The Tax Anomaly
Tibor R. Machan
Since the American revolution, when monarchy was rejected on this continent and sovereignty was finally legally established for individual human beings, not governments, there has been a problem with taxation. The institution is an anomaly, plain and simple, in a genuinely free society. In such a society one has unalienable—meaning, never justifiably violable—rights to life, liberty and the pursuit of happiness, among other rights. But instead of transforming public finance from a coercive to a voluntary system, the framers left intact taxation, albeit changed so that at least there’d be representation along with it.
Those who kept loving government more than individual sovereignty have made use of this anomalous feature of our legal system to expand the state. It is quite natural that this should have occurred—whenever one compromises a principle, eventually the compromise devours the principle altogether. (This is why ethics counsels even against little white lies—it corrupts character.)
By now the tax system in the USA doesn’t even adhere to the principle, “No taxation without representation.” (It was the famous pre-Revolutionary patriot James Otis who said, “Taxation without representation is tyranny.”) Government actually taxes members of future generations, ones certainly not represented in Congress. And taxes are imposed on travelers all over the place by politicians who do not represent them. What is far worse, but to be expected, given the logic of such processes, is that instead of confining taxation to financing the only proper function of government, which is “to secure [our] rights,” taxation is now used to fund every project in society that the human imagination can conceive.
But, isn’t it the case that, to quote Justice Oliver Wendell Holmes, Jr., “Taxation is the price we pay for civilization”? That is a ruse! It comes from one of America’s legal giants who had no sympathy at all for limited government, quite the opposite.
In fact, taxation is extortion. The government tells us, “You may work for a living only if you hand over roughly forty percent of your earnings to us to fund goals we have decided need funding.” This is not what citizens of a free society deserve from their agents, ones who are entrusted with protecting not attacking their rights.
But, didn’t “we” enter into a social compact that resulted in the tax system we have? No we didn’t, not if we indeed have unalienable rights—no contract can give up anyone’s rights. I certainly may not contract so that you lose your rights. A contract can only be entered into voluntarily—unwilling third parties may not be conscripted to it. If, as in the case of the USA, the society is grounded on unalienable individual rights, the only way government can come about is through “the consent of the governed.” And while this had been understood too loosely in the past, even by the American founders, its meaning is clear: you and I must consent to be governed.
Now we do consent to being governed if we remain within the legal jurisdiction of a certain sphere, but only to the extent that is just—it is the just powers of government only to which we can consent, and to tax isn’t one of the just powers of government. To be properly funded, some other, but in any case voluntary, means must be found. Since, however, this is a very novel idea—about as novel even in the USA as free markets are in the for former Soviet bloc countries or freedom of religion in Iran—studies as to how to bring it off are in short supply. (Remember, most universities are tax funded, so they aren’t likely to encourage alternative ways of funding government!)
Still, there has been some progress in the study of funding government without any coercive means. One method proposed is to charge for all contracts which are, ultimately, backed by the courts. Sure, one can just shake a hand and proceed, but this isn’t likely when multimillions are at stake and legal recourse is wanted in case of some kind of mishap. There is also the possibility of funding government via lotteries. And at the beginning, governments could make a bundle and fund plenty of their proper undertakings by selling off all the properties that they should not own in the first place.
No, I am not expert in the field of public finance for a government of a free society. Still, I can say confidently that if the idea were not dismissed so readily by those who just love to tax their fellows for projects of their own, human beings could put their minds to the task profitably enough and find a way to eliminate this anomaly from our midst.