Taxed to the max. In this world, nothing is certain but death and taxes. That famous quote, of course, is from Founding Father Benjamin Franklin. Among all the problems with the Biden administration’s policy, they even want to raise taxes on your death.
That’s a poke in Ben Franklin’s eye. Today’s column is not about Ben Franklin, though it’s worth noting that he, like many of the Founders, was an avid follower of the free market theories of Adam Smith, published in “The Wealth of Nations” in 1776.
Think about that (we can talk later about whether it’s a coincidence). The real point of this column is to press the question of why taxes matter. They do. A lot. And incentives matter. To quote Art Laffer many years ago: Tax something more, you get less of it. Something less, you’ll get more of it.
Why? Because in a free economy, which is certainly in line with our Founders’ legacy, we should reward success, not punish it. At the margin, if the extra hour worked, or the extra dollar invested, or the extra business risk taken, pays more after tax, that will propel an economy into prosperity.
More work, more investment, more risk, this is why America’s democracy and its founding principles have created the best economy in history. Taxes are not the only factor, but they are a big one. I would suggest five factors right at the top that are a useful intellectual model leading to prosperity.
First, low tax rates. Second, minimal regulations. Third, a sound, reliable, King Dollar. Four, free trade. And five, a strong defense. For men and women in the workforce, or business, or trade, or commerce, or finance, that’s a pretty good checklist to forecast the future.
I would add only this: The crucial importance of the rule of law. Adam Smith wrote about this at some length in his earlier book, “The Theory of Moral Sentiments.” It was published in 1759, some 17 years before “Wealth of Nations.” But today I want to focus on taxes.
That’s because the Biden administration has failed to fill in a single check in my prosperity checklist. I would ask my countrymen to think about joining us against the prosperity killers of high taxes, over-regulations, cheap money, uneven trade, and a weaker military budget.
Additionally, I believe the principal goal of the Biden administration has nothing to do with growth, but rather arises from a preference for redistributionist policies — to wage class warfare, punish success, elevate big government and the entitlement state, and undermine free enterprise.
I believe we can move the needle from prosperity killers to prosperity creators. It is a good time for Americans to review the tax and economy history of the past one hundred years and the policies of Presidents Calvin Coolidge, Herbert Hoover, FDR, JFK, Ronald Reagan, and Donald Trump.
This is a time to learn the stories of these presidents and to link them to — or unlink them from, as the facts may bear — today’s recovery-killing threats. It’s a time to recall the words of JFK, a Democrat.
“Middle and higher-income families are both consumers and investors,” he said. “And the present rates ranging up to 91% not only check consumption but discourage investment, and encourage diversion of funds and effort into activities aimed more at the avoidance of taxes than the efficient production of goods.”
And let me add an even pithier quote from one of my former presidential bosses, Ronald Reagan. “Lower tax rates mean greater freedom, and whenever we lower the tax rates, our entire nation is better off.”
Those two quotes kind of sum it up. Which is why I wrote “JFK and the Reagan Revolution: A Secret History of American Prosperity.” The secret has never been more relevant than it is today.
Adapted from Mr. Kudlow’s broadcast on Fox News. Image: Detail of the Muir Portrait of Adam Smith, artist unknown; the portrait is named after the family that owned the painting. Via Wikipedia Commons, which notes the portrait was probably painted posthumously, about 1800, from a medallion by James Tassie.