Pay Up! The Free-Market Depends on It.
Conservative scholars are correct: America’s debt is unsustainable and detrimental to our nation’s fiscal position and free economy. I also agree that ambitious spending cuts should be a part of the solution. However, more often than not, conservatives get scrambled up on the spending side of the argument when there is another side of equation: taxation.
America not only has a spending problem, it has tax collection problem.
Taxation is probably just as much of an issue for our nation’s fiscal condition because it has enabled the structural deficit to enlarge into today’s current form. Part of that enabling has come from something called tax evasion. Individuals, corporations, or trusts that have illegally succeeded in getting out of paying the full amount of their dues needed for government operation. To put it simply, people or businesses not paying their taxes — and it adds up.
Accounting for Tax Evasion
The Tax Justice Network released in their latest research that the US was losing $90–280 billion a year — after late collections and enforcement efforts were factored in. This lost revenue adds up to about $1 trillion stretched out over a ten year span. Revenue that could have been used, not borrowed. Revenue that could have resulted in cutting the deficit, not adding to it. The United States is continuously losing billions of these dollars in unpaid taxes. These lost taxes are in part of what is enlarging the growing deficit problem our country faces.
Where’s the Fiscal Conservative?
This should come as an alarm for fiscal conservatives, the supposed-to-be champions of stable budget structure. Yet, today, fiscal conservatives have become so hooked on tax cuts, that they have forgotten that taxes are also necessary to close the budget gap. More importantly, fiscal conservatives should know perfectly that Americans should be getting all the government they are willing to pay for — not any more, not any less. Ensuring that government commitments are in line with available resources is an essential element of good governance. Not — burning tax rates for the sake of cutting taxes like they have been doing.
Taking a stand against tax evasion is a very fiscally conservative position.
Taking a zero-tolerance stance against tax evasion is instead a very fiscally conservative position to increase the revenues needed to prevent budget deficits. It’s not conservative to let billions of dollars go unchecked for the sake of reducing tax revenue. Unless Republicans actually start cutting spending, measures toward combatting tax evasion are a great place to begin tackling our national debt. If we had only been collecting the revenues lost to this evasion — our debt would have been smaller and our deficits would have been weaker.
Although to be very clear — I still believe we must cut taxes, we just need to be collecting those same taxes. Especially when we reduce taxes, collecting those amounts become an even greater necessity because the rates are now generating less revenue. It’s very fair to say that every penny literally counts.
Properly combatting tax evasion and collecting unpaid accounts receivable will enable fiscall conservatives to close the budget gap quicker — without have to go too deep in spending reductions or depend so heavily on tax cuts to spur back revenue. That is why a real fiscal conservative knows it at heart: we need revenue. And until we start collecting that revenue, our deficits will only grow larger and more detrimental to our economic stability.
Weak tax enforcement enables yearly deficits, making our budget situation worse.
If the Republicans really wanted to become fiscal conservatives, they would put forward robust policies that slow down government spending, streamline the tax code, and ensure that tax evasion is minuscule and minute. Now that’s a balanced budget party I’d like to see.
A Strong IRS Pays Off
Center-right governments around the world understand this perfectly. They know that as real fiscal conservatives — every dollar in revenue lost is a dollar in deficit added. That is why they provide their tax collecting departments with all the resources needed to audit and collect every penny possible. However, American conservatives despise this reality — seeking to avoid touching the topic of tax collection at all, unless if it’s on the topic of cutting them. Since 2010, Republican pressure has led to a stable decline in IRS funding, leaving the agency understaffed, constrained, and operating with archaic information technology (IT) systems. Back in the 2016 primary season, a Republican candidate went as far as proposing to abolish the IRS in entirety. Any legitimate fiscal conservative would simply gasp. Such an approach is extremely flawed, impulsive, and irresponsible. Therefore, I stand with other center-right, pro-market governments in scolding that idea. Governments need effective, robust tax collection agencies to combat corruption and enhance predictability in our budgeting process. The IRS is one of the only agencies that actually pays for itself — if only given the resources. Studies show that increasing IRS enforcement funding would increase tax collections by much more than the cost. Increasing the IRS budget over the next 10 years by $100 billion would raise revenues by as much as $1.15 trillion over that same period.
For legitimate fiscal conservatives — the IRS is their best friend in government.
Anti-Evasion is Pro-Market
As free-marketeers, we understand that no tax is created equal. Some taxes can be market-distorting, others can be market-partnering. An example being consumption taxation, which derives the wealth created by markets, but does not damage or seek to destroy the overall market system. It is a very effective way of collecting revenue that most countries implement. Free markets can survive with this type of sound tax policy that focuses on reaping the wealth generated by markets, not destroying it.
Taxes should partner with markets — not destroy markets.
Fighting against tax evasion is in this way a non-distortive, pro-market tax collecting policy— since it is only focused on collecting the revenue that was supposed to be set in place — not to collect any more additional revenue. If you cut the corporate tax rate to 15%, a plan I support, I would like to ensure that those 15% are collected — not any more, not any less. Through this market-based revenue increasing proposal, we can begin seeing our budgets stabilize, grow efficiently, and balance structurally. Without it, we can say goodbye to long-term balanced budgets.
