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Source link: http://archive.mises.org/6513/can-there-be-a-just-tax/

Can There Be a “Just Tax”?

April 13, 2007 by

  1. The Just Tax and the Just Price
  2. Costs of Collection, Convenience, and Certainty
  3. Distribution of the Tax Burden
    1. Uniformity of Treatment
    2. The “Ability-To-Pay” Principle
    3. Sacrifice Theory
  1. “Distribution of the Tax Burden,” continued
    1. The Benefit Principle
    2. The Equal Tax and the Cost Principle
    3. Taxation “For Revenue Only”
    4. The Neutral Tax: A Summary
  2. Voluntary Contributions to Government

For centuries before the science of economics was developed, wrote Murray Rothbard, men searched for criteria of the “just price.” Gradually it came to be realized that there is no quantitative criterion of justice that can be objectively determined. The only possible objective criterion for the just price is the market price. Why do not economists abandon the search for the “just tax” as they abandoned the quest for the “just price”? One reason is that doing so may have unwelcome implications for them. The “just price” was abandoned in favor of the market price. Can the “just tax” be abandoned in favor of the market tax? Clearly not, for on the market there is no taxation, and therefore no tax can be established that will duplicate market patterns. FULL ARTICLE

{ 20 comments }

Mark Brabson April 13, 2007 at 2:41 pm

I am in the middle of reading “Power and Market” and in fact am in the middle of Chapter 4, so at the least this topic is well timed.

I have to comment that Rothbard makes mincemeat of the “consumption” tax, i.e, “Fairtax” people, but good.

Mark Brabson April 13, 2007 at 2:43 pm

Oh, and as for answering the question of the topic, i.e. Can there be a just tax?

No.

TLWP Sam April 14, 2007 at 1:14 am

Actually I liked the first part of that topic, what is a just tax? Which reminds of the similar question what is a just wage? Then what is just rent for an apartment? Or, really, what is the just ___? The article rightfully pointed out that without a disinterested result showing why one possible answer should be more correct than another, then we are left with personal preferences. After all, if the price of an egg is 50c it’s because the supply and demand have ultimately agreed to it, at least for the moment. Egg shortages and surpluses will then change the price of an egg again.

Yet this reminded of the Token Big Bad Rich Capitalist character portrayed awhiles back in the WWE of J.B.L. Even though he was portrayed in a manner to entertain workers and Socialists, he nonetheless make a reply consistent with market behaviour. When asked, “do you suppose you might be wrong?”. J.B.L. replied “I make too much money to be wrong!”.

Which in turn I would ask the question likewise is there any notion of ‘just laws’ and ‘just behaviours’ (or conversely ‘unjust behaviours’) if there is no unqualified agent then the we’re stuck with moral relativism. Just because something offends me doesn’t mean it’s going to offend you. Or if it offends me so that I think certain behaviour is unacceptable why should I have the right to impose my views on you if you think the behaviour is perfectly reasonable? Isn’t it a cop-out to resort to religious values? Isn’t that simply extending control of people’s behaviour beyond into a higher realm? And that really means handing law-making and tax-laying into the hands of priests?

Interestingly the article gave one particular answer devoid of any individual’s personal preferences by saying leave it to the market. And the answer may (must?) ultimately be correct because of its simplicity: just leave it to market forces and if it is profitable then it must correct. Why? As Libertarians have long since said: because anyone who engages in a deal is making a preference for one situation over another. An interventionist who deplores certain transactions on personal morals is someone who has forgotten that someone else has accepted the deal is escaping a situation that is far less preferable.

RogerM April 14, 2007 at 2:22 pm

Market-based defense looks good on paper, but then, so did socialism. It reminds me of the Civil War. The Southern States rebelled because they didn’t want a strong central government ordering them around. But when Jeff Davis tried to get the states of the Confederacy to send troops and money to fight the war they had started, they refused. Free ridership in the south contributed greatly to southern defeat.

The same thing happened in the war for independence. The states who started the war refused to finance it. Had not the Dutch and French bailed us out with enormous loans, we would have lost. As Washington complained, the yeomen farmers who fired the first shot went back to their farms and refused to fight or finance the troops, who were the poorest of the poor by the time of Valley Forge.

Allen Weingarten April 14, 2007 at 2:24 pm

Rothbard asks ‘Can There Be a “Just Tax”?’ and by the way he frames the question, answers “There is no quantitative criterion of justice that can be objectively determined.”

