RPA Rules Committee Chairman discusses Sixth Principle: lower taxes for economic growth

By: Steve Lux
We all grew up hearing the story of Robin Hood, the English character who sought the downfall of the evil Sheriff of Nottingham and the return of King Richard II. Whether you imagine Errol Flynn in tights, Kevin Costner with an always-wise Morgan Freeman by his side, or Walt Disney’s fox, the lesson to folks was the same: “robbing the rich to feed the poor.” Now, obviously, we know the Sheriff was corrupt. We know that people were starving because of excessive and unaffordable taxation by those corrupt leaders, but was Robin of Loxley right?

Everyone also knows that famous quote from Benjamin Franklin: “In this world, nothing is certain but death and taxes.” While the American people have always understood the necessity for some taxation for defense, infrastructure, and other public goods, our country has lately devolved into an economic system of excessive taxation to supplement increasing social program expenditures. Taking a hint from European socialist countries, modern America has sadly begun to pursue a Robin Hood perspective, robbing from the rich to feed the poor. It comes in the form of Democrat individual and corporate tax rate increases with the Leftist rhetoric of asking the rich “to pay their fair share.” Not only does the Republican Party platform view this as morally reprehensible, we believe it is counterproductive from an economic standpoint.

A 19th century French economist and political commentator named Frederic Bastiat popularized the concept of “legal plunder.” Starting his lesson in The Law, published originally in 1850, Bastiat described that “plunder” was the theft of someone else’s property for personal gain. But he continues by describing a situation in which the government is the thief. “When the law itself commits this act that it is supposed to suppress, I say that plunder is still committed, and I add that from the point of view of society and welfare, this aggression against rights is even worse.” If it’s illegal for an individual to steal, it’s also illegal for a government.

It was not until about 1910 that an income tax was first applied in the United States. Prior to the advent of the progressive agenda in the early 20th century, Americans understood the necessity of some taxes. In fact, according to the Bill of Rights Institute, many of the Founders held a belief in taxes on imported goods or luxury items. Mirrored in Federalist 21 by Alexander Hamilton, the consumption tax was largely used to balance the budget. Through this system of low taxes, a defense of private property rights, and historic individual freedom the United States quickly became the world’s greatest and freest economy.

Currently, there are nine states which do not have a state income tax.  Arkansas Governor Asa Hutchinson recently called a special session to consider once again lowering our State income tax. Our Republican supermajority is considering dropping the top rate of 5.9% a full percentage point to 4.9%.  Further, many Republican candidates running for office in the 2022 cycle have cited the goal of eliminating the state income tax altogether at some point in the future.

Contrast our Arkansas Republican approach to that of the Democrats in Washington, DC. They are proposing to raise the corporate income tax rate from 21 to 28 percent. That would make the United States corporate tax rate the highest of any developed country in the world.  Forbes writer Andrew Milsap wrote it best recently when he said, “It is important to remember that corporate taxes are paid by people.” He continued with the point that 30 to 35 percent of the taxes are indirectly levied on the employees, manifesting as lower wages. Milsap contends that the employer bears about 40 percent of the taxes and the rest is passed on to the consumer in the form of rising prices of goods. We currently see that manifested perfectly in out-of-control rates of inflation that risk accelerating to Carter-era levels. The consumer always suffers the most in the end.

Republicans know that both common sense and basic economics tell us that a free market with limited government regulation will naturally produce greater prosperity for all. More money in the pockets of business owners leads to higher wages and greater investment. When production is high and costs are low, the prices paid by consumers are much more affordable.

​The “invisible hand” of the market is very real. Adam Smith’s theory on free enterprise states that the collective self-interests of consumer and business will naturally drive a prosperous economy. Quite simply, prosperity is created, not taken from someone else. Rather than robbing the rich to feed the poor, let's help the poor by producing good paying jobs for them to fill. Quite frankly, as nice of a story as it is, Robin Hood was wrong. Keep the government from robbing everyone, and the poor won't be poor anymore.