Revisiting Taxation's Origins

by Tibor R. Machan

Come tax day each year it is important to recall just what gave rise to this practice of government extorting money from us. Not that the good people at the IRS confine their crimes to April 15 or thereabouts—the 17th in 2007. There are hundreds of hidden and not so hidden taxes involved in virtually all our commercial undertakings. (The exception I know of seems to involve horses—but don't tell anyone!)

First a little history: In feudal times, and even before, the monarch or whoever else pretended to be the "keeper of the realm" was deemed to have been granted ownership of a country, either with absolute title or with some constraints. (As the feudal era lost its dominance, the constraints became stricter and in time monarchies came to be mostly ceremonial—the still very expensive—as in the UK.) But the framework in all feudal systems involved statism—the government owned nearly everything. So if one lived in this realm and worked there, it collected rent, just as an apartment owner does form those renting in the building. The entire system rested on the firmly held assumption that the head of the state owned the country and could collect taxes from others who lived and worked there.

With the American revolution a new idea emerged, namely, that no head of state owned anything. Governments were now deemed to be instituted as a kind of service agency assigned the task of protecting the basic (and derivative) rights of all those who lived in the country. And it was these folks, not some king, tsar, pharaoh or some other keeper of the realm, who owned stuff. The right to private property had been identified as a proper instrument for deciding who owns what. John Locke, the grandfather of the American political tradition, claimed that people came to own stuff by mixing their labor with raw nature. While a challenging idea, it had the ring of truth about it far more than that story about the king owning it all!

With this new political notion the system of serfdom or involuntary servitude—whereby people were tied to the land that the king owned and needed the king's permission to act as they wanted to—had been consigned to the dustbin of history in most places in the West as well as a few others. But taxation remained in place because it hadn't been figured out how governments might be funded. However, severe limitations had been conceived so that all that taxes would do was fund a highly limited government.

Now as they say, the best laid plans of mice and men—well, taxation quickly got out of hand and we are now nearly back where we were with all those monarchs. Governments are claiming ownership of their countries' wealth—and some of their apologists are making sophisticated arguments defending the idea. (See Liam Murphy and Thomas Nagel, The Myth of Ownership [Oxford UP, 2002].) To put the matter differently, the current system of taxation is a reactionary policy that conflicts with the idea of the right to private property and the right to one's life and liberty, as well.

But then how might the valid functions of a government be funded, if taxation is really but extortion? There are answers but no one at major, prestigious centers of learning is doing research on the details. In broad outline, the proper substitute is a contract fee. Most people take advantage of contracts and these need a legal order for them to function properly. But it is not necessary to do so—it's technically optional. (For more on this, see my "Dissolving the Problem of Public Goods, Financing Government Without Coercive Measures" in my edited volume, The Libertarian Reader [Rowman & Littlefield, 1982].)

Men and women have lived with many unjust institutions and policies but that isn't sufficient to construe them acceptable, morally and politically. Nor should taxation be taken as an exception. An alternative must be found that avoids its injustices.