Yet if instead of seeking a mechanism for quantifying justice, we require a fair manner of taxation, the answer is a head tax, where every individual is an equal partner. Just as the members of a voluntary organization (perhaps a church or a theatre group) pay the same dues, the citizens of America would be equally taxed.

This has the advantage that every citizen has as much a right to the protection of his liberties as any other citizen. Moreover, everyone would have an interest in minimizing taxation.

Perhaps there is an argument that those who have greater property have more that is protected than those who have less. Here, I believe that this is a secondary matter than is protecting against foreign and domestic aggression to the individual and to the nation. However, should it be deemed that some taxation be proportional to the wealth owned, that could be approximated by a sales tax, which would be proportional to the amount spent.

The disadvantage of focusing upon ‘no just tax’ is that it leaves us with the present burdensome form.

Brent April 14, 2007 at 7:09 pm

Allen,

You should really read the article.

RogerM April 14, 2007 at 11:02 pm

The fairest tax is a flat rate tax, say 10%, for everyone, because the main purpose of government is to protect property (for those of us who aren’t anarchos). With a flat tax, those with the most property, the greatest need of protection and greatest consumers of protection, would pay the most tax.

Dave April 15, 2007 at 5:32 am

Roger said,

“Market-based defense looks good on paper, but then, so did socialism.”

Really, Roger? In what way does socialism look good on paper? No thinker that has ever understood the nature of man has ever fallen for the myth of “state imposed” socialism (which is what most people mean when the talk about socialism). Free market socialists, such as mutualists, ect, whom one would consider to be friendly to state sponsered socialism, have always seen it for the sham and depravity that it really is. In short, those that at least have some understanding of the free market have never beleived that socialism sounds good on paper.

“It reminds me of the Civil War.”

All I can say is this is you have a big imagination.
“The Southern States rebelled because they didn’t want a strong central government ordering them around.

True, and you know what? They where absolutely right!!

“But when Jeff Davis tried to get the states of the Confederacy to send troops and money to fight the war they had started, they refused.”

“They had started” is a matter of opinion. It is true that the South “fired the first shot” by attacking Fort Sumter, but it is equally true that the North blockaded many of the southern ports, cutting off there economic livelihood. The North was using Fort Sumter to impose the blockade at Charlston.

“Free ridership in the south contributed greatly to southern defeat.”

Really? Please prove this assertion. The North’s larger population and industrial base had nothing to do with their ultimate victory? And what about General Sherman, the terrorist?

“The same thing happened in the war for independence. The states who started the war refused to finance it. Had not the Dutch and French bailed us out with enormous loans, we would have lost.”

This does not really demonstate a free rider problem, partly because it was Dutch Mercahants, and NOT the Dutch government, who provided the firt loans. As for the French, they where hesitant to help until they saw that the Revolution had a chance in succeeding after the battles of Saratoga.

“As Washington complained, the yeomen farmers who fired the first shot went back to their farms and refused to fight or finance the troops, who were the poorest of the poor by the time of Valley Forge.”

It is said that the population of the colonies was split three ways: roughly 30% favored and supported the war; roughly 30% opposed it; and roughly 30% didn’t care either way. Moreover, many those “yeomen farmers” had food to grow and families to look after and protect.

“The fairest tax is a flat rate tax, say 10%, for everyone, because the main purpose of government is to protect property (for those of us who aren’t anarchos). With a flat tax, those with the most property, the greatest need of protection and greatest consumers of protection, would pay the most tax.”

I don’t see how any of this logically follows, particularly the part about “those with the most property, the greatest need of protection and greatest consumers of protection, would pay the most tax.” Moreover, if they are the “greatest consumers of protection, shouldn’t the be able to hire any security agency the want? This is actually a rhetorical question, because this is exacly what people and firms do, who are not “adequetely” protected by the government.

Regards,

Dave

Dave April 15, 2007 at 5:35 am

Actually, in my first paragraph, I meant to say “the nature of man and economics” not just “the nature of man.”

Allen Weingarten April 15, 2007 at 8:48 am

Brent is correct that I did not thoroughly peruse the article, and therefore should have commented on Rothbard’s statements regarding the head tax and the proporional tax. However, my claim was that his method of judging taxes by theory can be bypassed by simply using the guide of equal payments for members of an organization, such as a church or a theatre group. Can anyone find a problem with the equal payments required by these organizations? In other words, *what pertinence has theories with regard to an organization that simply requires equal payment?*

It is true that taxes are involuntary, but note that people can renounce their citizenship. So what is wrong with a head tax?

