounts, households in the lowest-earning quintile in 2004 received about $31,185 more in government spending than they paid in taxes, while the middle quintile received $6,424 more than they paid. The top quintiles, however, paid $48,449 more in taxes than they received in government spending. In the aggregate, the top 40 percent of income-earning households paid roughly $1.03 trillion more in total taxes than they received in government spending, while the bottom 60 percent received $1.53 trillion more in government spending than they paid in taxes (the difference being the amount spent by government in excess of what it brought in an excess mostly financed by the future top income earners). This is wealth redistribution.
We can see from these statistics how absurd is the phrase "tax breaks for the rich." The rich do indeed benefit most from tax breaks because of the fact that they pay most taxes. Tax breaks are the giving back to the rich some of the money that was previously taken from them. Yet socialists call this redistribution from the poor to the wealthy! In other words, if the poor aren't allowed to receive as much of others' incomes as before, and the rich are allowed to keep more of their income, then, in the eyes of socialists, the rich are taking from the poor. This is like saying that a thief who must return a woman's purse after getting caught stealing it is redistributing money from himself to her.
When the government imposes taxes on the rich or less rich for the purposes of giving the money to another it is no different from taking his car, house, farm, or individual possessions. It is often the case that people who inherit property from deceased family members, even property that has been in their family for generations, have to sell the property just to pay the taxes. They really do lose their physical property. Even when taxes are taken straight out of people's salary, the monetary income taken could instead have been spent to buy physical goods or assets. It is family property that will never exist but would have otherwise.
What is the morality of forcing wealth from those who have it to those who have less? How is it that people are outraged when a CEO steals from his company, or a street thug steals a car, but they are not upset with themselves and their poorer neighbors for stealing from those who rightfully earned more money than they? Indeed they actively support such theft and vote for more of it!
I conclude that society does not really care about morals. They care about what's best for them, defining terms in different ways in different situations, to fit their own personal or ideological agenda. Socialists condemn the businessman who becomes rich by pleasing others and providing jobs for workers and who harmed no one else in the process. But socialists claim that workers (and nonworkers) who were paid the full value of their work by the businessman but still choose government force to make him pay more, are innocent, righteous, and deserve "social justice."
As a reminder of why businesspeople take nothing from others but simply benefit from creating wealth for them, consider the fishing net example from chapter 1 of The Case for Legalizing Capitalism: If an island businessman creates a fishing net, he is able to reap the reward of more fish (more wealth). If he sells the net to others, he becomes wealthy by exchanging fishing nets for money (which exchanges for wealth). With others having a net, too, they can have more fish at lower prices (fewer hours of labor). Plus, those who help the fisherman make nets get paid wages in the process. The businessman creates wealth for everyone without taking from anyone in the process. Everyone benefits!
When people elect politicians who make campaign promises to interfere with the marketplace, they implicitly instruct government to take control of private companies. Businesses of all sizes, whose owners voluntarily went into business to bring us goods and services in order to make a profit then become slaves to society because the government, representing the people, dictates to companies how much to produce, what it must produce, what is not allowed to do, what prices it must sell above or below, what materials it is allowed or forced to use in production, and how much of its income must be sent to other people or companies.
Suppose your family decided to start a business. You invest time, sweat, money, and opportunity costs in creating a new product or service. Your company's product did not previously exist, but you made it available for others, without harming or forcing anyone to exchange their income for the product. After some years, your product becomes so popular that your family has now become wealthy through voluntary exchange. Others, who engage in forceful, not voluntary, exchange, in their jealousy, use the government to regulate you. They force you to sell part of your company to your competitors (antitrust legislation) who are not able to compete as efficiently and effectively; they force you to pay your workers more than you can afford (union legislation); they force you to sell your product for a lower price than the market demands and for a lower price than you would like (price controls); they force you to produce in a way that pollutes less but raises your costs and reduces your output (EPA legislation); they then impose a "windfall-profits tax" because they think you're earning too much money this year. Your company started out being your private property that benefited society, but then society -- through government regulation -- took control of it and sucked it dry. Now your family earns less, your workers earn less, and less of your product is available to consumers, and at a higher price. The consumers got what they voted for. Voting for the government to improve one's life almost always results in the opposite.
In 2008, congresswoman Maxine Waters threatened, on behalf of "society," to nationalize (i.e., to steal) the privately owned companies in the oil industry[9] due to the "large" profits they were making, since oil was at the highest price in years. But Congress itself brought about the high profits by
- sanctioning the printing of money by the Fed (increased demand) and
- preventing new oil drilling and refining (reduced supply).
One hundred fifty years ago, oil was a worthless substance. Companies voluntarily extracted and refined it, and made it useful, significantly improving our lives in the process. But by threatening nationalization, the government now threatens to take away the property of the millions of individuals who own these companies, by force, against their will. Americans should have been shocked and aghast that this government threat could happen in their own "free" country; instead, most agreed with her sentiments. If this is moral, then virtually anything could be argued as being moral.
Kel Kelly has spent over 15 years as a Wall Street trader, a corporate finance analyst, and a research director for a Fortune 500 management consulting firm. Results of his financial analyses have been presented on CNBC Europe and in the online editions of CNN, Forbes, BusinessWeek, and the Wall Street Journal. He is the author of The Case for Legalizing Capitalism. Kel holds a degree in economics from the University of Tennessee, an MBA from the University of Hartford, and an MS in economics from Florida State University. He lives in Atlanta.
This article is excerpted from The Case for Legalizing Capitalism, chapter 7, "The Immorality of Democratic Voting."
Notes
[1] Many of the rich, misguidedly, do vote for their money to be redistributed, but most people do not, and do not want it taken from them. If you think I"m wrong, then you would surely not oppose making taxation voluntary, or letting the rich choose their own marginal tax rate, since if people want to give their money away, they in fact will. The mere existence of tax havens and tax evasion, both of which are highly moral, proves that rich people do not always want to willingly give up their money.
[2] As occurred under Queen Elizabeth I, resulting in a more prosperous economy. Also, it is precisely because most people will not voluntarily pay the amount of tax they are currently paying that socialists have to use force in order to make people hand their money over.
[3] A budget is not a profit and loss statement, and the revenues on a government budget are revenues expropriated from taxpayers, not voluntary purchases of the product or service being provided.
[4] Bruce Bartlett, "Tax Facts."
[5] Andrew Chamberlain, "Who Pays Taxes and Who Receives Government Spending? An Analysis of Federal, State and Local Tax and Spending Distributions, 1991–2004."
[6] The Tax Foundation.
[7] The Tax Foundation, "Who Pays America's Tax Burden, and Who Gets the Most Government Spending?"
[8] Will Wilkinson, "All Tax Plans Are Wealth Redistribution."
[9] Fox News, "Maxine Waters threatens to nationalize US oil industries" (YouTube excerpt).
http://mises.org/daily/5723/The-Immorality-of-Democratic-Voting
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