Simple Liberty  

 

     
   
     

The American Income Tax

Chapter 23

Raising Revenues Without Coercion

Written by Darrell Anderson.

But let us cultivate our [own] garden.

Voltaire, Candide

Evaluating the income tax revealed that the tax fails to honor the rule of consent. Taxes on production, income, and accrued or perceived wealth are taxes to avoid. Taxes on property must be avoided. An excise tax does not completely honor the rule of consent unless people are allowed to buy in alternate markets, but at least there is some semblance of choice.

Such taxes are direct assaults on rights and property and negates the concepts of self-ownership, rights, property, contracts, and consent. Any such tax will be routinely resisted and evaded because such taxes converts the basic right to life into crimes. The problem is not good people going “bad,” but flawed ideas. The income tax system has always been a tax of contention and confusion. The brightest legal minds cannot agree on the simple question of what is income. Even the Supreme Court justices struggle with this fundamental question and researchers and students of the tax know full well that the confusion is far worse below that level.[1] Legislators have continually based their efforts on flawed concepts.

Is there a better means of collecting revenues other than taxes?

Perhaps the best long term hope of ending most taxes is education. Many of the so-called “common goods and services” provided through the political system can and should be managed by private individuals and organizations because those services have nothing to do with the process of government — protecting rights and properties.

By definition, no tax honors the concept of consent. The only way to truly honor consent is to ensure there are no consequences for not collecting or paying. Of the current existing methods, many people propose that a broad-based sales tax causes less damage than the existing tax models. Often many people label a sales tax as a consumption tax, but the phrase is misleading. Because only people can be taxed, all taxation is a tax on production because people must first produce before they can consume.

A sales tax does not fully honor consent because the incredibly high division of labor requires almost all people to participate in retail exchanges. Such a tax arguably provides some degree of consent in that people are taxed only when they choose to participate in a taxable transaction conducted in commerce for profit. People also can avoid that tax merely by directly exchanging wealth for wealth rather than using a common medium of exchange. If some obvious essentials and necessities are exempted from a sales tax, then a weak argument can be made that a sales tax is constitutional and somewhat honors consent. A weak argument, but a much better one than provided by the existing income tax system. At least an up-front out-of-pocket sales tax much better exposes the true cost of the entire coerced wealth redistribution game. A sales tax at least satisfies the rule of uniformity because the tax not only is the same geographically, but with respect to each person too.

Should people be in favor of exchanging the income tax for broad-based sales taxes? The trade is merely exchanging one form of iniquity for another. All taxation is coerced theft under the color of law. Transitionally, however, should people oppose replacing the income tax with a sales tax? The income tax must go, and there must be a rational orderly transition.

No tax reform discussion will resolve anything unless the problem of public borrowing and spending as well as the hideous problem of compound interest are confronted — issues I address in more detail elsewhere. The modern exchange system is deeply coupled with the mathematically impossible concepts of compound interest and currency inflation. Eliminating the hidden and embedded costs of monetary inflation and compound interest dramatically reduces the price of everything. Everything.

Most — if not all — of the so-called “common goods and services” funded by taxes can and should be financed by user fees. Do you want your garbage collected? Pay a per bag fee. Many areas where private firms are contracted to collect garbage use exactly this method. Those people who create lots of garbage pay a truer proportional “fair share” than under the current system. Consent is honored, equality and uniformity is established, and people pay proportionally according to ability. Certainly such a system is easy to administer and understand.

Want municipal swimming pools? Charge user fees. Want a district library? Charge user fees. Want a new park? Collect the money first and then build the park, or allow a private party to build the park, then recover costs with user fees. There is no reason or justification for forcibly obligating everyone to fund such projects. The true challenge with such projects is the flawed doctrine that property can be “publicly” owned and the belief that “being in the neighborhood” provides implied consent.

User fees provide an avenue for those people who desire specific services to finance those services. For those people who decide they can live without certain services, they can spend elsewhere the fruits of their labor and not fear the loss of their liberty to their home and property. Through user fees, the rule of consent is honored. Those people who are accustomed to years of legal plunder will greatly resist user fees. Legal plunder has a unique way of masking the true costs of any service. Directly paid user fees suddenly forces people to acknowledge the true cost of any good or service.