Axel Riemer April 15, 2007 at 12:04 pm

hang on, if I renounce my citizenship, I don’t have to pay taxes?

somehow, I think foreign nationals aren’t that fortunate.

Allen Weingarten April 15, 2007 at 12:58 pm

Alex Riemar points out that even if one renounces his citizenship, he must pay taxes. True, one would also have to take up residence in another country. That is one reason why one would prefer to join the citizen club of America.

Skye Stewart April 15, 2007 at 4:44 pm

Allen, stated;

“. . my claim was that his method of judging taxes by theory can be bypassed by simply using the guide of equal payments for members of an organization, such as a church or a theatre group. Can anyone find a problem with the equal payments required by these organizations?”

In focusing on the method of revenue collection, you’re not addressing the fact, that we are dealing with the state, not a church, or theatre group. The state is a compulsory territorial monopolist of juristiction. It’s an insurance agency that gives you the price unilaterally (with no choice). If your church didn’t let you leave or broke down your door when you didn’t pay, would this be “fair?”

The state is the agency by which everyone tries to live at the expense of everyone else. It is established and supposedly justified on grounds of market failure and public goods theory but it creates the greatest “free rider problems” and the largest failures. To find a way so we can equally fund such a mess is counter productive.

A voluntary state is a contradiction in terms. What is the “fair price” of funding the mob? 10% per head?

Allen Weingarten April 15, 2007 at 8:17 pm

Skye Stewart notes that “the state is a compulsory territorial monopolist of jurisdiction”. That is correct, for it is not a voluntary organization, but one based on force. Here, some argue that since it is not based on free choice, there is no justification for it at all. From that perspective, Rothbard’s article was an extensive irrelevancy. However, if we are discussing which tax is best, giving the necessity of government, it is not helpful to merely conclude there should be no tax.

So either Mr. Stewart takes the position that there be no tax for government at all, or considers which alternative is best. Again, I submit that given the imperative of government for our survival, the best is a head tax.

Allen Weingarten April 16, 2007 at 8:34 am

The subject of taxation is part of the broader issue of dealing with government (or if you prefer, the state). I wish to clarify this matter by an analogy. Consider that a ship sinks, and six people find themselves on a raft that can only hold five. Soon, unless one person is removed from the raft, all will perish. A moralist asks what would be a just decision, and investigates finding a volunteer to die, or ascertaining when people boarded the raft, or determining whose life is less worthwhile, etc. Yet none of these approaches lead to a morally justified outcome.

The realist proposes drawing straws, and recognizing that one or more of the passengers might not agree, stipulates that if someone is unwilling to participate, he should be the one thrown overboard. The moralist objects, for if morality means anything, it is freedom from coercion. The realist counters that the issue is not morality, but survival.

Consequently, the issue is not what is the moral thing to do, but whether to ensure survival or morality. When the moralist (or anarchist) insists on doing solely what is moral, he is implicitly saying that survival does not trump morality. Yet, if government is justified, it is not on the basis of guaranteeing moral requirements, but ensuring survival.

Skye Stewart April 16, 2007 at 7:22 pm

Allen stated;

“When the moralist (or anarchist) insists on doing solely what is moral, he is implicitly saying that survival does not trump morality. Yet, if government is justified, it is not on the basis of guaranteeing moral requirements, but ensuring survival.”

As a libertarian anarchist, I would draw a distinction between that which is perhaps “moral” and that which is legitimate.

For example, suppose a student tells another student the answer to a math problem during a test. Whether it was moral for him to do so is distinct from the fact as to whether the answer is correct.

2+2=4 no matter what.

In your life boat situation, you never mention who owns the boat. Therefore we do not know who has a right to it. If the owner is dead or absent from the scene then it is as if it was unowned. If is unowned, then the first one who finds it has essetially homesteaded it. The last to arrive is threatening the life of the others. Presuming the others were helped on by the homesteader.

Rothbard addressed these scenarios in The Ethics of Liberty,

http://mises.org/daily/1628

Allen, “if morality means anything, it is freedom from coercio”

Coercion or Criminality presupposes a theory of justice.

Justice presupposes a theory of rights.

Rights presuppose a theory of property.

Property Rights necessitate a theory of homesteading.

Locke ;

“[E]very man has a property in his own person. This nobody has any right to but himself.”

