Despite this coming from someone who used to tease about government being the root of all evil just to get a rise out of people, this is not hyperbole. The income tax is evil – truly, seriously evil. It should die at every level of government. There is nothing about it that is even slightly redeeming. The income tax is a product of pure ideology, nothing pragmatic, nothing rooted in practicality, nothing to promote general prosperity. And that ideology is rooted, more than anything else, in envy, one of the seven deadly sins.
But evil? Seriously? Where’s the evil?
Let’s start with what an income tax actually is. Whether simple or complicated, an income tax is a tax on prosperity and material progress – you know, what it is that makes malnutrition, starvation, disease, and general misery a whole lot less common. Even today, with all the automation we have, the bedrock on which all of our prosperity is built is human effort – work. Work’s reward is income.
There is an old adage that, like most adages, is rooted in truth. “If you want less of something, tax it.” An income tax is essentially a wish for less income, which is the same thing as a wish for less work. And frankly, it is not all that hard to get a lot of people to work less, even if it means a lower standard of living. Mixed with a “social safety net,” the income tax forms an elixir poisonous to prosperity. COVID-19 policies where people quit jobs to receive enhanced unemployment benefits lower than their incomes over the past year and a half prove it. Less work means less prosperity. Less prosperity means more malnutrition, starvation, disease, and general misery. If someone cannot already see the evil rooted in the income tax, they are blind to simple reason. But it’s worse than just this.
No truly just income tax system would tax the gross income of a person in business for himself. Instead, net income is taxed, necessarily allowing for the deduction of legitimate business expenses. This means that whether one is an independent carpenter, welder, small store owner, a doctor in independent practice, or a corporation of any size, the government gets to take an intimate look into how one’s business is conducted. Government tax bureaucracies often make arbitrary decisions about what is or is not deductible, creating unnecessary uncertainty and risk in starting and earning from a business. Again, the income tax reduces work, but it also reduces entrepreneurial initiative and innovation. But it’s worse than just this.
A business’ profits are maximized in two ways. Steps can be taken to raise revenues (advertising and improving one’s product) on the one hand. On the other hand, steps can be taken to reduce costs. Taxes are a cost of doing business. Cost cutting through innovation and efficiency is often difficult. But one of the easiest ways to reduce costs, and gain an edge against competing firms and industries, is to lobby for income tax privileges. No one has knowledge broad enough to completely understand every business and see through the propagandistic smoke screens that are often constructed in corporate lobbying efforts for tax privileges, whether it’s a massive credit for solar panels and wind turbines, a credit for mortgage interest, or deductions for luxury offices. The income tax encourages a soft form of corruption wherein lies by omission are constantly told in the halls of Congress and state legislatures all over the country. But it’s worse than just this.
When it comes to business people desperate to show a profit, whether in giant corporations where multi-million-dollar executive salaries are at risk, or in small businesses where a family’s basic needs are at risk, income tax complexity presents a strong temptation to cheat. It’s almost like putting in a private swimming pool without a fence around it. The temptation is so great, it’s difficult to blame kids for trespassing and swimming in the pool. This impacts not just the individuals who cheat but the entire culture as well. The more widespread even minor tax cheating is, the more acceptable it becomes, which means government has to clamp down and rigorously enforce the tax law, not unlike the philosophy behind broken windows policing where even minor infractions are justifiably punished. But very strict income tax enforcement is oppressive, especially given the fact that income-producing activity is not inherently destructive. But it’s worse than just this.
To rigorously enforce an income tax on personal, business, and corporate income, government has to invade the privacy of every income-earning individual in the land. Government gets to know how many children we have, how much we use a vehicle for business purposes, what vendors we use if we own a business, and how we divide the use of our house if we have a home office. If we are audited, the government gets to enter our businesses and homes to look at often intimate details of how we live. Other taxes can be almost as bad, but sales tax is limited mostly to retail businesses. Property taxes in most locales no longer tax personal property. The income tax violates the privacy of everyone, without exception. But it’s worse than just this.
The main reason ideologues, past and present, have advocated for an income tax arises out of a desire to make the rich pay. Income tax rates rise as income rises in an effort to engineer the desired outcome. Of course, even if an income tax rate were flat, higher-income individuals and corporations would pay more, but this is not enough for income tax advocates. They want higher incomes to pay higher proportions. They want the tax to be “progressive.” But this is a giant self-deception. Stories of rich individuals and corporations paying next to nothing in income tax are rife. High incomes are generally earned through investment and selling goods and services people want and that make their lives better (that work thing again). Being wealthy with a high income merely means having control of productive resources. Jeff Bezos cannot possibly personally consume his $200 billion in net worth (0.14% of total U.S. net worth). He gained his wealth the way most personal wealth is gained, by providing what people want, and by providing a lot of jobs. The income tax only hinders such efforts. Its impact is likely more regressive than progressive by frustrating the creation of jobs.
