“We hold these truths to be self-evident that all men are created equal and are endowed by their creator with certain unalienable rights and among these rights are Life, Liberty, and the pursuit of Happiness.” – Declaration of Independence. All men are created equal. Not everyone is born into the lap of prosperity. Freedom dictates that a person retains the right to make his own decisions, harbor preferences, and come to a unique conclusion on a variety of issues.
These differences lead to different outcomes. In this organic process, some participants become reliant on others who are leaders. Redistribution of income in America was not seriously considered until the early 1900s when the government began to experiment with the crime of unequal taxation.
Redistribution of income leads to stagnation and eventually the deterioration of an economy. While many progressivists, or fascists, vow otherwise, redistribution of wealth removes the incentive to work and innovate, is unfair to the wealthy, and even unproductive for the United States Treasury.
Redistribution of wealth removes the incentive to work and innovate as demonstrated by the reintroduction of federal income tax in 1913. Massive tax rates quickly ushered in a recession as both the wealthy and rich lacked incentive to work. In 1924 Secretary of the Treasury, Andrew Mellon states, “The history of taxation shows that taxes which are inherently excessive are not paid.
The high rates inevitably put pressure upon the taxpayer to withdraw their capital from productive business.” Secretary Mellon walked back the excessive income taxes passed under President Wilson. Despite great opposition to his plan, from 1922 – 1929, the workforce experienced a drop in unemployment from 6.7 to 3.2.
From 1919 – 1921, the real Gross National Product (GNP) dropped a combined 16%, however, GNP rose annually at an average rate of 4.7% between 1922 and 1929. While tax revenues initially fell after the Mellon tax cuts, revenues soared, and by 1928, tax collection exceeded 1920 levels during a period of nearly zero inflation. (Rugy, 1920s Income Tax Cuts Sparked Economic Growth and Raised Federal Revenues, 2003)
Redistribution of wealth is also unfair. The revenue acts starting in 1913 steamrolled the United States citizens taxing the rich, first at only 7% and eventually as high as 77% during World War I. (Coco, The Roaring 20s Revealed the Folly of “Tax the Rich” Schemes, 2019) Those with modest incomes were only taxed at 1% and later as high as 6% for the lowest earners.
Taxing the rich and poor unequally is unfair. America’s founders entirely rejected income tax; however, they did not outlaw the practice. The U.S. Constitution reads, “All duties, imposts, and excises shall be uniform throughout the United States.” Additionally, the 14th Amendment, ratified in 1868, promised: “equal protection of the laws” to all citizens. Clearly, a progressive income tax was wholly illegal and unconstitutional as the U.S Supreme Court declared in 1894.
Unfortunately, the 16th Amendment ratified in 1913, overruled the Supreme Court allowing not only a progressive tax, but also unequal redistribution of collected taxes. While progressive politicians were able to pass the 16th amendment and make progressive taxes legal, it does not justify the practice of taxing citizens differently based on their net worth.
Fascist leaders attempt to sell the idea that the rich have the means and the moral obligation to fund the government and thereby support the poor through redistribution of income. The wealthy do not just hog the money leaving the middle-class struggling and the poor class nothing. In fact, entrepreneurs cannot succeed without a healthy relationship with the rest of society.
Entrepreneurs are about creating – creating products that solve problems, creating industries, creating new markets, and creating employment for all classes. After the Revenue Act of 1913 and the 16th Amendment, the 70% income tax swiftly hit those earning over $300,000 and ushered in a depression. Wage-earners over $300,000 dropped in half by 1918. Realizing his party’s woeful mistake, Woodrow Wilson urged Congress to change course, “high rates of income and profit taxes discourage energy, remove the incentive to new enterprise, encourage extravagant expenditures, and produce industrial stagnation with consequent unemployment and other attendant evils.”
When the government decides to discriminately tax the rich, they interrupt natural and healthy free markets that tend to provide an opportunity for all income groups. Without fair and low taxes, entrepreneurs are forced to allocate their monies to tax-sheltered investments which remove market growth and job production. Citizens of a nation do not collect their money out of a social money bucket, but either earn income or receive redistributed funds.
The rich invest their resources in stocks, companies, or money-making markets where their money continues to grow. Reasonably low taxes encourage investing and spending for all classes. Companies expand and employment opportunities arise. A healthy economy with high money velocity affords great efficiency, competitive pricing, and the continued phenomena of innovation. To take earnings away from someone and gift them to someone who did not earn them is stealing.
The government’s role is not to force the rich to be charitable. Throughout the ages, the wealthy have been compelled to help the poor without force, and the poor have been rather compelled to find a way to help themselves unless the government intercedes and redistributes wealth to them.
Time and time again, when taxes are low, entrepreneurs invest in income-producing activity with their funds. Taxable income increases for all class levels and tax collection even increase for the government. So, clearly, expecting the rich to fund the government is unproductive for the wealthy, the poor, and even the United States Treasury.
Redistribution of income leads to a stagnant economy and eventually complete destruction as it removes the incentive to work and innovate, is unfair to the wealthy, and even unproductive for the United States Treasury. In summary, a smooth working economy requires the innovation of entrepreneurs.
The absence of innovation leads to the deterioration of an economy and increased hardship on the less fortunate as they attempt to access scarce goods with less income and higher inflation. Enforcing excessive taxes halts the natural order of economics and delivers fatigue to all of its players.
The political theatrics of income redistribution will always deliver stagnation and dependably kill the spirit of all citizens as they discover that the promises of equity and equality are not natural or achievable.