Posts tagged taxation
Republicans are Disarmed
Tibor R. Machan
In the current Democrat-Republican fracas Democrats want to ignore fiscal prudence and claim they are doing it for the poor and needy. Republicans, in turn, claim they don’t want higher and more taxes because of their speculative contention that taxing takes resources away from the market where jobs are created, especially by the rich who would spend what they have if its not confiscated from them.
When it comes to the strength of the two sides’ arguments, the Democrats win because they have the moral high ground, given that the Republicans lack a moral case in favor of their position. But there is one. But Republicans are as wedded to confiscating other people’s resources as are Democrats, only perhaps not as much of it as Democrats. The bulk of the members of each party believe in taxation for the goals that are dear to them. And with that premise, the Democrats have the upper hand since their goals are more compassionate, caring. Yes, the Republicans do embrace the virtue of prudence but in hard times generosity or charity trumps prudence. We all go out of our way to stand up when times are tough to help out, even if this is risky. People will jump into troubled waters to rescue someone even if they might perish. Not perhaps if they know they will perish but if they only might, the risk is worth it.
If, however, the Republicans took a principled stand against extortion and defended the idea that it must be those who own the resources who decide what should be done with them—whether to give it to the needy or invest it in productive endeavors, for example—then there would be a chance for them to win this argument. For, while people often sympathize with compassionate intentions and policies, they generally do not sympathize with coercing others to make them compassionate. Indeed, they sense that one cannot make other people do what is right—they must choose to do the right thing, whatever that happens to be.
What the Republicans ought to do is insist that whatever help people need in this country—or indeed anywhere—it must be given freely, not at the point of a gun. That theme may sit well with most American citizens since it is, after all, the centerpiece of the country’s political philosophy. Freedom! Republicans miss out on standing up for it against Democrats and come off as merely having a different scheme up their sleeves, one that seems like cronyism to Democrats and their supporters. Don’t tax the rich because it is an inefficient way to help the poor! This comes off as a bogus idea and it is to cave in, too, instead of to stand up for something really different.
The entire history of political oppression rests on the theme that important goals, like helping the needy, require oppressing people, forcing them to labor for the greater good, for society, for the public interest. It has almost always been a ruse, of course, but it is difficult to rebut unless one has a sound alternative, namely, insisting on everyone’s right to decide how one’s labor and resources should be made use of. It isn’t about wealth but about choice!
What the Democrats and their supporters want is control over everyone’s resources. They have argued this position for centuries. They still argue that it isn’t really your wealth at all, it belongs to society, the public, and in a democratic republic its allocation must be left to politicians. Not true but sounds plausible enough.
Several of the major intellectual advocates of the Democrats’ way make this point quite explicitly. Consider the books The Myth of Ownership, by Thomas Nagel and Liam Murphy, and The Cost of Rights, by Cass Sunstein and Stephen Holmes. And the Democrats’ base, the Left, has for all its existence denied that people have a right to the products of their labor, let alone what they come by through luck. Property rights are the first to be abolished in Marx and Engels The Communist Manifesto. It is basic for the Left, including for the somewhat softer, watered down American version of it we find among the thinkers who forge the Democrats’ public philosophy.
Republicans, if they want to win, must attack this directly, not with supply side economics but with Lockean individual rights. Until that happens, they will remain losers.
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.
Are Public Unions Unjust?
Tibor R. Machan
Bona fide Labor unions work within a free market system where firms compete for customers who are normally able to switch from sellers of wares and services if they want to. Public works are noncompetitive, however. Workers who belong to public unions conduct their labor negotiations without their employers facing any competitors. The USPS, for example, has a monopoly over first class mail delivery; teachers at public schools are working for monopolistic employers–students must attend school and the funds are confiscated through taxation and not obtained through voluntary exchange. So, as the saying goes, public workers have the taxpayers over a barrel–there are no alternatives and in most cases one cannot refuse to deal with these workers.
So public workers unions are not genuine free market agents. As such they are able to have their terms met by the taxpaying public basically at the point of a gun. The public must deal with these workers otherwise they face legal sanctions. There is nowhere else to go apart from moving out of the state to another where the same situation obtains, where once again public unions possess monopoly powers and costumers have nowhere else they can turn to get a different deal or to avoid dealing altogether.
In a genuine free market place unionization would involve organizing workers in a firm that competes with others for costumers and with which costumers are free not to enter into trade. So the unions would not be able to engage in extortionist practices, making demands that must by law be met. If one’s child attends a public–or, as some prefer calling them, government–school, and teachers decide they want a higher salary or other benefits, the option of leaving the school doesn’t exist because one will be taxed to pay for it anyway. The same basic setup exists when it comes to any public work and unions. So for these folks to unionize is quite unjust.
Indeed, the rationale behind public works is not the same as behind private works. In the latter all the parties are involved so as to get the best deal they can find and bargaining occurs to bring this about. Public works, however, are supposed to amount to public service, something done not for profit but as a commitment to the public good or interest. Anyone who views public work as if it were the same as private work is suffering from a misconception or perpetrating a hoax.
