Let the Battle for the Tax Producers Begin

Guest Post by Tom Luongo

The great Murray Rothbard cut through the fog of modern class warfare with his observation that in a place with governments issuing edicts the citizenry breaks down into two classes — tax producers and tax consumers.

And if you want to know which group you belong to just ask yourself two simple questions, “Where’s the gun? And is it pointed at you?”

Most of us don’t even think to ask those questions because it’s the world we live in. Government jobs are safe jobs. They’re part of the landscape and dominant economic theory holds that the government can be a source of stability when the free market fails, whatever the hell that’s supposed to mean.

The truth is most of us hate to ask these questions because it forces us to be honest about where we earn our living. No one likes looking in the mirror and asking hard questions about whether the job they perform is truly useful to someone else.

No one wants to believe they’re a leech upon the riches conferred to society through voluntary exchange between the truly productive and its transformative ability to better people’s lives.

With governments in control of the production of money and so deeply intertwined with our lives, the lines between tax consumers and producers has blurred a bit. But, as I said at the outset of this, in the end, if your salary depends on you or someone else acting on your behalf pointing a gun at someone else then you’re one of the bad guys.

When times are good the private sector can afford to outsource some basic functions of society to the government because it may feel like it’s worth the loss due to the inefficiency. But when times are bad, like now, I think it’s important to get back to basics and remind us where civilization comes from and why government handouts are not the cure for what ails us.

We’re looking at 35 million people out of work. And …

Outside of education, only 332,000 jobs have been cut around the country. That number needs to rise by a factor of 10 to alleviate the burden on what’s left of the private sector. When more than 25% of GDP — pre-crisis — was government spending and the economy is shrinking by a projected 20% or more in Q2, how is it even reasonable in anyone’s mind that governments have cut so little?

The smart ones are facing up to this reality now. They have bills to pay and services not being used.

The fundamental problem now is that the pols in D.C. are now positioning themselves to be the saviors, even though they could truly care less about any of us in the real world unless we’re willing to vote for them this fall.

The House, under the baleful eye of Chief Witch Nancy Pelosi, just passed a $3 trillion ‘support’ bill which is the height of the worst kind of pandering and virtue signaling.

Because she knows the Republicans in the Senate will vote it down as a matter of principle.

Forget the fact that the government doesn’t have $3 trillion dollars. The Federal government doesn’t have $1 at this point. The budget deficit for 2020 will be north of 20% of GDP.

Pelosi only put this bill together to make it unpalatable to even the odious Republicans so her people will have something to campaign against them on this fall.

This isn’t the basis for a new negotiation. Pelosi et.al. are arguing at the state level and lower to extend the lock downs into the fall to ensure maximal damage is done to the domestic economy.

This is all about how many tax producers can they turn against Trump before November.

That’s it. Power, votes, money from the future till from the Magic Money Tree that is the lifeblood of all political vampires, of whom desiccated Nancy is the Queen of the Damned.

What’s worse is that Pelosi couldn’t even whip all her people to back this thing, because some of them actually believe they can do some good by just printing money. They don’t understand that they are forestalling the reorganization of capital away from the tax consumers and back towards the tax producers which is what contractions in output do when free from their greedy hands.

But, the reality is that Pelosi isn’t the problem, she’s just its most apropos symbol. The Republicans are no better, President Trump included. They’ve already pushed through the CARES Act which was an abomination, with almost zero actual help for the engine of the country, small businesses.

He wants negative interest rates because he thinks like a real estate developer and that floating infrastructure loans at -1% is getting a rebate on the money like points on a credit card for pity’s sake.

Now it isn’t all terrible news because Trump’s Chief Economic Adviser Larry Kudlow was out making the rounds offering up a 50% cut in the corporate tax rate for companies that onshore production back here at home.

This is grist for Pelosi’s ‘eat the rich’ rhetoric but it is actually perfectly reasonable suggestion because we pay corporate taxes anyway, folks. You can shift which ledger the money is accounted on but the costs are still there.

Taxes are terrible. They are always net capital destructive. Some taxes are worse than others but all taxes are terrible. All taxes are theft.

Kudlow is simply the conduit for adding to Trump’s New Cold War with China. Trump wants the U.S. decoupled from China economically as much as possible. This economic nationalism sounds good in an election year where 35 million people have lost their jobs.

It’s a good start but it will be the first thing horse-traded away with The Stretched One.

But Trump isn’t stupid either.

Trump has demanded a payroll tax cut for workers, although that idea has received a chilly reception from congressional Republicans. White House officials are also pushing cuts to capital gains taxes paid by investors; expanding a deduction for meals and expenses; and extending a deduction for new investments as part of their demands for the next stimulus package.

See what I mean about the Republicans being just as bad as the Democrats? The one single thing that would be of the most use to what’s left of the middle class, lowering payroll taxes, is the one thing they will not countenance.

Payroll taxes lowered, corporate taxes lowered, useless regulations cut, these are all good starts. But the real problem is the multi-trillion dollar elephant in the room, the cost of all levels of government that are a net drain on the real economy.

But, like all insolvable problems, there is no easy solution when the tax consumers can vote themselves a job and their representatives can print the money at will to pay for it all.

The irony is that Pelosi just wants to spend money and repeal the SALT deduction cap, even though guess who’s helped the most by that? Big earners in big blue states. It’s a direct sop to the rich that’s far bigger than lowering the corporate tax rate would be.

The reality is the real second wave we’re about to fight is the collapse of state and local governments because they don’t have Magic Money Trees. They only have local tax revenues and the, now anachronistic, municipal bond market.

And while they may be responding quicker than in depressions past, it won’t be fast enough because of the dysfunction in D.C. and because we refuse to look in the mirror and be honest with ourselves.

So, the battle lines are drawn between Trump and the Democrats for this fall. The prize, as always, is the majority of the middle class tax producer. Trump has to make the argument that he believes in them and will get out of their way while they rebuild their lives.

Pelosi has to sell those same people, whom she has done nothing but berate, belittle and blaspheme, that she’s now got their backs with a few thousand bucks worth of fake money.

I know who I’m betting on to win that fight.

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