Posts tagged Extortion

Column on The Taxman (Extortionist) is Coming

The Taxer (Extortionist) is Coming

Tibor R. Machan

For most people taxation is a burden that’s accepted in large part because they know the alternative is worse. As a friend pointed out, it is like dealing with someone who holds you up in a back alley: “Your money or your life!” To put up a fight can be fatal and up to a point almost everyone can tolerate the loss. But as the economist Arthur Laffer observed, everyone has a point at which no further taxation can be lived with. Kind of like pain–we can all put up with some of it and will not succumb until the level is just too high. But it is never a good thing.

Now there are sadly some prominent folks who claim that this is all as it should be. As Justice Felix Frankfurter reported about Justice Oliver Wendell Holmes, “He did not have a curmudgeon’s feelings about his own taxes. A secretary who exclaimed, ‘Don’t you hate to pay taxes!’ was rebuked with the hot response, ‘No, young feller. I like to pay taxes. With them I buy civilization.’” (Felix Frankfurter, Mr. Justice Holmes and the Supreme Court [New York: Atheneum, 1965; originally published by Harvard University Press, 1938, 1961, page 71]) But this is not right at all, despite Holmes’ gravitas.

Taxation was the charge the ruler levied on his subjects for being privileged to live and work within the realm that belonged to him (or her). Yes, kings and czars and pharaohs were thought of as the owners of the countries they ruled. So they extorted funds from everyone at the point of the gun or bayonet. It wasn’t a free exchange, as between, say, a dentist and a patient. Or even a client and a body guard. No, the king ruled–indeed by some accounts owned–the subjects and confiscated what he chose from them in property and labor, leaving them just enough to survive.

This is what Robin Hood was protesting, by the way, not great wealth. His rebellion was to take back what the taxer took and return it to those who were the victims of taxation. The process of taxation is no peaceful interaction whereby citizens are offered services by their government and pay for it voluntarily, the picture Holmes painted of it. No. Rulers extorted the funds and didn’t obtain them in peaceful ways.

Taxation, then, was on par with slavery and serfdom, not with free trade. Once the American idea–learned from the English philosopher John Locke and some predecessors–of natural individual rights to one’s life caught on, both serfdom and slavery started to crumble. They lost their moral foundation. And once it was demonstrated that everyone has the right to private property as well, the notion that the monarch owns the country also took a major hit. Sadly, however, all this wasn’t taken far enough. It was all a bit too revolutionary, to make it clear that no one owns anyone else, only ones own life and property. Probably in part because that’s the only way political thinkers could see their way through to funding the legal services governments were providing–the civilization that Homes was talking about. But that is a bad way to have handled the situation.

As it was realized a bit later, one has no right or isn’t entitled to another’s life even if one needs that life very much, as, for example, in fighting a war in defense of a country or for harvesting one’s crop. For a long time folks put up with conscription in the USA even though it violates the right to one’s life. So they also put up with taxation, even though it violates the right to one’s labor and property. But it need not be like that in either of those cases: one can pay people to fight or give them other benefits, and an army will arise quickly enough, especially provided the purpose is a just one, not imperialistic adventurism. And one can finance essential legal services without confiscating anyone’s private property, mainly by charging a fee for all economic transactions that need the protection of the law. Both these methods avoid coercion. One can avoid service in the military by paying others who are willing to take up arms for a just cause. And one can avoid paying the contract fee by simply relying on a handshake. But in the latter case, few would make that choice since they would be left very insecure in their commercial exchanges. It is best to enter into a binding contract and paying the fee to have it well protected in the law. Moreover, there is plain old human generosity which is far better than extortion any day!

Of course, the details would be very involved. Sadly no one is studying this since public finance is so intimately tied to the system of taxation. But just as the switch from conscription to a volunteer military wasn’t impossible, so is the switch from taxation to the contract fee system.

So taxation is by no means the best way to obtain funding for the legal system, quite the contrary, just as any other involuntary service isn’t the way to obtain the work of others. It is high time that this is realized and the extortionists sent on their way.

Column on Here We Go Again

Here We Go Again

Tibor R. Machan

Innumerable arguments and research have been produced showing that government stimulus is useless. Despite what President Obama and his cheerleaders in the academy, like Princeton’s Paul Krugman, seem to believe (or at least say), there is no evidence that government stimuli do anything to restore market activities. Such policies merely take funds from the right pocket and put it into the left while most often the transfer entails wasting a lot of resources so the net effect is widespread economic loss.

Just consider the current administration’s plan to funnel billions into public works projects–building roads, improving rail lines, beefing up public parks, etc., and so forth. The funds come from someplace, right? Even if they are borrowed from China and future generations of Americans, there will be a minus sign somewhere on the ledger.

So what then is happening to provide a net gain? Nothing. The multiplier effect is a myth–one just cannot make something from nothing however much one might wish to do so. Thus some enterprises that would have been funded by the monies spent as stimulus will be unfunded; customers will have fewer dollars to spend, banks fewer dollars to lend, firms fewer to borrow, all because the politicians have decided to divert it all to projects they deem worthy. But what about projects that those deem worthy who have to be coerced so as to pay for all this?

Whenever one has funds extorted so as to artificially pay for improving highways, etc., one will no longer have them available to spend down at the mall or grocery store or one’s brokerage. Where is the stimulus here instead of the mere forcible redirection, something that will mostly mean spending on what the taxpayers didn’t want to spend on? Why is what the politicians choose to do with one’s funds more stimulating than what one would do with them?

