Carrots And Sticks

(Author’s Note: This article was inspired by a brief mention at another blog. Unfortunately, while the germ of this piece rattled around in my brain and grew into this, somewhere it lost its link to its roots. To my fellow blogger who I am lifting from, I apologize.)

Government, as has often been noted, does not have any money of its own. It only possesses money that it takes from its citizenry via taxes and other similar structures. And just how it raises its money is at the root of most political arguments.

“The power to tax is the power to destroy.” But that power is not absolutely binary; it need not be used to the point of destruction. Indeed, in most cases, it is not intended as such, but rather as a way to guide and shape and direct behavior — not destroy it utterly. (The incredibly-ill-advised “luxury tax” of the 1990’s that almost destroyed the yacht-building industry is the prime example of what can happen.)

But I’ve noticed a rather odd little dichotomy in the way the two major parties treat taxation that seems to fly in the face of their stereotypical images.

The Democrats — the “party of compassion,” of “caring,” tend to use taxation as a club. They tend to prefer taxes that punish behavior they do not approve of. Drive a gas-guzzling SUV? They’ll jack up the taxes on gasoline and push for special “carbon taxes” and “low mileage surcharges” and the like. Smoke? They’ll tax tobacco — and say it’s “for poor children.” Make big bucks? They’ll charge you a higher percentage of your income. And if you’re a big company, they’ll investigate you to see if you make TOO much (“windfall profits”) and look into a “special” tax on that.

The Republicans — the “heartless,” the “uncaring” party, though, tends to go for using taxation as a way of rewarding and encouraging behaviors. Save money for your retirement? We’ll give you a tax break. Re-invest your company’s profits instead of keeping them? That’s worth a tax break, too. Choose to expand and create jobs in places that needs it? We’ll give you a big break in your taxes if you do that. In general, they prefer to simply take less from you if you act in the way they think you should.

Here in New Hampshire, we were until recently a very Republican state — and, for the most part, it worked out well. And on the issue of taxes, the conversion is still too fresh to have had much affect. We are still the only state with absolutely no state or local broad-based taxes (no sales tax or income tax at all).

All in all, I think it requires a balance. While an all-carrot approach is certainly pleasant to those on the receiving end, I recognize that the occasional use of the stick is required. “Spare the rod and spoil the child” and all that. But both should be used very carefully and very judiciously, because the “power to destroy” is something that must never — never — be used casually.

Dishonor
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