Cafe Hayek prints a letter from Don Boudreaux about the spin-doctoring of the Democrats, when they claim choosing not to raise taxes should be seen as a ‘tax break’.
First off, Don makes an unwarranted assumption. No where is there a fundamental limit on what a “tax” means. A tax is whatever a government takes, to fund operations or for other purposes. Taxes are a big part of the cost of government. Regulations, inspections, fees, and mandates to perform certain functions to government standards are indirect costs. Prohibitions against using things, or performing actions – such as growing hemp fibers or carrying a weapon to defend yourself, your family, and your community, these are taxes against the nation. The time of service of anyone drafted into or employed in government service is another cost of government; the services of government workers and soldiers are not available to the national economy during their term of service.
Under most Presidents that swear to protect and defend the Constitution, prescribed limits on authority tend to keep the cost of government reasonable for the demands of the nation upon that government. The common practice has been to assay taxes on the income of citizens. But the estate tax, excise taxes on luxury items including new cars, taxes on capital gains, taxes on the income of businesses – when that income will be taxed again when it becomes income of owners – these are clear examples of taxes on money other than personal income. During wartime, the military draft was a direct tax of people of the United States. Mandates against states, doctors, and police forces to implement various provisions from building roads to serving Medicare patients constitute another non-income tax.
So I think Don’s initial complaint about misleading by calling an extension of tax relief a “tax break” is quite accurate. But his assumption that the government can’t tax anything, anything at all, is wrong, if you allow that an unscrupulous government won’t abide by any constraints.
Threatening farms with the Estate Tax.
I think there is a side issue that should be addressed with the estate tax.
Farming is a marginal activity, perhaps especially modern type farming as directed by Monsanto and the US Dept of Agriculture. In good years there can be a really impressive cash flow when harvesting crops from hundreds or thousands of acres of highly productive crop land. In other years, the vast costs of purchasing and maintaining the equipment, of buying the increasingly expensive (patented, GMO Monsanto) seed, of artificially made and transported fertilizers and cost of purchase and application of crop chemicals to manage diseases, weeds, and insects, of the costs of transporting grains to ever fewer and more highly regulated (remember the three biggest lies, ending with “We are from the government, we are here to help”??) grain elevators. Because there is so much grain being harvested and so few places to handle it, harvest “season” gets horribly compressed into days and weeks – and most grain must then be dried down to survive even temporary storage, at cost of fuel and money to the farmer.
And in years that the yield, due to inclement weather, crop diseases, etc., is rather meager – not all the bills get paid. Debt accumulates quickly on a farm, waiting for the next harvest.
Now consider that the average – the average, mind you, ’cause that means half of them are older – age of farmers in the US is 57 years. For the most part, the next generation of farmers left the farms. And the generation after that. For the first time in human history, according to one ASPO USA presentation, the people that will be raising an impressive portion of the world’s food – including the food the US depends on – won’t be raised by farmers. The next generation of farmers won’t have their parents and grand parents to teach them about the land, about the crops, about the equipment, about the markets. About debt, and combining farm operations with off-farm employment, as most farms are forced to do.
Now look at the remaining “farm families” – and the estate tax. Too many farms, when the owner dies, had to be sold to pay the estate taxes, back before the Bush tax cuts. That is a quandary facing farm families, and America’s farmers, with the “tax the wealthy” cry we here from Obama and the Democrats. While farm land might be worth $3500 an acre in parts, on paper, when a family sells the farm – who can afford to buy it? Few banks want to sink that much money for land and equipment into a farm with such a low historical return – on an unproven young farmer. So the land becomes part of a larger spread, and gets farmed, and the US muddles along with a few less farmers ready to operate in the next generation. That, or speculators pick up the piece – we know China and other nations are purchasing crop land around the world, to raise crops to feed their people – crops that *won’t* be available to feed Americans, or to contribute to sales of food overseas.
There are international and food security issues that make the estate tax a very real risk to national security, and a risk to the ability of America to feed itself should supplies of energy (peak oil, peak coal, over-subscribed national electricity grid) or vagaries of weather, or mere passage of time and this last generation of American farmers, come to pass