With respect to many local projects, the typical method of financing is to vote on a bond issue and then force and coerce each landed property owner to pledge part of his or her property toward financing the bond through the property tax. The straightforward solution is to stop such madness, but again legal plunder has taken its psychological toll and many people will resist a new system. Getting something seemingly for nothing is always more fun. The solution is simply that those who want to fund debt for pet projects should do so out of their own pockets and pledge their own property as security. Want a new sports arena? Let those people who want the addition all sign the loan papers or impose self-taxation methods to fund the bond. Or use a lottery to raise revenues. Or sell ownership stock. Or encourage private enterprises to assume the risks and later recoup costs through appropriate support sales and fees. Stop forcing other people to foot the bill through legal plunder schemes. Voting, for the purposes of forcing other people to pay for something they do not desire, must be abolished. With respect to tax schemes, voting is pure mob rule and legal plunder.

What about maintaining roads? In some areas a user fee would suffice. The fee could be collected using toll booths, a practice already used in some areas. Or some sort of high-tech metering system. Fees could be collected through fuel vendors or repair shops. Granted, collecting fees through the latter methods would look much like an excise tax. Because quick reform is unlikely, road maintenance probably should be financed through various use taxes, such as taxes on fuels, tires, auto parts, etc., but those funds must be earmarked and used solely for those purposes.

How would any participant in a political society advertise to potential customers of that participation? For example, how would an automobile service station owner let potential customers know that the he or she willingly participates in a particular political society and collects fees or excise tax to support that political society? If consent is to be honored, then potential customers need to be fully informed before they decide to pay a fee or to be taxed. The solution is no more difficult than the “No shoes, no shirt, no service” sign already seen at many business establishments. All participants need do is post a sign such that all potential customers know what might lay ahead. Consent is honored.

Do not be misled about the nature of user fees. If a fee is collected through force and coercion then the fee essentially is a tax or an extortion. The difference between a user fee and a tax is that with a user fee only those people who freely and willfully choose to use the provided goods or services are charged the fee. At least in that respect consent is honored. Taxes affect everybody by using force and coercion.

How would people determine the rates of such user fees? The same way any business owner determines final prices. Simply calculate the costs involved to support a particular endeavor and derive a price. Certainly in the beginning there would be some trial and error to estimate costs, but eventually rational user fees would be established.

Do user fees discriminate against the poor or those living on fixed incomes? Under the current system of legal plunder, there is support for such a statement. However, eliminate all forms of forced involuntary taxation, eliminate the hidden embedded costs of indirect taxation, honor the rule of consent, and suddenly the poor are more free to choose how they spend their initially limited wages and salaries. By implementing a rational tax and user fee system, poor people are then greatly encouraged to improve their own situations.

However, those people who do not want to pay the voluntary taxes can still use “common goods and services,” such as a “public” court system. All that is needed is to charge such users an appropriate fee.

If taxes are voluntarily collected and paid, a two-tiered user fee system would help. One set of fees apply to those people who provide evidence of paying applicable taxes, another schedule of fees for those who do not pay taxes.

For example, suppose an individual decides not to pay taxes that supports a local community school. Automatically that individual must pay normal tuition fees if the person wants to send children to that school. Similarly, that individual would pay higher user fees for other local services. If the normal “taxpayer” cost of filing court papers is $25, the “non-taxpayer” cost could be $100; plus the cost of hiring an adjudicator. Similarly, if the cost of recording a land deed is $15, the cost for the non-taxpayer could be $100. Although such fees might seem high, how often do most people buy and sell homes? Not often.

Such an approach allows people to transition out of the legal plunder environment and honors consent. Such an opt-out process also returns resources to people and allows them to be more self-determining. As more people are able to stand on their own without legal plunder, there is less need for taxes.

Charles Adams, in his book Those Dirty Rotten Taxes, The Tax Revolts that Built America, noticed five basic periods of tax abuse in American history. The first four periods resulted in violence and the fifth, the current period, likely could end the same. Peaceable solutions are available, but will people learn from the past?

Next: Appendix A — Statutes At Large Cited

Table of Contents

Bibliography

Endnotes

[1] Caron, Tax Stories, p. 12.