Dec

17

"Progressive" tax rates have the same fatal flaw as bimetallism; people will put enormous time and energy into gaming the rate boundaries. Characterizing the types of income has the same corruption; if all dollars are not treated equally, people will spend time and money doing magic tricks to convert, for example, ordinary income into capital gains.

Tariffs that are taxes had and still have one great virtue: the rate does not change based on how much commerce is being taxed. It has always puzzled me that the advocates for a "flat" income tax never once mention this.

Under tariffs Congress still had the ability to mess with things by assigning different rates to different objects; but there was, under that regime, at least the equilibrium produced by the competing interests of the users and the domestic producers. The lobbyists who wanted the wool tariff rate increased had to argue against the representatives of the clothing industry.

When the country went over to the income tax, that contest of interests was abolished. The people wanting special favors had no one directly pushing back against them. When you added the abolition of the Constitutional protection of money as Coin, there was nothing left to limit the desires of Congress to spend. There still isn't, no matter how many times we "reform" the income tax by reducing the number of brackets.


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