An oft-repeated anecdote features a bank robber named Willie Sutton, who in response to the question of why he robs banks replied: “Because that’s where the money is.”
In essence, this is the same justification progressives use to defend levying higher tax rates on the most productive in their preferred system of progressive income taxes. Commonly referred to as the “ability-to-pay principle”, it has become a cannon of “tax justice” for the left.
In this Durham Herald Sun article, however, I employ the arguments of economist Murray Rothbard to expose the left’s “ability-to-principle” for the naked money grab that it truly is.
Economist Murray Rothbard expertly laid out these reasons in his 1970 book “Power and Market: Government and the Economy.” For starters, the ability-to-pay doctrine fails to take into account an individual’s accumulated wealth — a factor that clearly affects a person’s ability to pay taxes. “A man earning $5,000 during a certain year probably has more ability to pay than a neighbor earning the same amount if [the first man] also has $50,000 in the bank while his neighbor has nothing.” Thus, using income alone as the metric to gauge one’s ability to pay becomes ambiguous and does not provide a sure guide on the concept.
Finally, the ability-to-pay doctrine fails because it harms society by more sharply penalizing the most productive. Those that prove most capable in serving the needs of their fellow man (at least in a free market economy) by efficiently creating goods and services that others value are those who will fall into the highest progressive income tax brackets. “Penalizing ability in production and service diminishes the supply of the service — and in proportion to the extent of that ability,” wrote Rothbard. The result will be greater impoverishment, felt most heavily by the low-skilled and low-income people who are always hardest hit by a stagnant economy.