America’s 30th President, Calvin Coolidge, had a thing or two to say on the subjects of government and taxation. When he became Senate president in Massachusetts, in 1914, Coolidge said in his acceptance speech: “Don’t expect to build up the weak by pulling down the strong.” In 1924, while delivering remarks to the Business Organization of the Government, he said: “A government which lays taxes on the people not required by urgent public necessity and sound public policy is not a protector of liberty, but an instrument of tyranny.” Coolidge was right in both instances – but Joe Biden is, clearly, no Calvin Coolidge.
In the entire history of human society, no poor person ever became rich as a result of a rich person becoming poor – unless it was a case of the former stealing from the latter. No government has ever brought the less well-off to prosperity by taxing the wealthy. If it were possible to do so, then humankind would have eliminated poverty decades ago by simply taxing the highest earners at whatever level necessary to ensure that no poverty remained.
If businesses, rather than individuals, are thrown into the “wealth-gap” issue, then the same applies: Exorbitant increases in corporate tax rates are a losing proposition, for a number of reasons, and are no magic panacea to the problem of poverty – which is both relative and subjective. The largest and wealthiest corporate entities will find a multitude of ways to minimize their tax burden, whether that means exploiting loopholes in the law (and the U.S. tax code is so unwieldy that loopholes can always be found), downsizing – which means people lose their jobs – or passing the increased costs onto the consumer.
Small, less well-heeled companies will have less opportunity to use any of the aforementioned methods of mitigating the burden of higher taxes, though.
Who’s Fleecing Whom?
Attempting to justify his proposal to hike the corporate rate from 21% to a whopping 28%, Biden claimed that he was “sick and tired of ordinary people being fleeced.” Like most statements that come out of his mouth, this one was a head-scratcher, to say the least.
In what possible way are “ordinary people” being “fleeced” by corporations not paying more taxes? The current occupant of the White House was not about to elaborate, for the obvious reason that it was a nonsensical statement that he could not have even begun to rationalize.
It is as though Biden is suggesting that businesses are stealing from those “ordinary people.” There is a comparison well worth making here: The financial burden levied on lower- and middle-income Americans by corporations versus government.
Individuals and businesses alike have the option to trade with – or not trade with – certain corporate entities. When it comes to paying taxes, they have no such option. When a private citizen or a small business pays money to another business, large or small, they receive in return an item or service commensurate with how much they pay. Additionally, the money they hand over has one, direct purpose: to finance the provision to them of the item or the service. In basic terms, they get what they pay for and they can choose to make the transaction or not.
When the government taxes an individual or a business, there is no choice available and the money forked over to the government goes anywhere the government decides. In return, the payer gets nothing directly, but, rather, contributes to a massive slush-fund that is then used to provide certain amenities or services to the general population – and a great deal of that money will be spent on programs, either in the U.S. or in other countries, that will be of absolutely no benefit to the taxpayer.
Mr. Biden is quite wrong, then. The ordinary people of whom he speaks are being fleeced by government, not by any private business entity. Moreover, the fleecing will be redoubled when the taxpayer finds himself or herself paying higher prices for goods or services due to the higher tax burden upon corporations. Worse still, perhaps, many Americans will find themselves fleeced right out of a job.
Ordinary Americans Are Businesses, Too
Moreover, these much-discussed ordinary people would do better to look upon themselves as entrepreneurs or even as businesses, albeit sole proprietorships – even if they are employees. After all, they are providing labor or technical skill or experience, or all of those things, to the highest bidder. In reality, every person who works is working for himself or herself.
With such an outlook, it becomes even more obvious that a raise in corporate taxes trickles down to affect everyone, from the big corporation to the small business to the sole proprietor, otherwise known as the “ordinary” person.
No, Biden is no Calvin Coolidge. He is also no Ludwig von Mises, who said: “[T]he system of discriminatory taxation universally accepted under the misleading name of progressive taxation of income and inheritance is not a mode of taxation. It is rather a mode of disguised expropriation of the successful capitalists and entrepreneurs.”
Read more from Graham J. Noble.