UPDATE: Welcome visitors from 4Simpsons! Thanks for the link!

I spotted this article from Chris Edwards of the Cato Institute. (H/T Club for Growth)

In the article Edwards explains why taxing the rich is bad for economic growth. The article is a response to a leftist polemic in The Economist.

The first thing to note is that tax increases decrease the growth of the efficient, market-oriented private sector:

President Obama wants to go in the other direction, raising the top two income tax rates, which would reduce production and increase avoidance by highly skilled people. Such economic damage from higher taxes is called deadweight loss. In the 2006 paper, Mr Feldstein argued that deadweight losses from a federal income tax rate increase would be $1.76 for every dollar of tax increase. That means that every new $1 billion spending programme in President Obama’s budget will destroy about $1.76 billion of activities in the private sector.

Yes, this is why we are losing jobs today, because Obama is transferring wealth from private companies, who answer to customers and shareholders, to public bureaucracies, who are insulated from market competition.

He continues by explaining that the rich already pay most of the taxes:

…43% of American households do not pay any federal income tax, according to data from the Joint Committee on Taxation. That large group is doing little to support the huge burden of the welfare state, so it is laughable that they might be angry at the wealthy who do bear the burden. The CBO data show that the top one-fifth of households pay 69% of the entire costs of the federal government. Frankly, the rest of Americans are free-riders on the top quintile’s enormous financial support of government.

And he explains why the public sector is less efficient than the private sector:

There are fundamental reasons why big governments do not work very well. As taxes rise, resources are shifted from more efficient private activities to less efficient government activities. The private sector is not more efficient than government because it does not make mistakes, but because it has mechanisms to purge mistakes and move resources to higher-valued uses. Government policymakers do the opposite: they retain failed programmes year after year, and resources get stuck in low-value uses.

Even if politicians did focus on moving resources to higher-value uses, they would be unable to because government activities do not generate the price and profit signals needed to allocate capital and labour efficiently. A final problem is that government programmes are often horribly managed.

For an example of why governments don’t manage money efficiently, consider this USA Today story. (H/T Representative Mike Pence)

Excerpt:

The federal government will soon send more than $300 million in stimulus funds to 61 housing agencies that have been repeatedly faulted by auditors for mishandling government aid, a USA TODAY review has found.

The money is part of a $4 billion effort to create jobs by fixing public housing projects that have fallen into disrepair. Recipients include housing authorities in 26 states that auditors have cited for problems ranging from poor bookkeeping to money that was spent improperly, according to the review of summaries the agencies must file with the federal Office of Management and Budget (OMB).

Where did that money come from? It comes from the private sector. It comes from you.