High taxation discourages entrepreneurship, investment and attempts at high achievement, while at the same time transferring money to a wasteful government. This suffocates the economy, leading to less economic activity from which to tax. At the same time, a slower economy creates higher demand for social services due to unemployment, lower standard of living, etc. In addition, social programs create their own increased demand for more social spending, as people come to rely on the government.

Consequently, socialist governments face the continuing and simultaneous pressures of a decreasing tax base due to a smaller economic pie and higher demand for social spending. Furthermore, due to tax avoidance and evasion, a soak the rich tax strategy yields quite a bit less than anticipated and promised by the the socialist politicians.

Under these circumstances, how fast do you think a politician will break promises to tax only a small segment of the population, i.e. the rich? The answer is very fast!

In fact, these promises are broken even as they are made. For example, Barack Obama’s campaign promise to raise taxes only on the “rich”, defined the rich as a married couple making over $250,000 a year. $250,000 for two people is $125,000 per person, and it’s a big stretch to call someone earning $125,000 as “rich”, especially in expensive cities as New York City!

Even if $125,000 seems rich to you, facing budget crises, socialist governments soon enough want to grab money from anything that moves. For example, in December ‘08, David Paterson, the governor of the welfare states of New York, proposed to tax movie tickets, taxi rides, hair cuts, soda, beer, wine, cigars, massages, and cable and satellite TV. The proposal also offered to renege on the tax exemption for clothes costing under $110. And this is on top of other recent tax hikes such as the infamous “Amazon tax”, in which New York state strong armed non-New York based companies into collecting New York State sales tax for Internet transactions. Oh, yes, it sure looks like only the rich are getting soaked here! There simply isn’t enough money in taxing only the “rich”.

The Hidden Taxes on the Poor and Middle Class That Socialists Don’t Want You to Know About

In addition to overtly betraying their own promises to only raise taxes on the rich or well to do, governments have very powerful tools at their disposal for effectively raising taxes without having to call it raising taxes. Those tools are borrowing, and printing money.

Government borrowing postpones budget crises to the future, ostensibly once the politicians responsible are gone. Once the money is spent, future taxpayers are are left with the burdens of interest and repayment, putting further pressure on the government to raise taxes then. But that’s in the future, we don’t have to worry about that, or do we? Some socialists will tell you that in the future things will be so much rosier due to their wonderful investments in society financed by current borrowing, that we will easily repay the debt, but things never work out that way because socialist policies do not create prosperity.

Printing money is a term used to describe how the government conjures up money out of thin air. Since we have bank accounts, the process need not actually involve the physical printing of more money. However, the effects are analogous to an actual printing and distributing of paper money. It describes a process that’s easy to visualize and understand, and therefore, the term “printing money” is a good one to use.

Any government that controls its own issuance of currency, such as the U.S. Federal Government, can print money as needed for its own spending. However, printing money takes a toll, otherwise we could just all live off of an endless stream of printed money. But we all instinctively know that it’s impossible, and the reason is inflation. As the government prints more money, the value of the money decreases and prices inflate. For instance, if the total amount of money is one billion dollars and the government suddenly prints one billion dollars more, then every price doubles because now there are two billion dollars available to buy the same number of goods and services. Therefore, printing money is effectively an across the board tax on holding cash or fixed payment contracts. But since technically it’s not a tax, politicians are safe to promise no higher taxes while in reality everybody ends up losing to inflation.

Conclusion

Make no mistake about it. You will pay. If you make or spend any money, then you will pay more for an expanding government. No politician will ever deliver a tax on only “the rich” that will pay for government freebies dolled out to everybody else.

The evidence is the tax structure of the social democracies in Europe, whose tax rates are considerably higher than those in the U.S. for lower income brackets. For example, the income tax in Denmark goes up to 63%, the highest rate in the world. (Source: Wikipedia) And don’t think that it’s only a few rich people who pay that tax rate. The highest tax bracket in Denmark starts at 347,200 DKK (2009), which is about $66,000 per year. (Source: TaxInDenmark.com)

In addition, sales taxes (VAT), which are paid by all regardless of income, are considerably higher in Europe than in the U.S. Those tend to hover around 20% in most of Europe, a figure which is twice as large as that of the highest sales tax state in the U.S., California. If anyone could figure out how to support a large welfare state by soaking the rich, it surely is a Western European socialist, but no one did!