Libertarians are wrong about taxation

Libertarians believe that if Lazy Farmer works in his fields for 6 hours a day, and Industrious Farmer works in his fields 12 hours a day, and Industrious Farmer consequently grows twice as many crops, that it’s not fair to assign a higher tax rate to Industrious Farmer because that would punish him for his hard work in creating value.

If we still had an 18th century agrarian economy, I too would be a libertarian economist! But that’s not how our modern economy works. People aren’t rich because they put in more hours tilling the fields. They are rich because they own monopolies. They are rich because they have the right degrees, the right contacts, the right personality, to get into the high-paying career tracks. Wealth has become divorced from actual value creation. The people doing the real value-creating work, like the engineers (many of whom are from foreign countries because value-creation is work that Americans don’t want to do), are paid salaries on the high-end of middle-class but they are not wealthy.

Another libertarian talking point I see a lot is that high taxes suppress value creation because people will choose not to work. But all empirical evidence from the real economy shows this argument is bogus. The people most likely to be sitting home playing videogames are those who would have had the lowest tax rates had they been working in the labor force. Those putting in the most hours, like BIGLAW partners and investment bankers, have extremely high hourly incomes (and thus the highest tax rates). And the argument assumes that these rich people create value in the first place. There’s a case to be made that our nation would be better off if BIGLAW partners and investment bankers worked fewer hours instead of more hours.

As we move more into a post-scarcity economy, we see jobs being a luxury for the rich rather than the means to create value. Remember my blog post about Toby Milstein? She is an heiress who never needs to work a day in her life, and she lives in the Dakota, but she still has a regular job in “business development” for a tech startup, because not having a job is for the lower classes.

Libertarians say that taxation is “theft.” But as I’ve shown, REALLY rich people voted for Hillary Clinton over Donald Trump by a 3 to 1 margin. Even though it was well known that there would be higher taxes under Hillary Clinton and the Democrats. People don’t vote for theft.