Accordingly, all the people who work for governments, which are all supported through confiscatory payments–that is, taxation–are strictly speaking ineligible for unionization.
Public work in contrast to private business is something legally required and paid for involuntarily. So unlike going to the grocery store, of which there can be several in one’s neighborhood and which one can actually avoid if one decides to do with little food and household supplies, in the case of public services citizens are not free to deal with others or walk away from the providers.
Clearly, then, the original idea of labor organization into unions does not fit the public service situation. Unfortunately, this is rarely kept in mind. Thus when in Wisconsin or anywhere else for that matter public service employees are insisting on retaining the benefits they have obtained through bargaining with the government they were getting a very special deal. Public policy imposed their services on the citizenry and now the citizenry is no longer able to come up with the loot previously extracted from them via what comes to extortionist means. Yet, because much of the population–egged on by people who would very likely just as soon impose public services on everyone in every line of work (just check out Paul Kurgman’s column in The New York Times last Monday [2/21/11])–has sympathy for the usual laborer or worker when these are often dealing with powerful firms in a free market, the unions are getting a free pass in their current conflict with their employers.
This situation needs to be seriously reexamined. It may indeed imply that the entire idea of public service, let alone public service unionization, is misguided.
Why Rip Off The Rich?
Tibor R. Machan
This fracas about letting the Bush tax cut expire for those making more than the arbitrary amount of $250K per year is bizarre. Never mind for now that the entire system of taxation in a bona fide free country is criminal–not different, in principle, from a system of serfdom or involuntary servitude. (Taxation had its place in the same systems that were home to these other types of bondage!) But this unrestrained hatred for those who earn more than $250K is rank bigotry, not different from racial, gender and ethnic prejudice at heart.
Well, yes there is a difference, since when men and women become wealthy, this isn’t unavoidable as when they are black or women or from a given background into which they were born. But neither is becoming wealthy something for which anyone ought to be blamed and punished.
It is, after all, no longer the case that behind every great fortune there must be a great crime. That used to be generally true enough when wealth was obtained primarily via conquest, looting, and robbery perpetrated by armies and navies. One of the great discoveries of Adam Smith, the father of modern economic science, is that wealth is much more efficiently created without such methods, by protecting the equal liberty of everyone to produce and trade. Because we are often so radically different from one another, we can easily find opportunities to gain from others while they are also gaining from us. This is one of the benefits of specialization. Understanding this much should be sufficient to reject the notion that anyone needs to be put in servitude to other people so that these others can find what they need and want. A genuine, unbriddled free market place makes that possible, one in which the government with its monopoly on physical force does not try to cherry pick who gets what and how much and when.
Apart, however, of the irrationality of interfering in people’s freedom of production and exchange, there is in this debate about extending the Bush tax cuts to those who make more than $250K a viciousness that should be entirely unwelcome among civilized men and women. This enviousness that many people harbor and which is then taken advantage of by so many politicians–and fueled by their academic instigators such as The New York Times columnist and Princeton University economist Paul Krugman–is neanderthal, barbaric, totally unbecoming of people who live in a complex society and who have only the faintest idea of how others earn their resources. To have cultivated this envy toward those who are economically better off is really no different from cultivating it toward those who have superior talents or other assets in their lives, such as good health and good looks. To pick on such people is totally unjust and pointless.
Some, of course, try to peddle the notion that the very rich really owe it all to society–which is to say, to politicians and law enforcement–as if it were the referees at a game who scored points! But that is a fabrication and rationalization aimed to sooth one’s guilty conscience for harboring the envy of those who happen to be better off. Nothing good can come from it and a lot of ill will and needless acrimony is fostered by it all.
We have a very fine model for understanding economic differences among people in the field of competitive athletics. Sportsmanship is part of it, whereby competitors at all the different levels of achievement and skill live in harmony instead of hating one another and insisting on placing extra burdens on the successful. (Where there is a policy of handicapping it usually serves the purpose of making the sport more appealing to spectators and has nothing to do with equalization!)
I suggest we get rid of this attitude of rich bashing once and for all and shame those who refuse to do so instead of exploiting their attitude for political purposes.
Private Property and Human Community Life
Tibor R. Machan
If there is one thing that divides people most on matters of politics it concerns loyalty to the principle of private property rights. You can test this easily enough.
Ask someone to tell you whether he or she thinks a person has exclusive authority over that which he or she owns. Those who say yes will find the scope of governmental authority in our lives to be severely limited, mainly, to the protection of individual rights. Those who do not will consider it quite all right for government to take, take, and take some more, via taxation, eminent domain, and government regulation, for whatever purposes it may have. It makes no difference whether the government is democratic, dictatorial or parliamentary—the central issue is its scope of authority over the lives of its citizens (or its subjects, in some cases). And that depends on how serious the law is about the protection of the right to private property.
One major reason people are not loyal to—or even out and out dismiss as mythical—the principle of the right to private property is that they have a misconception of its main function. Many think only the wealthy benefit from it. And even if they do not have anything against being rich, they do have something against unfair legal advantages for those who are.
