I found this doodle in my notebook. The caption on the the first doodle is “Entrepreneur” (though I spelled it wrong in the doodle).
In the second, “Politician”.
I thought it was a good graphic representation of some of the topics from my recent post, What is wealth and where does it come from?
See below the fold if you need help interpreting.
What is the tax code?
Many might say it’s how we fund government. But, that’s not really it. Funding could be accomplished with a flat tax.
The tax code is more than a funding mechanism. It’s a political power machine. It gives elected officials the power to pick winners and losers. Here’s some examples:
- A politician might pick a winner based on what might sound good to voters. I voted for tax breaks for the poor. Why not vote for low taxes for all?
- State lawmakers often get to save the day by offering tax incentives to keep businesses from leaving their state so they claim that they kept jobs local in their next campaign and count on support from those workers. Why not attract even more jobs by lowering tax rates for all businesses?
- Lobbyists for special interest groups partner with elected officials to get the elected officials to give their special interest groups favorable tax treatment.
The tax code isn’t the only power machine in government. Any activity of government that involves picking winners and losers has the potential to be a political power machine.
Some other examples of political power machines include granting exceptions to Obamacare, placing tariffs on sugar imports, requiring professional licensing, meeting Department of Education requirements in exchange for dollars for local school districts.
The raison d’etre for such things is to empower elected official.
Politicians are thankful when their citizens keep the debate centered on who they think should win and lose — who should pay the least and most in taxes, for example — because that means they get to keep their power and maybe get more.
So, when you consider whether folks making over $200,000 a year should pay a higher or much higher tax rate than you, keep in mind that it doesn’t matter. There’s no right answer. Politicians don’t care too much either. They just care whether you believe the rate should be different for that group than for others. As long as you believe that, politicians have power.