Rothbard ;

“developing the Roman theory of acquisition, Aquinas, anticipating the famous theory of John Locke, grounded the right of original acquisition of property on two basic factors: labour and occupation. The initial right of each person is to ownership over his own self, in Aquinas’s view in a ‘proprietary right over himself’. Such individual self-ownership is based on the capacity of man as a rational being. Next, cultivation and use of previously unused land establishes a just property title in the land in one man rather than in others. St. Thomas’ theory of acquisition was further clarified and developed by his close student and disciple John of Paris (Jean Quidort, c. 1250-1306), a member of the same Dominican community of St. Jacques in Paris as Aquinas. Championing the absolute right of private property, Quidort declared that lay property ‘is acquired by individual people through their own skill, labour and diligence, and individuals, as individuals, have right and power over it and valid lordship; each person may order his own and dispose, administer, hold or alienate it as he wishes, so long as he causes no injury to anyone else; since he is lord.’ This ‘homesteading’ theory of property…[i.e., t]he Aquinas—John of Paris—Locke view is the ‘labour theory’ (defining ‘labour’ as the expenditure of human energy rather than working for a wage) of the origin of property.”

- Murray Rothbard, Economic Thought Before Adam Smith, (Massachusetts, USA: Edward Elgar
Publishing, 1995), 56-7.

Allen, “if government is justified, it is not on the basis of guaranteeing moral requirements, but ensuring survival.”

If not through conquest and pilllage, governments are established for the purpose of protecting persons and property.

There inherent failure and ineptness to do so has been thoroughly delt with. For example,

Hoppe . . . http://mises.org/daily/1356

Excerpt,

Gustave De Molinari’s central argument was laid out in his article “De la Production de la Securité” of February 1849. The argument is worth quoting because of its theoretical rigor and its seemingly visionary foresight:

If there is one well-established truth in political economy, it is this: That in all cases, for all commodities that serve to provide for the tangible or intangible needs of consumers, it is in the consumer’s best interest that labor and trade remain free, because the freedom of labor and trade have as their necessary and permanent result the maximum reduction of price. And this: That the interests of the consumer of any commodity whatsoever should always prevail over the interests of the producer.

Now in pursuing these principles, one arrives at this rigorous conclusion:

That the production of security should, in the interests of the consumers of this intangible commodity, remain subject to the law of free competition.Whence it follows: That no government should have the right to prevent another government from going into competition with it, or require consumers of security to come exclusively to it for this commodity. . . . Either this is logically true, or else the principles on which economic science is based are invalid. (Gustave de Molinari, Production of Security, J.H. McCulloch, trans. [New York:_Center for Libertarian Studies, 1977], pp. 3–4)

De Molinari then predicted what would happen if the production of security is monopolized:

If, on the contrary, the consumer is not free to buy security wherever he pleases, you forthwith see open up a large profession dedicated to arbitrariness and bad management. Justice becomes slow and costly, the police vexatious, individual liberty is no longer respected, the price of security is abusively inflated and inequitably apportioned, according to the power and influence of this or that class of consumers. (Molinari, Production of Security, pp. 13–14)

_ _ _ _ _

If we are concerned about our survival, we should be concerned with institutions that create burdensome liabilities. Rozeff has a great lecture on the agency costs of the state.

http://video.google.com/videoplay?docid=-4487981464492478834&q=rozeff

or read his essay,

http://www.lewrockwell.com/rozeff/rozeff85.html

Allen Weingarten April 16, 2007 at 7:59 pm

Skye Stewart deals with the issue of survival versus morality, by a set of techniques that evade the heart of the matter. Stating that 2+2=4 is not pertinent. Nor is declaring that whoever entered the raft first has ownership, since the boat’s owner could be elsewhere, and a fortiori I have already stated that “none of these approaches lead to a morally justified outcome” as part of the situation. Nor is an answer given that others addressed these situations elsewhere. Real cases for example occur where an innocent must be killed in order to save oneself and others. (Since Skye accepts references, I offer John Hersey’s “The Wall” as if that constituted an argument.)

We agree that “[E]very man has a property in his own person. This nobody has any right to but himself.” This however does not address the fact that there are situations whereupon survival can only occur by depriving another of his rights.

Skye apparently answers how to decide the issue of survival versus morality by presupposing that it is always possible to act in a moral manner, without precluding survival. With that assumption the reality is avoided.

Jesse April 16, 2007 at 8:23 pm

People, forget the lifeboat scenarios. They aren’t relevant. The point in contention is this:

Allen: “if government is justified, it is not on the basis of guaranteeing moral requirements, but ensuring survival.”

