A gigantic national struggle should by now be upon us. As I write this, the political storm clouds are gathering. We're probably reading about the battle daily now in the newspapers. That fundamental struggle—between those who would hold the line on taxes and those who want to raise taxes to reduce budget deficits—has to do with the most basic question of all: How much money is going to be forcibly taken from the people?
Thus it is that we find Mr. Ronald Reagan standing virtually alone in the universe of power and manipulation in Washington, D.C., as one who flatly states, "No new taxes." Now this isn't actually correct—there will be new taxes, and the tax burden will increase every year into the foreseeable future. But compared to what others would do, including the born-again budget balancers who just this year happened to notice the last 20 years of conservative rhetoric about balanced budgets, Reagan's stand on refusing to raise taxes is outrageously radical.
What makes the president's position all the more unusual is that he stands almost alone among the leaders in his administration and his party. As early as October 1981, GOP Senate Majority Leader Howard Baker (R–Tenn.), House Leader Bob Michel (R–Ill.), and Senate Finance Chairman Bob Dole (R–Kan.) were talking about increasing taxes $50–$70 billion "to cut budget deficits." Then, by February 1982 Reagan's Chief of Staff James Baker and Budget Director David Stockman became "convinced" that higher taxes were needed, that the promise that Reagan was virtually elected upon would have to be scrapped. The rest of the team soon joined the chorus, baying for more taxation.
The Old Man was almost convinced (some reports had it that he did agree). But by the time of the president's State of the Union speech in late January, Reagan had decided to take his splendid stand, saying, "Raising taxes will not balance the budget. It will encourage more government spending." And he is exactly right. The president might have added that, because taxes are already so outrageously high, any increase in the tax burden might actually decrease government revenue by forcing people to shrug and give up working any more than they absolutely have to. Which would be fine, except we would all then pay the price of a further-eroding standard of living.
The seminal point is this: Are we going to hold the line on taxes as much as possible and damn the deficits, or will we increase taxes for the announced purpose of holding the deficits down and thus "encourage more government spending"? Free-market economist and Nobel Prize winner Milton Friedman put it succinctly, as always: "The crucial issue is whether we are getting our money's worth for the vast sums government is spending or obligating us to spend.…President Reagan's emphasis on cutting government spending is far more important than his emphasis on balancing the budget in 1984 and why it deserves our enthusiastic support."
But the battle is just beginning. According to Senator Dole in early February, if the economy hadn't improved by about April, Reagan would be assaulted by a group of congressional Republicans trying to get him to both trim the defense budget and raise taxes. With his highest aides on the opposition's side, the president stands alone.
All of which presents something of a dilemma for those convinced of the necessity of cutting back government in the interests of enhancing individual liberty. After all, the National Taxpayers Union has been pushing a constitutional amendment to force a balanced budget for years now. They're within two or three states' approval of forcing a constitutional convention to propose just such an amendment. On the other hand, increased taxation (1) causes inflation both by encouraging increased government spending and by generally raising prices, (2) emboldens the government and the bureaucrats and special interests who exist on its largesse, and (3) acts to further impoverish the people.
President Reagan has opted squarely for the historically valid action urged by supply-side economics (see, for example, Bruce Bartlett's "Supply-Side Success Stories," REASON, July 1981). He is going to increase spending while simultaneously putting through the income tax cut in hope that the productive capacity of the American people will be set free. Since the tax cuts only decrease the rate of increase, that hope seems foolish. What should be undertaken is a drastic and sharp arrest of the federal spending spree. Much more is needed than the timid budget "cuts" up to this point. Despite the media propaganda about a "revolution" in "slashing the budget," federal spending—and taxing—are slated to continue to explode for at least the next few years. They're just exploding at a slightly decreasing rate.
Still, the president has opted for more spending, period. What about deficits and inflation? At this point, as George Gilder points out in his extraordinary book Wealth and Poverty, "there is no practicable antiinflationary program except Lafferite economics and supply-side stimuli." The two traditional alternatives—sitting on the money supply and jacking up taxes—will both serve to crush productivity in the private sector…and further impoverish the American people.
So you want to save taxes? Well then, go out into your community, in your neighborhood and town and workplace, among the toilers and leaders all about you, in the newspapers and on the radio and TV stations, and let the word go forth. Let it be said loudly, repeatedly, and clearly: No More Taxes. Enough. Let there be an end to the ever-increasing plunder. We cannot stand to be bled any longer. The clamor for more taxes is going to increase; let us meet it: No more taxes, no more taxes, no more taxes…
Tim Condon is an attorney and a tax specialist practicing in Florida.
This article originally appeared in print under the headline "Taxes: Let the Word Go Forth".