Since the 80’s, it has been an article of faith, for anyone not in the Cult of Modern Liberalism, that all taxes are bad. Robert Novak used to say that “God put Republicans on earth to cut taxes.” That generation of conservatives were convinced tax cuts would lead to spending cuts and that thinking still infests the modern mind, despite the evidence to the contrary.
Tax cuts have become a get out of jail free card for “conservatives” and Republicans. They can prattle on about moving commas around the tax code and sound butch about small government, without actually doing anything about it. Worse yet, they get to do social engineering through the tax code on the sly with gimmicks like child tax credits.
That’s why this bit from Trump got my attention. Everyone has focused on his immigration statements, but this is radical stuff on taxes. I’m not talking about the details of his tax plan, which is not terrible, but not very detailed. The radical bit is challenging the idea that some forms of income are sacred.
You never hear pols from either side talk about this because their donors would never tolerate it. Both parties love the special treatment of capital gains, because it makes their donors happy. It’s good for the financial class. The same is true of the labyrinth of loopholes and subsidies on the business side. It lets both sides cater to the donor party, while mau-mauing their voters.
Sensible people know that taxes are merely how we pay for government. They should never be a tool for social engineering and they should never be a tool for looting the country. The former inverts the relationship between citizen and his government and the latter leads to social instability.
Both parties and their media arms work hard to keep such talk out of the public. The reason for that is it would reveal the truth of modern politics and that is both parties work in concert. It’s no longer an adversarial system. It is a game of good cop/bad cop and the American voter is the perp. Progressives get their social engineering and Conservatives get their looting.
That’s why Trump’s line about hedge fund managers is so radical. When was the last time anyone, even a lefty, said anything like that? Once in a while Elizabeth Warren will waddle out of the wetus and say bad things about rich people, but otherwise hedge fund managers and their clients have become sacred people. Hell, we make movies glorifying the Wall Street tycoons.
What should really jump out is this line. “The hedge fund guys didn’t build this country. These are guys that shift paper around and they get lucky.” Trump is essentially correct. Hedge funds have about a three year run of wild success and then reversion toward the mean kicks in and they run out of juice. Usually their good run is based on inside knowledge.
What’s radical here is the notion that dumb luck plays a part in getting rich. This is obviously so, but a taboo topic. Mark Zuckerburglar hit the lottery. Mark Cuban hit the lottery. Say that in polite circles and people start thinking you’re a communist. But, it is correct. These men hit the lottery.
Acknowledging that reality is dangerous because it turns the tables on the social engineers. If we are going to use the tax code to alter behavior, shouldn’t we tax the hell out of lottery winners, while lightly taxing people who, I don’t know, build tall buildings in big cities? The building will become a part of the nation’s stock of capital. Facebook will become another Broadcast.com.
Worse yet such talk inevitably leads to talk about how the pols decide who to tax and who to subsidize. These are not conversations we have had for a very long time and that’s intentional. When one side shouts “tax the rich” and the other side yells “tax cuts for children!” there’s no room to talk about the daily auction of tax breaks to the connected held by the political class.