There are a lot of economic myths out there.  One that I tend to hear quite often is when someone is told they should be thankful for the government’s spending on “fill in the blank” or else they wouldn’t have a job.

Let’s take an example.  Let’s say there is a guy working in the tax department of a major corporation.  The guy happens to be a libertarian.  He says that we need to drastically cut government spending.  He says that we should have low or no taxes.  He believes that corporate taxes should be eliminated.

Along comes this guy’s coworker who says that if it weren’t for corporate taxes, then he wouldn’t have a job.  This could be someone who has been in his job for 20 years.  Yeah, as if corporate taxes never existed, I’m sure this guy would have just sat there doing nothing for 20 years without a job.  Thank you government.

It is not correct to say that, without government, neither one of these guys would have a job.  It would be correct to say that without government (including no corporate taxes), these guys wouldn’t have the particular jobs that they currently have.

Should the libertarian feel guilty about working in a job that wouldn’t exist without government?  Absolutely not.  Of course, that is a decision that each individual must make on his own.  (I wouldn’t recommend that a libertarian, or anyone else, become a sniper.)  But the libertarian in this example is simply selling his labor to a corporation that has certain needs.  It is not the fault of the individual or even the corporation that such a need exists.  I’m sure the corporation would rather have everyone working in sales and marketing instead of working in a tax department that is nothing but overhead costs.

(I do realize that some corporations actually advocate policies of big government and taxation, but that is only to keep away competition.  They would not voluntarily pay more taxes and hire more tax experts on a voluntary basis to make their company more profitable.)

This whole economic myth goes back to Henry Hazlitt, or even Bastiat.  It is an economic myth because people are only looking at the results that can be seen.  They are not looking at the unseen long-term consequences.

If there were no corporate taxes and the government at all levels were spending a fraction of what it currently is spending, then things would be much different.  Resources would be allocated in a different way.  But it would be in a more efficient way in accordance with consumer wants and needs in the free market.

There would be no tax departments in corporations if there were no taxes to be paid.  There would still be accounting departments.  But these resources would be freed up to do other things.  We live in a world with scarce resources, so there are always jobs to be done.  With corporations not having to hire tax accountants, these talented individuals could be used in other jobs that will be more productive.

In conclusion, governments can only create jobs by siphoning off resources.  This destroys other jobs and it also misallocates resources.  It makes society poorer as a whole.