Or, How I Learned to Stop Worrying and Love Redistributive Taxes
I think many people in this country have a problematic idea of the nature of government, and of what the world would be like without it. Too often it seems like we think "The Government" is some entity that is unnatural and apart from other good, American things like money and freedom. A good example: recently I had someone defend tax cuts as "stimulating the economy by creating spending" as if this were some sort of obvious thing - clearly if the people have that money they'll spend it, so if you give the money to the government instead...
...This is the problem, of course: the government will also spend the money. In fact, given it likes spending large amounts of money that it doesn't have, it is pretty much sure to spend the money it does have. Citizens will, on the other hand, even given our current addiction to spending and credit, save some of it, and that tendency to save goes up as the economy gets more shaky. The government is a huge employer as well. Most lists of largest employers I could find surveyed only the private sector, but this table, compiled by the Bureau of Labor Statistics, implies that the public sector employs around 22 million Americans, a bit over ten times as many as Wal-Mart, claimed as the largest private sector employer by this sadly undated table. (I'm also not sure if the BLS is including workers who are technically in the private sector but contract primarily to the government, like weapons developers; I assume not.) In any case, at somewhere between 17% and 18% of the workforce, government work keeps food on the table for a vast number of people. It might well be reasonable to argue that this isn't a desirable situation, but the argument that somehow tax money vanishes from the economy is clearly ridiculous.
Another great example of this misunderstanding of the nature of government is libertarianism, a disgracefully trendy outlook among my peers. The Great Libertarian Myth is, in my mind, the idea that somehow the government is an alien entity forced upon us, and that if we were to remove it entirely, we'd all be in some primal state, where wealth naturally accumulates to those most deserving. (I realize some brands of libertarianism don't advocate the complete removal of government, but virtually every brand I've encountered is close enough - at the very least, the central conceit of the movement seems to be that any kind of redistributive function of taxation is abhorrent. The most that seems acceptable is a "slush fund" for things like decent roads, police, and army, and I've even heard a lot of people wanting to privatize those.)
Ultimately this idea of a parasitic government is sadly sometimes true, but is about as well-founded in history or philosophy as Ladder Theory, another reprehensible ideology designed to let people deny the real causes of their discontent. At its core, government is the way in which people organize themselves. That's it! If you remove the current government and go back to the state of nature you quite quickly get...well, what we last got when we began organizing ourselves in units larger than tribes: aristocracy.
It is pretty easy to see that this is what will happen, too. "It takes money to make money" is an adage for a reason, and if you've ever tried to do business, you'll understand why. As long as the money flows, everything is great. As soon as it stops flowing, everything becomes non-great in a big hurry. Even if we're spending the same initial amount, if you and I both open up new businesses, and one of us has a ten billion dollar trust fund whereas the other of us now has some debt, it isn't hard to figure out which business will succeed. If the money's close, the better businessman might pull it out, but with that kind of difference, there's no chance: you can operate at a loss long enough to drive me out of business, then move on with your life. In the absence not only of industry regulations but rather of any kind of government, you can hire thugs to light me and my business on fire. In fact, you can hire enough thugs that no one will ever be able to open up any competition, unless they can hire more thugs. You should probably write down what will or won't cause your thugs to rough someone up, so that people will be able to visit your businesses without fear of random beatings. Obviously since there's no estate tax (since there's no functional government) you'll pass all this on to your kids and...
...Now you're a king (or queen.) And now you are the functional government. Even if you're the biggest Randian ideologue ever, there's no getting away from it, either - organized peoples stomp disorganized peoples in all cases, at least in the long term. On the very small scale you can easily see why - if you don't opt in to the hiring of thugs, you have to be able to fight off the thugs yourself. Even if this works, you can't spend a lot of time creating wealth when you have to spend all your time personally defending what you already have! About the best you can do, if you really want to encourage the best people to get rich, rather than having an aristocracy, is ensure that the wealth and power don't automatically pass on to your kids, but rather to the worthiest candidate, however you want to measure that.
Which basically just means you create some kind of republic, codifying the laws to redistribute power (which is still based ultimately on direct or indirect control of material goods, because it always is) in some way other than just letting people give it to whomever they want when they die. So, congratulations, in pursuit of the good libertarian principle of making sure the worthy become wealthy, you've discovered wealth redistribution via taxation.
Similar arguments work for the watered-down versions of libertarianism as well - even if you can't hire your own army, having more money makes success in business far easier, and failure far less destructive. Rags-to-riches is probably possible in some libertarian societies, but the burden here is far higher than possibility: the ideological claim is certainty, that in a libertarian society economic "justice" will certainly prevail. This is clearly rubbish. History can help us here, too: in America's Gilded Age, lack of government regulation led to monopolies and concentration of wealth, creating for a while a de facto American aristocracy, the remains of which can be seen in countless historic mansions and corporate histories throughout the country. The end of that era was brought about in large part by government intervention, both through regulation but also through redistributive taxes in the form of a meaningful estate tax. (Incidentally, my complaints with libertarianism hardly end here; I might cover that in-depth later, but the Gilded Age is an excellent example of why reasonable people probably shouldn't want extreme income disparity even if you can arrange it so the people at the top really do deserve it.)
So, to wrap it all up, the central flaw in the tragically common "all government sucks" talking point that routinely crops up in American politics is the idea that government is unnatural, parasitic, and, most importantly, always bad. Working more or less from first principles, I think I've shown above how you can figure out for yourself that this narrative is deeply flawed. At the very least, the natural and organic nature of government should be clear from its development everywhere humans make a home, and indeed even among some other social animals. (Pack hierarchy is not notably different from simple government.) As for always bad, that isn't even meaningful - government is inevitable, a natural consequence of humanity. What we need to do then, as the constituents and participants of government, is make sure our government is as good as possible.
Personally, I think we're doing a pretty wretched job of it these days. That is, primarily, a story for another day. I will say, though, that our redistribution if wealth is pretty awful. I'll talk about that later too, but for now take a look at this chart showing how our marginal tax rates have changed in the 20th century. I'll probably talk about that chart next time, when I think I'll talk about the philosophical goals of wealth redistribution via taxes. That should be after this weekend, because I have a busy one ensuring my own personal economy is adequately stimulated.
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