Thursday, August 28, 2014

Why Not Fight for Immediate Abolition of Sales and Income Taxes?

Previously, I've advocated for a flat, low-rate income tax in exchange for eliminating deductions and ending rate progressivity of rate. I also once toyed with the idea of lowering sales tax rates as a trade-off for extending sales taxes across the internet (a position I ultimately rejected). 

Longer run, I believe broad-based taxes such as sales and income taxes should be abolished.

A question that some may ask is: Why not advocate for an immediate end to sales and income taxes, rather than quibble over reforms? The answer is, because fundamentally, government spending, not taxes, is the problem.

Fiscal conservatives used to say we could check government spending by "starving the beast" through tax reductions—a line of thought I once subscribed to—and deficits soared even higher as spending growth continued virtually unabated. These conservatives had it backwards.

The government has three ways to finance its operations; direct taxation, borrowing (future taxation), and artificial money creation (inflation, or printing money to monetize the debt, which confiscates dollar purchasing power rather than actual dollars). All three are a form of claim on private sector wealth. Even if sales and income taxes were abolished today, the government would just go on spending, using debt and inflation to finance itself. Nothing essential would change. The government would go on confiscating our wealth, one way or the other.

There is no escaping the necessary hard work of philosophical education followed by practical implementation. People must first be convinced of the moral rightness of reducing rights-violating government spending and the virtue of a government limited to protecting individual rights. Then would come the job of rolling back spending, regulations, and the welfare state in an integrated way that allows for people to readjust their lives over time with as little economic disruption as possible. As we do that, we can phase out taxes as we go. 

A good example of why an orderly, integrated approach to tax abolition is necessary can be seen regarding New Jersey's state income tax. The state income tax was instituted in the mid-1970s as a means of propping up "poor" school districts. The tax was collected by the state, then doled out to poor districts whose property tax base was allegedly too small to support the "thorough and efficient education" the state constitution demanded. Over time, the income tax grew and all districts—"rich" and poor alike—got in on the state education "aid" scheme.  

As one can see, to abolish the income tax involves not only immediately cutting off money that school districts now depend on, but also the cumbersome, time-consuming process of amending the state constitution that guarantees every child a "right" to an education. And that, in turn, is tied to the broader philosophical question of individual rights and the proper role of government. In the mean while, wouldn't it be advantageous to fight for less unfairness and more liberty through a flat tax and properly structured tax credits for education? 

Of course, liberty advocates should always be ready to defend the idea of abolishing coercive taxation and the rights-violating programs they fund when appropriate; i.e., when abolition is politically feasible and/or as a vision in conjunction with an incremental approach to more liberty and less government rights-violations. But to come out for tax abolition in a vacuum as a political strategy would be unrealistic, to say the least.

Let's fight to advance liberty on the tax front, and take what we can get, while never losing sight of our no-tax ideal. But to put tax abolition on the front burner at this time would be a futile waste of precious time, and, as history has shown, would not solve the fundamental problem—government spending, which is itself primarily the outgrowth of an even more fundamental problem, the ethics of altruism.

Related Reading:

How Would Government Be Funded in a Free Society?—Craig Biddle

Education in a Free Society—C. Bradley Thompson

1 comment:

Mike Kevitt said...

This goes to show why tax abolition is the last, not the first, step on the way to a free society.