Is the statement is true or is it not? You seem to just dismiss it because you don’t like Milton Freidman. I can see either way, and you could argue that it is a half-truth, but I see a basic grain of truth that all taxes eventually come out of the pocket of some human being.
Your question seems confrontational, since you ask me to choose between one undesirable outcome and another undesirable outcome. The answer to the question is neither.
Given the nature of your question, and since you call my other email a “rant” and describe Friedman as insignificant, it appears to me like name calling, which is a tactic often used by some in political discussion. I have the impression that you are reacting out of emotion, although I also think that you have a desire to base your views on facts.
I think that there are many liberal myths that we have been so pounded into us that people can’t see the trees through the forest. Some of these myths are indeed partial truths, but they get exaggerated so out of proportion that they distort the reality of the situation.
I consider the following to be facts that can be backed up by clear evidence …
1. The wealthy pay a great deal more in taxes than the middle class and poor even when measured as a percentage of their income. Of course there are exceptions to this where some people have taken advantage of the system and maybe we can close some loopholes. (Personally I want to scrap the entire tax code and start over.) But closing loopholes will produce less than a hundred billion in annual revenue which is a drop in the bucket compared to our current deficits.
2. No matter how high the tax rates have been in the past, the Federal Government has never collected more than 20.6% of GDP and this was during the dot com boom. This is because people change their behavior as taxes go up.
3. The current level of spending of the Federal Government is around 24 to 25% of GDP. Therefore, just trying to soak the rich will not solve our deficit issue.
4. Using government spending to stimulate the economy has always failed and produced worse economic outcomes. The reason that it fails is that causes resources (capital, labor) to be taken away from the free market and it always puts us deeper in debt.
5. The total spending of all levels of government in the United States is around 40% of GDP.
6. Increasing total government spending beyond 25% of GDP, regardless of the context, reduces GDP growth on average by .1% per year for every 1% increase in spending as a percentage of GDP. Theory aside, I think that the political reality is that total government spending will never be less than 30 to 35% of GDP, and the economic reality is that the percentage will probably get higher, not lower.
7. The total unfunded liabilities of the Federal Government are so huge that we can’t hope to pay them. Our best hope is to have strong economic growth, which will increase the tax base, and is why you can’t dismiss economic growth.
8. As the public sector portion of the economy increases, the investment portion of the economy goes down, as it has done in recent years.
I get a sense that you are concerned about disparity of wealth, and so am I. There are many who believe, including myself, that having too much government spending and inflationary monetary policy produces disparity of wealth because there are too many people who figure out how to profit from this.
My core values are that I believe personal and economic freedom. I think that if the government takes from me just to give to someone else, that this is legalized theft and takes away the fruits of my labor and my freedom. However, I am not a pure libertarian in the sense that I don’t want to pull the rug out from underneath those in need. But I do think that with the help of economic growth that we could move in the direction where fewer people are reliant on public charity.
Since you mentioned morality …
I don’t believe that it is ethical to take excessive amounts of money from people just because they are wealthy. Under the current system, a person could pay 40% federal plus Social Security and state and local taxes. Asking someone to pay, hypothetically, 60% or more of their income is just theft, and discourages hard work and investment. There is no government benefit that well-to-do person would get that would justify confiscating 60% or more of his income.
Now it is my turn to sound emotional, although that is not really my intent: In part, I think that we have become a national of thieves. It has become O.K. to use government to steal from your neighbor and benefit yourself. We have lost any belief in limited government, and the constitutional limits on government have been completely ignored. In effect, we have thrown out the Constitution, and become a European style government.
Milton Friednam comment is an insignificant tautology. All tax designations are labels for who pays what. Likewise, the highest corporate tax rate meaningless if no US corporation pays then.
So where are you coming from? Are you looking for someone else to pay your burden for being able to live in this great country or are you offering to pay somebody else’s taxes.
Milton Friedman pointed out that Corporations don’t pay taxes – people do. It either comes from the shareholders, or higher prices, or less employment.
We have the highest corporate tax rates in the world. Other countries lowered their corporate tax rates to become more competitive.
Would no more tax holiday for GE really end up helping Mr. and Mrs. Taxpayer? Doubtful. "The average Joe should be in favor of lower corporate taxes," says Hodge, "because ultimately they are paying the corporate income tax. Either as workers, getting lower wages and fewer jobs, or as consumers, paying higher prices, or as retirees, getting lower dividends and earnings on their investments."