Tuesday, September 21, 2010

Why Marx liked progressive income tax and inheritance taxes. What's it say about taxation in the US and West.

I came across an interesting piece by Austrian economist Ludwig von Mises on the Marx attraction to a progressive income tax and confiscatory inheritance tax. This is taken from the Kairos Journal.

Austrian-trained economist Ludwig von Mises came to America on the eve of World War II. He was a prolific writer on behalf of capitalism. Among his books are Theory of Money and Credit, Socialism, and Human Action. In the following passage from Planning for Freedom, he disparages inheritance taxes and the progressive income tax, whereby those who make more pay not only pay more, but pay a higher percentage of their income. He shows these two forms of taxation, that many take for granted in a free society, are right out of the Communist bible and a good way to weaken the economy.

"Looking backward on the evolution of income tax rates from the beginning of the Federal income tax in 1913 until the present day, one can hardly expect that the tax will not one day absorb 100% of all surplus above the income of the average voter. It is this that
Marx and Engels had in mind when in the Communist Manifesto they recommended “a heavy progressive or graduated income tax.”

Another of the suggestions of the Communist Manifesto was “abolition of all right of inheritance.” Now, neither in Great Britain nor in this country have the laws gone up to this point. But again, looking backward upon the past history of the estate taxes, we have to realize that they more and
more have approached the goal set by Marx. Estate taxes of the height they have already attained for the upper brackets are no longer to be qualified as taxes. They are measures of expropriation.

The philosophy underlying the system of progressive taxation is that the income and the wealth of the well-to-do classes can be freely tapped. What the advocates of these tax rates fail to realize is that the greater part of the incomes taxed away would not have been consumed but saved
and invested. In fact, this fiscal policy does not only prevent the further accumulation of new capital. It brings about capital decumulation. This is certainly today the state of affairs in Great Britain."

Ludwig von Mises, Planning for Freedom, and Other Essays and Address, 2nd ed. (South Holland, IL: Libertarian Press, 1952, 1962), 31-32.

Makes you wonder whether our system of taxation in the the US and the West differs from Marxist economic thinking in degree rather than kind.

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