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Taxes

As before consider 2 moral codes.  Code 1: People have a right to their own property and labor and the produce thereof no matter how large or small that may be and the government should have no role in redistributing wealth.  Code 2: The government is in the best position to determine how much everyone deserves so they should have the power to distribute all wealth in whatever way they see fit.  As before, if we took a nationwide poll between these two, I suspect the first one would win handily.  But of course we are never asked to choose between these two codes.  We are told that having a code is rigid and unreasonable. 

If you are a practical person you will consider every issue independently without reference to any overarching theory of government.  Then you will be given questions to consider like “do the rich really need more money”  or “doesn’t everyone deserve a decent living?”  You will think about it and come to the conclusion that these statements (and that’s what they are) are very reasonable and then they will ask “isn’t it fair then, to tax the rich a little more to provide a decent living for the poor?”  And this will seem very practical.  The problem is that even considering questions like this assumes the second code.  If you believe in private property then even if most people think the rich are too rich and the poor are too poor, it’s a moot point because that decision is not one that the populace at large is tasked with making.  If you wanted to help poor people you would have to actually go out and do it instead of using the coercive power of government to force someone else to do it. 

The founders didn’t consider redistribution of wealth to be an appropriate function of government.  Benjamin Franklin is famously quoted as having said “When the people find they can vote themselves money, that will herald the end of the republic” (notice he didn’t say the end of democracy).  And in fact they tried to prevent the government from doing this.  How did they do this you ask?  Well start by examining the notorious (and most widely misunderstood) “3/5 clause.”

Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons.

Progressives, of course want you to read this and be driven mad by rage over how racist the founders were.  After all they believed black people were only 3/5 of a person.  Of course, this is a complete distortion.  First of all, the distinction is not about blacks and whites it is about free men and slaves.  Obviously there is a high correlation there but free black persons (which did exist) were counted the same as free white persons.  Second, and more importantly, there is no such value judgement in this statement.  The statement is simply a prescription for apportioning two things.  The first (representatives) was a compromise to limit the representation of slave states (an anti-slavery provision).  The second (taxes) brings us to the actual point of this post.  Now notice this clause.

No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken.

You see, the founders knew that the government had to be able to collect taxes in order to perform its intended functions but taxation is a tricky issue.  It requires the government to have the right to some amount of the citizens’ wealth.  This is difficult to avoid.  But you can prevent the government from using its power of taxation to redistribute wealth.  This was done by preventing the federal government from taxing people directly (at the time most of its revenue came from duties on imports and exports) and disproportionately.  In other words, no progressive income tax.  If you can’t take more from the rich than from the poor you can’t redistribute wealth (at least it’s a lot harder).  This is the whole reason this language was originally included and it is also the whole reason progressives had to eliminate it which they did in 1913 (what a year that was).

The progressives (including the king of progressives Woodrow Wilson) went to the public and basically made the case described above.  They said they would only take from the rich a little bit.  The original top rate in 1913 was 7% and the bottom bracket was 1%.  The people didn’t notice that they were sacrificing a fundamental pillar of the republic.  They just thought it was fair to take a little bit from the rich to run the government and probably help the poor a little bit.  Five years later the bottom bracket had risen from 1% to 6% and the top rate had risen from 7% to 77%. 

There is no such code as: most people should usually keep most of what they earn but sometimes it’s ok for the government to confiscate wealth from certain people in a targeted way.  If you try to adopt this code you are accepting code number 2.  And this is what we have accepted.  We now have a tax code that is thousands of pages long explaining what part of your property belongs to the government based on all kinds of criteria made up in Washington D.C.  The result of this is that they can transfer wealth in essentially any way they want.  What’s more, they can  incentivize you to engage or not engage in whatever activities they think you should.  If they don’t want you to drive an SUV they don’t have to pass a law, they just raise your taxes and then give you a credit for driving a fuel-efficient car.  The examples of this are endless. 

Democracy means that decisions are made by a majority.  The unrestrained power to tax means there is no property which is out of reach of the government.  This means a majority can direct the use of any property or wealth in society.  To see democracy in action take a look at Illinois, they’ve been giving out money for decades and now notice who the bulk (though not all) of their new tax hikes are falling on, unpopular minorities: corporations, and smokers.  You might have heard that the whole country is in massive debt.  How popular are you?  And remember the smallest minority is the individual.

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Categories: Uncategorized
  1. Klouddweller
    January 19, 2011 at 9:08 am

    The point of the last few sentences unraveled on me. Can you elaborate on their significance?

  2. Free Radical
    January 19, 2011 at 6:34 pm

    I will write a post on democracy shortly, the last couple have kind of been leading up to that. In the meantime here is an illustration of what I mean from “We the Living.”

    “In regards to this water pipes business, Citizen Argounova,” he said, throwing the list on the table without removing his hat. “The house committee has voted a resolution to the purpose of water pipes, to repair same, in addition to rent. Here’s a list of who pays what. Have the money in my office no later than ten o’clock tomorrow morning. Good night, citizen.”

    Galina Petrovna locked the door after him and held the paper to the light, in a trembling hand.

    Doubenko–Worker–in #12…………………….3,000,000 rubles
    Rilnikov–Soviet Employee–in #13…………….5,000,000 rubles
    Argounov–Private Trader–in #14…………….50,000,000 rubles

    The paper fell to the floor; Galina Petrovna’s face fell on her hands on the table.

  1. February 1, 2011 at 8:45 am

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