Taxes: Theft or Duty?

As goofy as Ron Paul is about defense and foreign policy, he is mostly right about domestic policy, namely that there should be little of it — especially at the national level. This is from his exchange with David Gregory on Meet the Press (October 23, 2011):

MR. GREGORY:  Let me, let me ask you about the role of government.  You’ve said about taxation, in a way that doesn’t minces words, the following: “Taxation is immoral,” you told the Libertarian Party News.  Would you scrap the tax code altogether?

REP. PAUL:  That would be a pretty good idea, a pretty good start.  I, I can qualify it if I’m allowed.  Taxation is theft when you take money from one group to give it to, to another, when you, when you transfer the wealth.  Now, taxation could be accomplished with user fees and, you know, highway fees and gasoline taxes and import taxes.  But the income tax is based on the assumption that the government owns you, owns all of your income and provides the conditions on which they allow you to keep a certain percentage.  That, to me, is immoral, and the founders didn’t like it.  That’s why the Constitution had to be amended in 1913.

Not eloquent, but fairly near the mark.

Government has essentially one legitimate function, which is to protect citizens from predators, foreign and domestic. That covers national defense and domestic justice (including the enforcement of contracts and prosecution of fraud). Those functions could be provided by private agencies, but — because of the danger of warlordism — they are best provided by government and funded from a true flat tax.

A proper division of labor would place defense in the hands of the national government and justice in the hands of State and local governments. This would eliminate the ability of the national government to criminalize conduct for the sake of imposing its will on everyone. For the same reason, the provision of justice should be devolved to the lowest possible level within each State.

I see no need for State and local governments to do more than provide justice, though the government of a very small community — say, not more than 150 persons — might legitimately do more if authorized by the community, following rules explicitly and regularly adopted by consensus. Expanding the scale of government action beyond the jurisdiction of a small community courts runaway statism and precludes the provision of services (utilities, highways, etc.) by private actors, which are subject to discipline by market forces.

With that background, I turn to the October 20, 2011, issue of The New Republic and “Don’t Mess with Taxes: A moral defense.” Excerpts of the editorial (in italics) are accompanied by my comments (in brackets and boldface):

Elizabeth Warren, the Harvard law professor now running for U.S. Senate, is getting a lot of attention for the video of a speech she made recently. It wasn’t just because she was taking on Republican talking points more forcefully than most Democrats do these days. It was also because she was defending an idea almost nobody in American politics dares to champion anymore, at least explicitly: She was defending the idea of taxes. [Elizabeth Warren is all wet.]

In recent decades, Republican politicians and key allies, most notably anti-tax crusader Grover Norquist, have succeeded in demonizing taxes, as if the very concept of a tax itself were immoral. [Not quite. See above.]

But there is nothing wrong with asking [asking?] people to pay taxes. On the contrary, there is something very right about it. Nobody [nobody?] questions whether society [the state] can require people to serve on a jury or, in times of war, to enlist in the military. [So soon is Vietnam forgotten, along with its main legal legacy: all-volunteer armed forces.] So why do we question whether society [the state] can require people to pay for the government whose services, and protection, they enjoy? [Most of us do not “enjoy” government services, other than defense and justice, and even those that we do “enjoy” would be provided more efficiently by private firms.]

The moral case for taxation rests on two separate, but related, principles. The first is distributional. History teaches us that capitalism is an excellent economic system for generating wealth. But history also teaches us that capitalism will create losers as well as winners, often because of forces beyond any individual’s control. Whether it’s accident or illness, mismatched skills or misallocated resources, large numbers of people will inevitably find themselves in financial difficulty—without a job, without savings, and without enough money to pay for the basic necessities of life. It can be crippling for them and crippling for their children, so that poverty, like affluence, becomes its own sort of inheritance. [And that’s another thing better left to the private sector: charity. Charity-by-government is an inefficient way of taking from the few to give to the many — but it yields votes, as in “tax and tax, and spend and spend, and elect and elect.”]

A civilized society recognizes this problem and vows to mitigate it. [A state, driven by power-lust, is not a society, and cannot claim to be civilized.] If capitalism does not offer everybody at least some realistic hope of upward mobility, it cannot survive.  [But it does offer that hope, and it will survive unless the minions of the state have their way.] Here in the United States, a part of our solution has been to enact government programs that offer the needy minimal allotments of sustenance (food stamps) and shelter (housing choice vouchers), that provide the less affluent with cash (Temporary Assistance for Needy Families) and college tuition (Pell Grants), and that guarantee all citizens pensions (Social Security) and health insurance (Medicare, Medicaid, and the Affordable Care Act). These programs cost money. And the money has to come from somewhere. [These programs are self-defeating because they (1) create dependency, (2) reduce the incentive to better oneself, (3) reduce the incentive to save for one’s future needs, and (4) drain resources from growth-producing investments that create jobs and higher incomes, and allow people to save for future needs.]

The second reason we need taxes isn’t about the least fortunate; it’s about public goods. You’ll frequently hear conservatives argue that taking money from people, particularly successful people, is unfair because they, not the government, earned that money. But that’s not quite right, for reasons Warren explained very well in her monologue. Behind every successful individual is a set of public investments that past generations made. Could Bill Gates have made his fortune without government-financed education and technology? Could Sam Walton’s stores have spread across the country without government-sponsored roads on which goods and customers travel? “You built a factory and it turned into something terrific, or a great idea?” Warren said. “God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.” [“Public goods” are a crock. Elizabeth Warren is all wet.]

[O]n the morality of asking [asking?] people to pay taxes, there should be no debate at all. Taxes are an act of citizenship [coercion]. We should all be proud to pay them. [Speak for yourself, kemosabe.]

Other than that, I found the punctuation and spelling to be impeccable.

As for the question posed in the title of this post: theft, all theft, because even essential protective services are not funded equitably.

Related posts:
The Social Welfare Function
Risk and Regulation
A Short Course in Economics
The Interest-Group Paradox
Addendum to a Short Course in Economics
Monopoly: Private Is Better than Public
Utilitarianism vs. Liberty
Utilitarianism, “Liberalism,” and Omniscience
Accountants of the Soul
The Real Burden of Government
Zones of Liberty
Toward a Risk-Free Economy
Rawls Meets Bentham
The Rahn Curve at Work
A True Flat Tax
The Case of the Purblind Economist
The Illusion of Prosperity and Stability
Estimating the Rahn Curve: Or, How Government Inhibits Economic Growth
Asymmetrical (Ideological) Warfare
Giving Back, Again
Taxing the Rich
More about Taxing the Rich
Luck-Egalitarianism and Moral Luck
The Destruction of Society in the Name of “Society”
What Free-Rider Problem?
Utilitarianism and Psychopathy
Elizabeth Warren Is All Wet

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