First, the statement is clearly irrelevant, because the condition (“if government is justified”) is false. Second, even if that were not the case, the vast majority of those who would attempt to provide a justification for government would never stoop so low as to call it a matter of “ensuring survival”. Simply put, government exists because some people desire power over other people beyond the level of natural social interdependency, and are willing to commit aggression to exercise that power. If the government ceased to exist today it is not a stretch to claim that you would probably still be alive tomorrow, next month, a year from now; there simply isn’t any immediate, life-threatening situation. The actions of governments are not justified by some kind of lifeboat scenario, because no such scenario exists.

A person may choose to take an immoral action in the interest of survival, but the fact that the action was deemed necessary for survival does not make it any more moral, or any more justifiable (which is the same thing). Government would not be moral or justifiable even if it were necessary for survival.

Rothbard on lifeboat situations

Skye Stewart April 16, 2007 at 9:21 pm

Allen;

“Skye apparently answers how to decide the issue of survival versus morality by presupposing that it is always possible to act in a moral manner, without precluding survival. With that assumption the reality is avoided.”

The point is that the morality vs. survival dichotomy is unwarranted, thus far. To my knowledge, no one above has put forth an apodictic moral code. Therefore we can not posit it against some other criteria, such as “survival”.

What I see here is an attempt to lock morality in a box seperate from the reality of property.

To quote Hoppe in his intro to Rothbards, Ethics of Liberty,

“What Rothbard objected to was the argumentatively unsubstantiated acceptance, on the part of Coase and the Chicago law-and-economics tradition, of the positivistic dogma concerning the impossibility of a rational ethic (and by implication, their statism) and their unwillingness to even consider the possibility that the concept of property might in fact be an ineradicably normative concept which could provide the conceptual basis for a systematic reintegration of value-free economics and normative ethics.

. . . .

“Rothbard sought and found support for his contention regarding the possibility of a rational ethic and the reintegration of ethics and economics based on the notion of private property in the works of the late Scholastics and, in their footsteps, such “modern” natural-rights theorists as Grotius, Pufendorf, and Locke.”

.. . . .

“When The Ethics of Liberty appeared in 1982, it initially attracted only a little attention in academia. Two factors were responsible for this neglect. First, there were the anarchistic implications of Rothbard’s theory, and his argument that the institution of government — the state — is incompatible with the fundamental principles of justice. As defined by Rothbard, a state is an organization

which possesses either or both (in actual fact, almost always both) of the following characteristics: (a) it acquires its revenue by physical coercion (taxation); and (b) it achieves a compulsory monopoly of force and of ultimate decision-making power over a given territorial area. Both of these essential activities of the State necessarily constitute criminal aggression and depredation of the just rights of private property of its subjects (including self-ownership). For the first constitutes and establishes theft on a grand scale; while the second prohibits the free competition of defense and decision-making agencies within a given territorial area — prohibiting the voluntary purchase and sale of defense and judicial services (p. 172–73).

“Without justice,” Rothbard concluded as St. Augustine had before him, “the state was nothing but a band of robbers.”

Rothbard’s anarchism was not the sort of anarchism that his teacher and mentor Mises had rejected as hopelessly naive, of course. “The anarchists,” Mises had written,

contend that a social order in which nobody enjoys privileges at the expense of his fellow-citizens could exist without any compulsion and coercion for the prevention of action detrimental to society … The anarchists overlook the undeniable fact that some people are either too narrow-minded or too weak to adjust themselves spontaneously to the conditions of social life. An anarchistic society would be exposed to the mercy of every individual. Society cannot exist if the majority is not ready to hinder, by the application or threat of violent action, minorities from destroying the social order.

Indeed, Rothbard wholeheartedly agreed with Mises that without resort to compulsion, the existence of society would be endangered and that behind the rules of conduct whose observance is necessary to assure peaceful human cooperation must stand the threat to force if the whole edifice of society is not to be continually at the mercy of any one of its members. One must be in a position to compel a person who will not respect the lives, health, personal freedom, or private property of others to acquiesce in the rules of life in society.”

_ _ _ _ _ _

Attempting to find a moral way to do an illegitimate thing, is essentially a dead end. There is no “just tax” because there is no such thing as “just theft”

And doing so on the assumption that it is necessary is simply unfortunate. I think the best practical advice is decentralization of all state power. As rothbard stated, we will then find less “life boat scenarios.”

HaHa May 30, 2008 at 4:08 am

“The maintenance of a government apparatus of courts, police officers, prisons, and of armed forces requires considerable expenditure. To levy taxes for these purposes is fully compatible with the freedom the individual enjoys in a free market economy. To assert this does not, of course, amount to a justification of the confiscatory and discriminatory taxation methods practiced today by the self-styled progressive governments. ”

– Ludwig von Mises

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