Thomas Sowell’s column today delves into the subject of taxes. He points out the Econ 101 lesson that few people understand (and virtually no politicians) — the money taxed away from people and businesses has an opportunity cost. That is, when the government makes off with money, it prevents people from spending or investing it as they would have chosen to.
The more people are taxed, the more command politicians (or monarchs or whatever the ruling types are called) have over the resources of the society. Louis XIV taxed the French people relentlessly so he and his fellow nobles could live in splendor and wage continuous wars. What if the people had been allowed to keep their money and put it to productive uses of their choosing? No Versailles, but lots and lots of investments in productive things instead.
How about the US? What if the federal government had not mushroomed following the federally caused Great Depression? We would be a far wealthier society if it hadn’t been for the vast diversion of resources into Washington’s versions of Versailles.
Since 1977, for instance, taxes have been paying for a small army of bureaucrats in the Department of Education — people who educate no one and arguably impede good education. Remember this line from the Declaration of Independence? “He has erected a multitude of new offices, and sent hither swarms of officers to harass our people and eat out their substance.” It applies to not only the Department of Education, but nearly all the rest of the many federal agencies.
The cost of government isn’t just the taxes you pay, but the hidden loss of productivity.
