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Those Who Love to Pay

August 13, 2003

In fiscal crises, there are never shortages of proposals to hike taxes (or to change the rules to make it easier to hike taxes) on "the rich" or to keep their taxes from being lowered, in order to support or expand various government programs.

These proposals trigger the rebuttal that high income earners are already forced to pay far more than their fair share in taxes. And there is always the chance people will take that rebuttal seriously. After all, surveys show that most Americans think it is unfair for the government to take more than 25% of any person's income in taxes, though that is far less than many high income earners pay, in contrast to the minuscule share paid by the bottom half of earners and the large number who pay zero or negative income taxes.

The risk that people might focus clearly on the question of how heavy a tax burden on any group can be ethically justified leads those pushing higher taxes to attempt inoculate themselves from    criticism. They work to find some rich people to publicly volunteer to forego a tax cut or to pay more in taxes to support spending on their favorite government programs.

Former President Clinton is a prime example. At a Rainbow/PUSH conference in June, he complained that "We are going to put half-a-million [children] out on the street, so I can get my $80,000 [tax cut]," and in February on Larry King Live, said "I don't think that you and I should be getting a tax cut, Larry.  I think they should take that money and guarantee more police and more fire protection and do this other stuff."  (He also said "I think they ought to audit me and everyone in my income group every year. . . . I want to pay what I owe.")

Warren Buffet campaigned against the dividend tax cut by saying that it would "further tilt the tax scales toward the rich."  Bill Gates, Sr. organized more than 1,000 American businessmen to oppose cutting inheritance taxes.  At ResponsibleWealth.org, Peter Barnes (founder and former CEO of Working Assets Long Distance) says "So it makes no sense that people like me are the recipients of most of the Bush tax cuts" and Gun Denhart (founder of Hanna Andersson Corp.) says "Wealthy people like me should share in the sacrifice, not benefit while others take the hits." The website even asks those who got a tax cut to donate their savings to groups who lobby for "tax fairness."

This display of "sainthood" is designed to deflect consideration from the central issue to that of how much those involved proclaim themselves to care. And, at least as importantly, it implies that those on the other side are merely being selfish. However, no such implication can be drawn. That some will volunteer to forego lower taxes or bear higher taxes in order to support government spending to help particular groups (always prominently featuring "the poor") is perfectly consistent with others opposing a vast array of such government programs for waste and ineffectiveness, rather than out of cold-heartedness.

If a few rich people each volunteer to pay more in taxes to fund some "caring" government program, that does not mean they believe the program is effective. That would only follow if the money was privately donated to benefit the group in question, for that would show they believe in it enough to support it out of their own pockets (although if their donations were tax deductible, even such private donations do not imply the belief that the program is worth what it costs). But that is far different than what they are proposing.

Rich tax volunteers are proposing to impose "coercive charity" on others, rather than being private benefactors. However much they may preen about their moral rectitude (which they can always display directly through their own independent, private giving), they are volunteering to pay only a small share of the total cost of trying to do good through the tax code. They are primarily volunteering others, who are unlikely to share their evaluation of the programs in question, to pick up the vast majority of the tab for their favorite causes. 

To volunteer to pay, say, $100,000, out of a total cost that may run tens of billions of dollars, reveals very little about how much one cares or how effective a program is. When the same person is unwilling to give the same amount privately and directly, they reveal that they don't think the good done is worth the cost. 

But given the low price of coercive charity to them (especially when the controversy generated gives them far more positive publicity than private giving), it only reveals a belief that at least a small amount of good will be done with the hefty spending. A program may greatly undermine the incentives of those helped (and so create even larger burdens in the future), lose huge amounts to administrative costs, waste and corruption, and seriously burden those forced to pay most of the bill, yet still garner such support from some. 

Given those low standards, even honest, good-hearted tax volunteers often act more as agents to promote ineffective and even counterproductive programs than to do the good they seek.  This is especially so, given that a great deal of far more effective private charity will be crowded out by the taxes imposed involuntarily on others as a result.  One could be Mother Teresa, rather than Scrooge, and still not support what they propose.


Gary M. Galles is a professor of economics at Pepperdine University. Send him   MAIL, and see his Mises.org  Daily Articles Archive

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