The income tax is deceptive in its impact, discourages work effort, encourages corruption, violates our privacy, discourages innovation and investment, and thus increases misery in general. It is the malevolent result of malevolent ideology. Every income-taxing government, local, state, and federal, should expunge it from their tax codes. And those who claim to believe in true justice, limited government, and the benefits of continued prosperity should stop, in the name of limited government, advocating for blowing holes in the revenue streams of less-bad taxes like the sales tax and property tax. A sales tax applied to services and groceries is far less damaging to us all than the evil income tax, and we should be about the business of eliminating that evil, not turning it into the only alternative to fund necessary functions of government.
Byron Schlomach is Director of the 1889 Institute and can be reached at [email protected].
The opinions expressed in this blog are those of the author, and do not necessarily reflect the official position of 1889 Institute.
I would argue that neither the sales tax or property tax are less evil than the income tax. It, whether static or progressive in terms of the rate charged is at least based on the ability to pay. The other two are not. A couple who buys rich farmmland both to earn a living and have a pleasant place to raise a family has no control over its value if a new highway suddenly makes it incredibly as a manufacturing, distribution or retail center. The valuation will rise dramatically as will the tax owed, but unless the land is sold it provides no extra income to pay that higher tax. It means that anyone can either force a land sale either by simply seeking approval of a project for what they consider “a higher use” or having enough pieces needed for public infrastructure that can again be taken at fire sale prices to make the remaining land unusable for living ore agriculture. Is that not a greater evil? Sales taxes on yachts have some relationship to income, but the percentage they take from those with small incomes for buying necessities again is not matched by any increase in income. Same in Oklahoma for food and OTC drugs often prescribed for a variety of ailments. But roads, schools, clean water, sewage treatment, police and fire departments certainly are not evil. They cost money and that requires some form of taxation. An home-based tax is the fairest tool society has yet devised. If you have a truly viable alternative, please share with the 5 ‘s of journalism: who, what, when, where and why.
Should anyone be able to sit on a productive resource indefinitely as a result of ownership? I’m not so sure. Having lived in fast-growing areas like Phoenix and Austin, I have personally seen the effects of ranch and farm land being surrounded by urban development. Opportunity cost is borne by such owners in the form of forgoing high sale prices, something many are willing to do for the sake of sentimentality. Property taxes turn that foregone implicit cost into an explicit cost, which does admittedly force people into sales sooner than they might like. Nonetheless, the sellers, feeling forced or no, get a good price for their property, plenty to re-start a ranch or farm where land is cheaper, and the taxes are, too.
But, the fact is, all taxes have bad aspects; they are all, in a very real sense, economically destructive. Ultimately, taxes have to be judged by what they fund, and the NET value that government hopefully creates. That net value should be maximized, which means using the LEAST damaging taxes available. The case I’m making is that the income tax is the MOST damaging of all taxes. What you’ve provided, whether following journalistic rules or not, does not in any way refute that.
I will completely agree with you Byron~~~ The Internal Revenue Service, with which I have dealt with over the course of a 30 year career in helping people “protect” the income they have so diligently earned, is a giant bloated Orwellian monster, and all of the “reforms” that Congress has created to make the IRS seem more “friendly” have been patently false and nothing more than “window dressing” to make the Service appear like our “friends”. The IRS has singlehandedly been responsible for more health issues of the American public than any pandemic could ever hope to inflict. Statistics are woefully unavailable, but I would place my career on the fact that more suicides in this country are a result of citizens being bullied and disparaged by situations brought about by IRS Auditors and Examiners, and the related “disallowances” of which you speak about early in your piece. I have witnessed the stresses and medical conditions brought about by this overbearing segment of our government. It is truly evil. The IRS employs hundreds of thousands of people, and by its sheer size makes it almost if not entirely immune to being dismantled and sent to the lake of burning sulfur, if you will. It would be nearly impossible for the government to put that many people out of work, and as such it is intrinsically destructive to any administration’s “re-election” efforts. Thank you Byron for piercing this veil~~ We are on a road to ruin if something is not done, and done quickly!
This is a well written article! I just wanted to thank you. I’m just a regular joe with a limited understanding of “taxes”. This article, I understood! This article aligns with a conversation my sister and I recently had about intentionally trying to stay in a lower tax bracket yet still having a quality of life.