Tax Evasion Destroys the Free-Market
When the government dismisses tax evasion — two problems occur that will fundamentally distort the free-market framework.
- Tax evasion fuels corporatism, indirect favoritism, and economic injustice — providing an exceptional, non-market benefit to the evader.
- Tax evasion slowly erodes the fiscal health of a nation — which markets depend on for dynamic, long-term expansion and the advancement of economic freedom.
Direct corporate welfare is when the government directly assists specific businesses or industries through subsidies or tax breaks. Thus, being the most common form of this practice. Often overlooked, however, is the indirect version of corporate welfare: tax evasion. Corporate welfare already provides an unfair, non-market advantage to specific businesses. Privileges that smaller competitors cannot obtain — severely compromising market forces and enabling monopoly formation. Even when this direct corporate welfare is cut, large corporations can still use tactical methods to manipulate and abuse the tax code. Obtaining additional funds through unpaid taxes that their competitors still had to give up. If someone pays less, someone else had to have paid more. Creating a market imbalance that the indirect form of corporate welfare has enabled.
Tax evasion demotivates an honest business community.
Tax evasion is nonetheless an indirect form of cronyism that inevitably puts smaller, more innovative corporations at a disadvantage. Letting this practice go unchecked, there becomes severe negative consequences on our economic health. The indirect imbalance of favoritism only demotivates an honest business community needed to combat corruption and maintain market competition. Through these distortionary benefits, business will never be able to fulfill their highest potential when competing against better-off tax evaders. Translating to a reduction in long-term growth that will reduce our overall economic freedom. Putting an end to free-markets as we know it.
Another large part of our economic freedom comes from the strength of our fiscal health. Strength that is currently being eroded by the government’s inaction towards tax fraud and evasion. Without the revenue needed to sustain government, budgets often turn towards runing large deficits that only deteriorate our economic position. Through this corrupt act of evasion, the government can equally lose sight of its integrity — capable of losing track of its own stability. Thus, creating a compromised government that makes the market wither its own inherent consumer and business confidence.
A loss in market confidence can weaken its capability of generating capital, increasing investment, and growing an overall economy. Stress that puts an unneeded strain on a solid safety net — requiring the government to seek additional spending and taxes to close that gap. Building this ever continuous damaging, anti-market cycle over time. All the while our economic freedom declines and free-markets become opaque.
It shouldn’t have to be this way, we should just collect the taxes as needed. Through enhanced tax collection — we can properly fund government, rebuild our fiscal health, and improve government spending. Ensuring the protection of economic freedom for overall society. Many of the Nordic governments understand this — having strong positions in both fiscal health and government integrity. Even with their own distorting levels of public spending, they handle these expenditures responsibility through effective tax collection. Further enabling them to run continuous surpluses that strengthen the long-term economic freedom of their citizens.
Rejecting the Social Democrat Agenda
So you see, combatting tax evasion is a very viable, free-market solution to collecting additional revenue — putting direct pressure on the social democratic ambition to destroy wealth creation and tax the wealthy for the sake of taxing the rich.
Although, to their credit, 70% of the tax gap is created by very wealthy individuals. However, the aim should be to collect those already existing taxes — not create new ones. This is exactly what’s planned by the social democratic left. Their approach to tax evasion would involve more anti-market proposals that include a series of wealth taxes, capital gains taxes, and excess profit taxes. Additional taxes that distort and inhibit wealth will absolutely not collect their desired revenue targets — since they will only erode the revenue and profit they are seeking to collect.
Fiscal conservatives need to step up and collect those desired revenues by enforcing strict rules against tax evasion — with the intention of collecting already existing revenue, not any additional revenue. Properly combatting tax evasion should then result in no need to raise a single decimal in tax rates. Thus, actually enabling a beginning phase of tax rate reductions, since the revenue collection process would be more stable and transparent.
Fiscal conservatives have a very important role to play in sustaining a tax system that protects the free-market economy.
Free-marketeers do not shy away from the debate on taxation. Cutting taxes is just as important as collecting those taxes for the following reasons:
- Properly collecting all the revenue is needed to avoid budget deficits that structurally distort the free-market economy.
- Tax evasion enhances the social-democratic claim that more damaging taxes are needed to collect the missed revenue from the most wealthy Americans.
- Combatting tax evasion gives the government an additional way to collect revenue in a non-distortive, market-friendly fashion.
- Transparent, clear, and effective tax collection systems combat the corruption that weakens government integrity — translating to higher economic freedom.
- Zero-tolerance against tax evasion combats corporatism and promotes economic justice — motivating an honest business community needed for dynamic, long-term expansion and advancement of free-market principles.
A free-marketeer is a fiscal conservative who values lean government, deficit reduction, and balanced budgets. Not the current GOP’s tax cuts above all — since it’s pointless to cut taxes if we can barely collect those taxes. In this way, we can effectively prevent the social democrat ambition to destroy wealth and erode the revenues needed to operate government. As free-marketeers, we can then protect the market economy from these distortions of indirect cronyism — by efficiently collecting the needed revenues to sustain financial stability for long-term economic freedom.