All over the map of diverse ideologies this mistake has tended to polarize people. As an example, throughout the legal education community there are very influential teachers—usually members of what is called the “critical legal studies” school of jurisprudence—who hold this view. They think private property rights amount to a legal privilege for the rich, a weapon with which they keep the poor from gaining on them.
This idea, in turn, is fueled by the “zero sum game” mentality, the belief that if someone gains, someone else must lose. Wealth is viewed as a static pile of goods and it just sits there and is dipped into by various folks and if one accepts the principle of private property rights, those who get there first to do the dipping will manage to bar the rest from any chance of enriching themselves. They view the world as such a static pile and cannot fathom any enrichment without at once producing impoverishment.
Yet even such folks—whose ideas are way out of line with reality but somewhat understandable, given their use of the principle of the conservation of mass and energy as a model for understanding political economy—ought to appreciate something vital about private property rights, namely, how it facilitates peaceful diversity in human communities. Just take the example of religion.
In a society in which the right to private property is at least significantly accepted and legally protected, different faiths can flourish because the faithful can gather in distinct places, worship apart from others who gather elsewhere for the same purposes, at any time they choose. Compare this to places around the globe where religion is a public affair and people of different faiths are all battling to become the dominant public religion so they can rule the public square and call the shots as to which conception of God and His ways will prevail for everyone. India, the Middle East, even England are in greater or lesser religious turmoil because of this version of the tragedy of the commons, while in the USA there is noticeable peace at least on that front.
It may appear that this has to do with the US Constitution’s protection of the right to freedom of religion, laid out in the First Amendment, but that right would be impossible to exercise without the corresponding right to private property. And while we are talking about the First Amendment, it is worth noting that the right to freedom of the press—or as it is now more broadly understood, freedom of expression—would also lack any teeth without the principle of the right to private property. Just consider the contrast between the exercise of this right where private property is the rule—in the publication of magazines, newspapers, books, newsletters, paintings, posters, pamphlets and such—versus where public ownership prevails—as in the broadcast industry, radio, television and the like. The former are diverse and full of variety in content, style, level of culture and such, while the latter tend to be pretty bland and undifferentiated.
There is more. In a community that’s at least somewhat loyal to the principle of the right to private property the possibility of cultural diversity itself is far more evident. Not only are there a great variety of religious practices afoot in such communities—about 2500 different religions in the USA—but there are also many life styles, forms of entertainment and sport, with none enjoying substantial legal privileges. (Where there is an exception, as in the cases involving public funding of football or baseball arenas, controversy and acrimony are rife.)
So even apart from the alleged unfair economic benefits to the propertied classes of the right to private property—benefits that are mostly imaginary, since the fierce competition this same principle encourages keeps all participants in the productive sector on their toes—the right is of enormous and widespread benefit throughout human community life.
Still, mainly prominent intellectuals resist it. Recently Professors Liam Murphy and Thomas Nagel have published a book (by Oxford University Press!), titled The Myth of Ownership. The central thesis of this work is that there is no property prior to government saying there is, so taxes do not take from anyone something they own but merely serve as a method for distributing resources that belong to no one. So the ascription of the right to private property rests not on anything objective, pre-legal and real but on political make-believe. (Murphy and Nagel continue the line of thought first articulated by the English Jurist Jeremy Bentham who declared, back in the 18th century, John Locke’s initially very influential idea, that the right to private property is a natural right, that is, it’s grounded firmly in human nature, “nonsense upon stilts,” and more recently by Stephen Holmes and Cass Sunstein, in their book, The Cost of Rights.)
In contrast to Murphy’s and Nagel’s criticism, Bernard Siegan’s Property Rights, From the Magna Carte to the Fourteenth Amendment (Transaction Books, 2002) lays out the history of the idea in Western Law. Siegan doesn’t offer a moral justification of this right but shows that such a justification had been taken as sound for nearly one thousand years. And the early champions of the idea did not see it primarily in economic terms. William of Ockham, for example, regarded natural right “nothing other than a power to conform to right reason,” not unlike Robert Nozick, who took such rights to identify the “moral space” every individual requires in order to make his or her own choices. And natural rights include, of course, property rights since, to quote another famous philosopher, the late comic Myron Cohen, “Everybody’s got to be someplace.”
Significantly, Murphy and Nagel’s is just one more of a very long list of books during the last century that have attacked the right to private property. One should recall that in The Communist Manifesto Karl Marx and Frederick Engels listed it first among the principles that needed to be abolished in order to usher in socialism and, eventually, communism! Since then hundreds and more such attacks have been and continue to be aired, mainly from political philosophers and theorists.
It is, of course, true that the right to ownership does allow for inequality of wealth, but it also threatens all wealth with competition and, thus, even with possible poverty. One need but reflect on how giants of private industry such as Montgomery Ward, Kmart, and, yes, Enron lost their might in the relatively free market, one that does not tolerate mismanagement and corruption very long, in contrast to how state owned industries across the globe manage to hang in there even while crooks run them.
It is too bad that the overall value to human beings of their basic right to private property is so widely and prestigiously denied. It is one of the most beneficent institutions and certainly the bulwark against any kind of tyranny, be it that of a ruling party, a dictatorship or even of a democratic majority.