Taxes and Spending

Like presidents before him, Donald Trump is using the IRS as a weapon against organizations he doesn‘t like. Richard Nixon did the same thing—and it helped bring down his presidency.

In the name of fighting income inequality, pundits in the UK and US are calling for wealth taxes as magic bullets that will restore an imaginary state of income equality that never existed in the first place. It is time to abandon this idea for good.

In the world of private enterprise, business owners pay attention to costs already incurred that cannot be recovered, also known as “sunk costs.” Government officials, however, see sunk costs as an incentive to promote public projects where costs clearly outweigh benefits.

Mainstream economists have been obsessed with finding “optimal” tax rates, and Nicholas Kaldor‘s 1940 formalization of the “optimal” tariff is no exception. Austrian economists, however, know that there is no such thing as an “optimal” tax, given the harm taxation causes.

The Trump administration announced that the IRS will end its free Direct File (DF) program that taxpayers have used on the IRS website to file their own tax returns.

When politicians claim they are “creating jobs,” they usually mean hiring people for tax-funded government employment. Jobs in private enterprise, however, help to create real wealth and contribute to economic growth and higher living standards.

President Trump‘s threat to withhold $9 billion from Harvard University is being framed in the legacy media and academia as a threat to Harvard‘s academic freedom. But there is a pertinent question no pundits are even asking: Why are taxpayers being forced to give Harvard $9 billion?

Politicians and central bankers assure us that they are diligently “fighting” inflation. Actually, they are fighting inflation the same way that an arsonist fights against the fires he just set. Government is the inflation arsonist.

Economist Robert Higgs described the “ratchet effect” in which government either creates a crisis or responds to one, leading to a permanent expansion of government power. After the crisis ends, government retreats—but not to the point where is was pre-crisis.

Our taxes are due today. It‘s a reminder that we must get past the tax reformers’ favorite ploy of revenue neutrality.