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Renewing Limited Government: Tax Limits

Guest post by: Michael Hume

Article Overview: In latter years, Americans have fallen asleep, and have allowed their elected (and unelected) leaders to dodge the Constitutional limits on government... far too often, for far too long. Until we get back to true limited government, as defined by the Constitution, America will continue to slide toward the collectivist abyss that has claimed every great nation in history....

Renewing Limited Government: Tax Limits

Limit Tax Rates, And Government Revenue Will Soar The United States was founded as a Constitutional republic - a nation of laws, not of men - a nation where the citizenry was to govern itself. The people and their respective states, according to our founding document, have all the power except that which is expressly granted (by them) to the federal government. In America, the people are supposed to control the government - not the other way around.

This is an important distinction from other great nations, past and present. Only with this free-market, civil liberty, personal responsibility approach can the sort of wealth and strength that has always characterized America be created. Only free citizens, protected from their own government by their Constitution, can so successfully start a business, risk capital, make investments, build wealth, and create jobs (and other opportunities) for others as Americans always have.

In latter years, Americans have fallen asleep, and have allowed their elected (and unelected) leaders to dodge the Constitutional limits on government... far too often, for far too long. Until we get back to true limited government, as defined by the Constitution, America will continue to slide toward the collectivist abyss that has claimed every great nation in history.

There are at least ten key limits on the federal government that should be restored (or, in the case of a few later-arriving quasi-governmental institutions, established) in order to restore the strength and glory of America. Previous pieces have discussed the merits of limits on elected terms, page-length of proposed legislation, and government spending. The government should also be limited in terms of the debt it may incur, the bureaucrats it may employ, and the regulations it may impose on the citizenry; in addition, the establishment of limits on litigation, union dues, and academic tenure would would be ideal.

None of the other handcuffs on our runaway government will be effective, though, unless the federal edifice is limited in the amount of tax money it can collect from its citizens. Conversely (happily), if the other limits are successful, the federal government would be able to limit taxation to a fraction of current levels and still have more than enough revenue to meet its true, valid obligations.

For instance, if government spending were strictly limited, we could easily limit taxation to somewhere around 10 to 15 percent of EVERY American's income. Millions more taxpayers would mean billions (maybe trillions) more in tax revenue, even though the rate of taxation would be severely limited. The reason is simple: investment money would come flooding into America, and pouring off the sidelines within the U.S., as people found new incentives to start a business, build wealth, invent new technologies, and do all the other things which keep our nation smart, strong, and free. Yes, the rich would get richer... and so would the poor, who'd once again have a chance to become the "former" poor.

The eminent Thomas Sowell reminds us, in recent opinion pieces, that the same opportunity for prosperity existed ninety years ago. The top income tax rate in 1921 was 73% - and, when the government decided to implement that rate "to ensure the rich were paying their fair share" (sound familiar?), the riches in America started to disappear. The investment class put their money beyond the reach of the tax man, and in so doing, also put that money out of the reach of the free-market economy. When Treasury Secretary Andrew Mellon finally got Congress to reduce the top rate to 24%, a flood of money reappeared in the U.S. economy, bringing with it a flood of jobs and a flood of new revenue for the government. The decade that followed came to be known as "The Roaring Twenties," when even financial mistakes were typically "covered" by the general prosperity of the country.

All erudite economists - liberal and conservative, Republican and Democrat - know this. They all know that dropping tax rates in an economy like today's is the way to kick the market back into high gear. And they know this how? Because that's what's happened every single time dramatic tax cuts have been tried, most notably by Presidents Harding and Coolidge in the 1920s and Reagan in the 1980s. And when the opposite has been tried? Presidents Roosevelt (in the 1930s) and Obama (nowadays) moved the nation sharply toward socialism, and their results have been called the Great Depression and the Great Recession, respectively.

There are many great plans out there, including the "Fair Tax," the "Flat Tax," and hybrids like GOP presidental candidate Herman Cain's "9-9-9 Plan" (nine percent tax rate limits on corporate profits, personal income, and nationwide sales). But the current elected leaders will block all true tax reform. Why? Their goal, regardless of public pronouncements, is not to revive the economy, renew the Constitutional limits on government, or even increase revenue to the government - all sure-bet outcomes of sensible taxation limits. Their goal is simple: they want your vote. And as Sowell points out, "class warfare" - making you believe that the rich (Obama's "millionaires and billiionaires" who make more than $250,000 per year) are not paying their fair share - has always been a reliable political ploy for the liberal Democrat party.

Once you realize that liberal collectivists like the president are not really concerned about your security and prosperity, but only about their own grasp on power, you see why limited government (particularly limited taxation), as much sense as it makes, is anathema to them. And you start to understand that their aims are precisely those from which America's founders, and the authors of our Constitution, were intent on protecting you.

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  Renewing Limited Government: Page Limits
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Article Tags: entrepreneurship, inspirational leadership, personal responsibility, wealth building



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