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‘Life and Taxes’ by Yaron Brook

Yaron Brook has another excellent commentary in Forbes, this time on “Life and Taxes.” Here’s an excerpt:

Tax policy works by attaching financial incentives to a long list of values deemed morally worthy. If you want to maximize your wealth come tax time—and who doesn’t?—you must look at the world through tax-colored glasses, “voluntarily” adjusting your behavior to suit social norms and thereby qualifying for tax breaks. In this way, the social engineers of tax policy preserve the impression that you’re exercising free choice, while they’re actually dispensing with your reason and your judgment.

As an example, consider the choice between buying and renting a home. In a free market, a dollar paid in rent is equivalent to a dollar paid for mortgage interest. But when the federal government offers a mortgage interest deduction—based on some alleged need for an “ownership society”—then each purchase dollar saves a few pennies in tax that a rental dollar does not. So the path to wealth maximization suddenly veers away from renting and toward home ownership.

Over the past century, such social engineering has inflated the nation’s tax laws to an estimated 66,000 pages of statutes, regulations and rulings. At the core of this unreadable agglomeration is the most arrogant scheme of all, the progressive income tax. Its basic idea is that the more productive you are, the more you should pay in taxes. If you dare to suggest that penalizing success is neither a moral ideal nor a practical tax policy, you will be told that all such questions must be decided by reference to the good of society.

And now the presidential candidates want to bulk up this already bloated system. For instance, Hillary Clinton wants you to take care of your elderly relatives ($3,000 “caregiver’s credit”), Barack Obama wants you to keep your company’s headquarters and jobs in America (“Patriot Employer” program) and both Obama and McCain want you to fund more research and development (making an existing credit permanent).

Of course, there’s nothing wrong with caring for grandparents, hiring local people or spending on R&D—if a rational thought process leads you to conclude that those choices actually serve the self-interest of you or your company. But government has no right to influence your decisions one way or the other. . . .

If government were restricted to its proper functions—police, courts and a strong military to defend individual rights against physical force and fraud—our 66,000-page coercive tax code would be a thing of the past. What’s more, a great burden would be lifted, not just from the economy, but from our lives.

Read the whole thing.


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