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Affluent Christian Investor | May 29, 2023

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Dear Conservatives: Excess Taxes ‘Voluntarily’ Paid By Liberals Are A Tax On You

Photo: Getty Images

Every so often it’s worth reminding readers that Medicare began as a $3 billion program in 1965. As Sally Pipes explained it in a Wall Street Journal column from 2015, in 1967 a House committee naively forecast Medicare spending of $12 billion in 1990. The actual number was $110 billion. The cost of that which still doesn’t cover all presumed recipients had ballooned to $511 billion by 2014, and is expected to surge past $1 trillion sometime in the 2020s.

It’s all a reminder that rising government revenues cheered by conservatives are not a good thing, and have nothing to do with limited government.

To be clear, this is in no way a write-up calling for an end to economy-boosting tax cuts. Anything that shrinks the federal government’s take of what Americans produce should be reduced. At the same time, it is a call for tax cuts large enough that tax revenues actually decline. And for the purposes of this piece, it’s a call for conservatives to cease their braindead bluffing of already braindead lefties to put their money where their mouth is and voluntarily increase what they hand over to the U.S. Treasury.

For background, every year without fail some Hollywood celebrity, or some well-funded left leaning group calls for the rich to pay more in taxes. That’s what American-style liberals do, year after year. It’s a pose.

Sadly, conservatives take the bait and act as the fools who fall for this dopey pose. They follow up with op-eds and blog posts telling the guilty lefties that nothing’s keeping them from paying more each April; or in this year’s case, July. When conservatives do this they’re revealing a glaring misunderstanding about taxes. We all suffer them whether we individually pay a lot or little each year.

Medicare is instructive in that it’s like all-too-many government programs. They start out small, only for the small bureaucracy in search of a purpose to grow into something much larger. While private businesses succeed by doing progressively more with less, government programs ensure their long-term existence by doing progressively less with more. Stated simply, it’s hard for politicians to sunset that which employs lots of people.

Just the same, these growing bureaucracies in search of a purpose develop constituencies. That they do similarly makes shutting down what fails a very difficult concept. You mean, you want to take away medical care from old people? Readers hopefully get where this is going.

It’s a reminder yet again that we all suffer the burden of taxes paid.

Indeed, Medicare was a consequence of a revenue surge that followed the 1964 tax cuts. It’s a reminder of what should be obvious: politicians don’t tax away our dollars only to stare lovingly at them. Our dollars represent opportunity for individuals who exist to spend the money of others to do just that.

This is why attempts to distinguish between federal budgets in balance or that include borrowing really are a waste of time. The only number that matters is total dollars spent. The more dollars available for politicians to spend, the greater the chances for them to design new programs that never die; thus expanding the biggest tax of all: government itself.

The great Don Boudreaux argues that deficits have an immoral quality to them for today’s generation leaving bills for future generations to pay. He and I have debated this, only for me to say that the spending damage is in the here and now: right when politicians spend. It means we suffer right away the politicized allocation of wealth by Pelosi, McConnell, Trump, Obama, etc. etc. Pick your poison as it were.

Still, Boudreaux might agree that with Medicare as one of many examples, the bills are passed on to future generations whether the money is borrowed or taxed away right away to fund political waste.

Medicare is once again instructive. A revenue surge theoretically “paid” for a new federal program. In a sense it did in 1965. But government is different. Government as previously discussed has to grow. This means that what was theoretically paid for in 1965 never accounted for how bureaucracies grow. In 2025, those not born anywhere near 1965 will pay for that which won’t die.

Again, the spending is the problem. A focus on deficits and surpluses is a focus on how politicians get the money to introduce new governmental intrusions and expansions. Those numbers are in a sense small. The true cost of government comes with time as the modest becomes ostentatious.

Which is why yours truly, if offered $50 trillion in federal spending over the next 10 years with none of it borrowed versus $25 trillion over 10 years with half of it borrowed, would take the deficit scenario every time. The challenge is the spending. It drags us down in the near term as politicians mis-direct precious resources, but it’s much bigger over the long-term as small morphs into gargantuan.

In short, the goal should be to limit the inflows into U.S. Treasury. Period. Better yet, shrink the inflows. The paradoxical truth about deficits is that as evidenced by the lowest-in-the-world interest rates paid by Treasury, they are high because revenues are too high now and will be too high in the future. Reduce the inflow and you reduce both the spending and the deficits.

Which is why conservatives must stop falling for the annual trick whereby they waste ink goading lamebrained lefties to pay more in taxes. Bad idea. We’re all burdened when extra funds are handed to politicians. Conservatives who claim they’re for limited government should recognize this simple truth.

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