By Nathan Tucker
On a campaign stop last week in Newton, Iowa, President Obama advocated extending the wind energy tax breaks that are due to expire at the end of this year, something that all of “Iowa congressmen agree with.” Regardless of the merits of wind energy, however, these tax credits, as with all tax credits, are merely an exercise in the redistribution of wealth.
The Declaration of Independence states that the purpose of government is to secure man’s natural and inalienable rights to life, liberty, and property. As Frederic Bastiat elaborates in The Law, “The law is the organization of the natural right of lawful defense. It is the substitution of a common force for individual forces. And this common force is to do only what the individual forces have a natural and lawful right to do: to protect persons, liberties, and properties; to maintain the right of each…”
As Bastiat explains in Justice and Fraternity, the function of the law is not “to make men happy directly by compelling acts of charity, self-abnegation, and mutual sacrifice,” but “to declare the limits of pre-existing reciprocal rights and to see that they are respected.” Consequently, the task of government is “the protection of all persons, all products of labor, all property, all rights, all interests. Is this anything else than universal justice?”
The sole purpose of taxation, therefore, is to create revenue for government’s three core public functions—national defense, a criminal and civil justice system, and functions the free market is unable to perform (infrastructure and public utilities). It ceases to be legitimate when it goes beyond these limited purposes to encourage “energy independence,” “home ownership,” “higher education,” or whatever else the political class may approve of at any given time.
The reason for this is simple—government cannot pursue these goals without violating man’s natural rights, the very rights it was established to protect. “The mission of the law,” Bastiat writes in The Law, “is not to oppress persons and plunder them of their property, even though the law may be acting in a philanthropic spirit. Its mission is to protect property.”
Government perverts the law, therefore, when it engages in legal plunder. Quoting Bastiat, the current platform of the Iowa Republican Party reads: “Legal plunder is defined as using the law to take from one person what belongs to them, and giving it to others to whom it does not belong.”
Tax deductions are no less a form of legal plunder than direct payments from the public treasury to individuals or businesses. A ten-year extension of the wind energy tax break, for instance, is estimated to cost taxpayers $4.1 billion in lost revenue. According to the Congressional Joint Committee on Taxation, total federal tax breaks cost taxpayers over $1 trillion in lost revenue every single year.
Tax rates, therefore, are kept artificially inflated in order to plunder from taxpayers to provide nearly 200 different types of tax breaks that benefit only some. Each year the federal government collects roughly $1 trillion in personal income taxes in order to give $1 trillion away in tax breaks. It could easily raise the same amount of money by eliminating all tax breaks and cutting everyone’s taxes in half.
Additionally, this system denies individuals equal treatment based on their behavior—those who conform to government-approved behavior are subsidized (rewarded) by those punished for not doing so. Not surprisingly, as Bastiat writes, this turns the nation into one of special interests in which “everyone will want to participate in making the law, either to protect himself against plunder or to use it for plunder…Everyone wants to live at the expense of the state. They forget that the state lives at the expense of everyone.”
This, as Congressman Paul Ryan argues, in turn leads to crony capitalism with distortions that are “similar to government spending—instead of markets directing economic resources to their most efficient uses, the government directs resources to politically favored uses, creating a drag on growth…”
Once you extend the law beyond the equal protection of the natural rights of everyone, none are secure. You will, as Bastiat notes, “be lost in an uncharted territory, in vagueness and uncertainty, in a forced utopia or, even worse, in a multitude of utopias, each striving to seize the law and impose it upon you…Once started, where will you stop?”
Property rights simply become the citizens’ dutiful sacrifice on the alter of a utopian society.