How will ending the income tax help the poor?
I was unable to persuade a liberal friend that the income tax is evil because it is essentially forced labor through coercion, or that we could largely pay for the elimination of the income tax simply by halting our overseas empire (it seemed best to use a liberal priority in this instance). He maintained that eliminating the income tax would benefit only the wealthy. Could you help me show that eliminating the income tax is in everyone’s best interest?
Ultimately, the poor are hurt most by income taxes and government spending of any kind.
When government spends, it must tax or run a deficit. Both harm the poor. Deficit spending results in inflation. People on a fixed income, low income, or no income at all are hurt most by inflation. The little money that they have buys even less than before.
When government taxes middle or upper income individuals, money is diverted from consumer spending, spending which otherwise would create jobs that might lift some of the poor out of poverty.
Instead, the tax dollars go to government spending, which delivers half the service at twice the price of the private sector. Gross domestic product (GDP), a measure of wealth creation, goes down as government spending goes up (for details, see Chapter 12 of my book, “Healing Our World,” available as a free download [1992 edition] at www.ruwart.com or [greatly expanded and footnoted 2003 edition] for purchase from The Advocates).
Less wealth creation means that goods and services are more expensive than they otherwise would be. The poor are hurt the most when prices rise or do not fall as they otherwise would.
Thus, when government spends, GDP falls and inflation grows, middle and high income individuals cut back on discretionary spending, like vacations; the poor, however, must cut back on necessities, such as food, safe housing, and preventative medicine.
On the other hand, when government spending slows, inflation slows too and jobs increase. Some of the poor move into the workforce and become more affluent.
Income taxes are bad for everyone, but the poor are hurt the most. The hidden negatives are often overlooked, and those who are trying to help the poor often hurt them out of ignorance.