Sunday, March 6, 2016

The American Economy, Circa 1960

Taxes are a perennial problem for citizens. They are, in the words of Thomas Paine, a “necessary evil.” Taxes are truly necessary: if a government is to have the resources to protect the lives, properties, and liberties of its citizens, it will need the resources to carry out that responsibility.

Yet taxes are truly evil: the are the confiscation of a citizen’s property. To the extent that property is attained by work, taxes are the appropriation of a citizen’s labor, and thereby constitute involuntary servitude: slavery.

This was true in ancient Egypt, Babylon, Rome, and Greece. It is also the case in modern history. Reviewing economic statistics sometime around 1959, Senator Goldwater wrote:

Here is an indication of how taxation currently infringes on our freedom. A family man earning $4,500 a year works on the average, twenty-two days a month. Taxes, visible and invisible, take approximately 32% of his earnings. This means that one-third, or seven whole days, of his monthly labor goes for taxes. The average American is therefore working one-third of the time for government: a third of what he produces is not available for his own use but is confiscated and used by others who have not earned it. Let us note that by this measure the United States is already one-third ‘socialized.’” The late Senator Taft made the point often. “You can socialize,” he said “just as well by a steady increase in the burden of taxation beyond the 30% we have already reached as you can by government seizure. The very imposition of heavy taxes is a limit on a man’s freedom.

That citizens tolerated, in the early 1960s, the government’s seizure of a third of their annual income is due to the disguised nature of that seizure. Had the government presented, all at once, a bill for that sum, a revolution would have been likely.

Instead, taxes were divided into various segments: income taxes, capital gains taxes, tariffs, etc. Some taxes are hidden in the cost of consumer goods: the price on a loaf of bread or a bottle of ketchup, for example, includes the taxes paid by the manufacturer and shipper of the goods.

The political process regularly features candidates who express sympathy for the citizens and the burden of taxation which they bear. Yet the uniformity with which those candidates, regardless of their party affiliation, fail to significantly alleviate that burden is a uniformity which engenders a cynicism on the part of the voters.

While eager to elect leaders who will address the excessive size of taxes, voters have ceased truly to expect meaningful relief in this regard. Senator Goldwater wrote: “I suspect that this vicious circle of cynicism and failure to perform is primarily the result of” the habit, found among the news media and the politicians, of addressing taxation as a technical economic inconvenience, instead of considering taxation as an ethical question.

When a government uses the brute force of regulation to confiscate property from citizens, then surely a moment of ethical consideration is in order. The old slogan of ‘no taxation without representation’ alerts us to the fact that ‘administrative rulings’ and ‘user fees’ constitute a path around proper legislative processes.

Yet, as Goldwater notes, the political class and the media have fueled cynicism because of their “success in reading out of the discussion the moral principles with which the subject of taxation is so intimately connected.”