by Roxeanne De Luca | November 24th, 2012
Glenn Reynolds discusses marginal tax rates at Instapundit. High marginal tax rates encourage people to ‘go Galt’ when those people can obtain extra income with extra effort (e.g. freelancers, salesmen on commission, small business owners contemplating opening for more days or hours): very often, they will prefer leisure time to the dwindling return on investment (investment of time, effort, and risk).
Of course, that is all predicated on being able to make ends meet: those who cannot earn enough to cover expenses will do whatever it takes to earn enough to cover the shortfall. A government can thus raise the marginal tax rates without repercussions: a person in need of an extra dollar with earn $90 and let the government take $89 in taxes, if the alternative is starving, losing a job for lack of gasoline to get to said job, or not having a roof over the family’s head.
Counterintuitively, a government that is heavily in debt, or a government that wants to purchase votes with freebies to certain classes of people, wants the productive class to be irresponsible with its money. The housing bubble, the inflation in food prices, the higher education bubble, skyrocketing health insurance costs, and higher energy costs prevent the productive class from going Galt with its marginal income.
ObamaCare is particularly pernicious: force the entire productive class to funnel large sums of money into health care spending via gold-plated plans that subsidise the non-productive class, and you’ve given people the choice between being eternally yoked to the plow or dying for lack of health care. (Amanda Marcotte relishes the idea that we are all forced to pay for her sex life as a cost of insuring ourselves and our kids against cancer and heart failure.)
Rising food prices (influenced in no small part by the federal government, e.g. the ethanol mandate, various carrots and sticks of subsidies) yoke all people to the plow: work more, letting the government take its pound of flesh in the process, or starve.
The housing bubble and the higher education bubble have the same effect: those who work for a living are forced to work much harder to cover the same costs as a previous generation. Prof. Reynold’s correspondents are all in the position of having paid off houses and student loans – the spoils of having been born in a time wherein a college education cost about 500 minimum-wage hours per year and a house could be purchased on husband’s salary while the wife stayed at home. The younger generation (my generation) is yoked to the plow, forced to tend to as many of the government’s fields as it desires.
Do you need a conspiracy in order to create this? No – you just need badly aligned incentives, i.e. a rapacious government with unsustainable levels of spending and debt, as well as the power to influence the price of food, housing, education, and energy. But as long as the government cannot live within its means, it would prefer us to not live within ours, so that we will have to constantly increase our means, regardless of what the government will take from such increased production.