All Commentary
Monday, January 1, 1996

The Tax Racket: Government Extortion from A to Z

The Income Tax Quells Economic Growth and Opportunity

Every tax levied by government somehow distorts economic decision-making and drains resources away from productive private-sector ventures. As Jean-Baptiste Say succinctly observed in his Treatise on Political Economy, “Taxes and restrictive measures never can be a benefit: they are at best a necessary evil. . . .”

Living in a misguided century, where big government mistakenly has come to be seen as a benevolent problem solver, individuals often avoid thinking about the many evils of taxation. Thankfully, Martin Gross’ book The Tax Racket: Government Extortion from A to Z serves as a stark reminder.

If the reader seeks an academic treatise on the economics of taxation, he should probably look elsewhere. The Tax Racket is meant to stir America’s anti-tax spirit. It surely accomplishes this mission. With little subtlety, Gross reveals the many costs and problems wrought by different forms of taxation. From airline levies and audits to withholding taxes and “zany tax stories,” Gross does indeed explain the evils of taxation from “A to Z.”

Along the way, the author offers some sound reform measures as well. For example, he calls for the elimination of capital gains taxes, the eventual privatization of Social Security as Chile has done, the end of county government and its commensurate tax burden, and believes that the IRS should be held accountable to a document called the Bill of Rights.

The primary target of The Tax Racket is the income tax. Gross essentially argues—and correctly I think—that the income tax remains the greatest evil among many evils. By its intrusive nature and legions of government IRS agents, the income tax constitutes an immediate affront to individual liberty. By directly raising the costs of working, investing, and risk-taking, the income tax quells economic growth and opportunity. As it was born by class warfare rhetoric, the income tax continues to feed mistaken and dangerous class-based thinking. As already noted, every tax brings with it many problems, but none seemingly so vast and distasteful as the income tax.

Gross wisely argues for disposing of all income taxes—federal, state, and local. Before getting into what kind of tax should replace the income tax, he first outlines a plan for greatly reducing the size of government. So while Gross calls for the income tax to be replaced partially with a national retail sales tax (bringing with it a different, though less severe, set of problems), Gross understands that the most sound “substitute” for an income tax is substantial government spending reductions.

In the perverse vernacular of today’s public policy debates, a suggestion to cut taxes is met by the question: how will you “pay for” your tax cut? The best answer remains: cut government spending.

When combining The Tax Racket with two of his previous bestsellers—The Government Racket: Washington Waste from A to Z and A Call for Revolution: How Washington Is Strangling America—And How to Stop It—one realizes that Martin Gross may indeed be the Stephen King of the anti-government crowd. That is, he tells horror stories in an entertaining fashion. Fortunately, though, if his advice eventually is heeded on eliminating the income tax and cutting government spending, the story will have a happy ending.