Tariffs vs. Income Taxes – Which tax is better?
Today I was presented with an argument that I preferred to ignore but was forced to combat based on the economics of the modern day. I typically tend to lean to the Libratarian right politically, however, every philosophy has errors and the error in the Libertarian philosophy is the belief that if everybody embraced individual responsibility the world would be better off. Well, based on the people I meet day in and day out we as a country, we in the west are far from reaching that goal. So with that said dealing with the fiscal deficits now, what tax is better a tariff tax or an income tax.
When backed into a corner I admitted that a tariff tax is far better than an income tax, that’s when the Trump supporters got me. Personally I’d prefer no taxes, however, there’s a belief in a large segment of the population that they want and believe that it’s the government’s role to take care of them. How do you even influence these types of people to change their thinking, well you do it by not punishing them for working hard?
An income tax, especially a tiered income tax is nothing more than blasphemy. What I mean by a tiered income tax is the harder you work the more you’re taxed within your countries borders. This money you’re taxed is then given to the government who then spend the money how they see fit. When your income is taxed you have no way to fight it as an employee or a business, which results in most people simply finding ways to work less hard or not working at all. Because in our current economic system income earners have their money taken away in many instances and redistributed to people and entities that don’t work as hard.
In a tariff based tax system, people are only taxed if they purchase foreign made goods. If you’re in Canada there are province to province tariffs also, so that’s an additional potential tax that consumers would pay however here’s the kicker when it comes to tariff taxes. The actual tax is paid by the businesses and then passed onto the consumers. Which in real terms equates to the consumers having a choice to pay or not to pay the tax.
Now, are tariffs protectionist? Yes, they are! The major problem with tariffs are the potentials of added protections onto tariffs. This is the part that people forget about tariffs. It’s not so much the tariffs that are the problem it’s the tariffs with the addition of things like workers unions, minimum wage laws, income taxes, property taxes and any other taxes people can dream up in their minds to take from the productive and give to the unproductive.
But in a side by side comparison Tariffs are more choice based than are income taxes. Income taxes essentially make employees slaves to the government. The moment you as employee works a job you’re taxed, the moment you make a purchase at a store you’re taxed, when you die you’re taxed, there’s taxes upon taxes upon taxes, taxes all over the place and it’s this type of environment that allows manufacturing jobs to disappear to other lands. This is, of course, Donald Trump’s argument for tariffs. It’s a common sense argument if you’re on the political right.
However, there are a large number of people in finance on the political right that when they look at the numbers as it relates to taxes hate the idea. I’m one of those people too, however, the main problem in my view is that this economy is not being allowed to crash. Economies before Keynesian economics and central banking in a digital world became a match made in heaven used to crash and collapse all the time which would lead to more opportunities being made. The government’s tax was a tariff and it was a costly business didn’t mind paying because all it meant was that they’d have to work harder to sell their concepts to consumers.
This is partially the reason why in the 1940’s and 1950’s you’d hear so many stories about extremely pushy salesmen. You see there are 2 sides to every story and if a product was produced it was imperative that it get sold because without a profit a company would go bankrupt. This fueled a culture of hard work and being that there was no social safety net similar to countries in the 3rd world people would work like crazy to assure they had a nest egg when they were forced to retire.
Well, while this prosperity was being produced the lazy amongst us thought it a good idea to create a tax for working hard. Somehow politicians were able to sell the working class on permanently donating their income to fund government policies. Once the populations of the world fell for this scam, deficits exploded, because now the working class was on the hook for government spending, then of course, gold backed currency became fiat money and the match made in big government heaven became a very real reality, which we’re all paying for today.
I’d prefer no taxes but when given the choice I’d choose tariffs, because there’s more of a voluntaristic aspect to Tariffs, whereas Income taxes is nothing but force, the more money you make the more you’re taxed and if you’re an employee paying an income tax you’re more enslaved than the person who incorporates. I believe in corporations right to exists which differs from most Libertarians, however, I don’t think corporations should be allowed to pay fewer taxes than an employee. I think both entities should both be paying the same tax rate of 0%. The difference being that corporation liabilities should differ than that of an individual who opts to receive wages upfront as opposed to accepting potential earnings down the line.
Interesting times ahead