This seems to be no more than a shell game, at best, or out and out fraud. Making it appear that politicians are doing something about the dire straits a large number of citizens are experiencing. But it is a mirage, nothing real. Again, one cannot get something from nothing and to make it appear one can, the net effect is gross waste. You rob me to support something you want so I don’t get to support what I want; but then I need to make provisions to replace the stolen stuff and you had to exert energy on the theft instead of on something productive. Nothing about it is an economic plus.

Most of the truth of this is hidden behind a lot of talk of what “we” are doing. But there is no “we” involved, only you, I, and the others who get rooked by it all. The United States of America is not a firm but a country. When politicians treat it otherwise they must engage in malpractice. Their job is to provide a setting for us to do productive work, not to embark on various ventures as some kind of corporate giant that keeps borrowing and borrowing but has run out of collateral. Somehow this point is being missed all over the place and journalists who are supposed to hold the politicians’ feet to the fire are failing to get to it during all their Sunday interview programs.

Whenever people’s property rights are violated by all the taking and regulating and redistribution done by the politicians what is involved is removing the people from the position of being able to choose, to allocate their labors and resources, and substituting the politicians and the bureaucrats for this role. Just why these folks are believed to know better is a mystery, other then that perhaps most citizens are still in the grips of the governmental habit inherited from the times when kings, czars, pharaohs and other rulers were supposed to know it all, with everyone else just following orders.

Yet that is precisely the system that was overthrown by the American Revolution! So why do so many Americans still believe in it? Why do they want to imitate Europe and other parts of the globe that American said “no” to in the first place? Go figure.

A timely piece from Machan’s Archives

Taxes, Greed and Prudence

Never mind the attempt at intimidation by some, like the 2007 Nobel Laureate Woodrow “Woody” Clark, II, Senior Fellow at the Milken Institute, claiming that if you work to reduce or let alone to abolish taxes, you are greedy. You are not. You simply have a common sense understanding that there is something basically amiss with a system that coerces you and millions of others to part with your resources for services that would appear to be either hardly needed or, where needed, capable of being funded without using coercive force. Moreover, not only are you not guilty of the vice of greed. You can take pride in your practice of the virtue of prudence. Because what this moral virtue requires of us all is that we make sure we and those we are responsible for are well taken care of.

So, for example, check ups at the doctor and regular workouts are a function of prudence, as is brushing your teeth regularly and driving the roads carefully. (That famous financial firm featuring the rock of Gibraltar as its logo isn’t called Prudential by accident.) We should all, especially if we have families and other intimates to care for, be prudent, which includes taking good care of our resources. So, then, not permitting the tax collector to raid these is clearly one instance of being prudent, not being greedy. The more of your resources you can keep from the extortionists, the more praiseworthy you are!

Of course there are the apologists for this reactionary public policy, one that really belongs in the age of feudalism when the population was taken to be beholden to the royal family and its goons. The justice of the U. S. Supreme Court, Oliver Wendel Holmes, Jr., is supposed to have said that taxes are the price we pay for civilization and since he was a smart and powerful American justice, many think what he said must clearly be a pearl of wisdom. (Actually, the source of the statement is a bit obscure. Holmes is said, by Justice Felix Frankfurter, to have “rebuked a secretary’s query of ‘Don’t you hate to pay taxes?’ with ‘No, young fellow, I like paying taxes, with them I buy civilization’.”) In any case, the sentiment is way off. It is not just a ruse but a paradoxical one at that.

Civilization, if one can sum up its nature in just a few words, means relating to our fellow human beings peacefully, respectful of their dignity and sovereignty, never using them against their will. This is what distinguished civilized folks from barbarians throughout human history. But when we focus on governments it becomes evident that these agencies have routinely managed to circumvent the principles of civilization simply because a minimal portion of their work is quite useful, the portion that America’s Founders so clearly pinpointed in the Declaration of Independence. This is where governments are assigned the role of securing the rights of the citizenry, the sole purpose for which the institution exists.

So what Holmes is supposed to have said is quite wrong–taxation is a major subversion of the principles of civilization, principles which are supposed to guide us all toward dealing with one another peacefully, not through extortion.

Ah, but you will not find this view widely discussed, let alone championed, among academics, even historians of ideas, let alone public officials, the majority of whom live off this extortionist device, just as the king and his minions used to with impunity, in most parts of the world and in America back before the Revolution demoted them all to mere citizen status!

So, if you have come by your resources, your wealth, honestly, have no shame when you also work hard not to let the government rip you off. Yes, of course, legal services–courts, the police, the military and such–need to be paid for but not by this means. Extortion is how organized criminals come by their “income.” It isn’t supposed to be the method of public finance of a genuinely free society.

The fact that in the course of emerging from centuries and centuries of oppression via a great varieties of rulers–Caesars, Pharaohs, Czars, kings, and even democratic majorities that disregard individual rights–much of the world is still sticking to taxation as its way of funding its legal systems doesn’t make that right, any more than the fact that there was slavery and serfdom and still is in many places makes those right. One task of civilized people with a concern for the quality of their system of government must be to discover and implement ways of funding legal systems in a bona fide civilized fashion, without coercion, that is to say, without taxation.