Friday, January 1, 2010

Do Not Render Anything Unto Caesar

The principle of “no taxation without representation” was the first step towards a tax-free society. This noble idea was first incorporated into Magna Carta, the great foundation of Anglo-Saxon constitutionalism:

No scutage not aid shall be imposed on our kingdom, unless by common counsel of our kingdom, except for ransoming our person, for making our eldest son a knight, and for once marrying our eldest daughter; and for these there shall not be levied more than a reasonable aid.

The idea became a central slogan of the American Revolution, which brought the principles of Magna Carta to their ultimate conclusion. American revolutionary James Otis said that “taxation without representation is tyranny.”

The concept of “no taxation without representation” helped crush royal tyranny but it turned out to be useless for fighting parliamentary despotism.

The next step was made in the 19th century, when the idea that taxation should only be used for the proper functions of government (national defense, police and the judicial system) became more popular. The disastrous effects of the Elizabethan poor relief system induced England to partially dismantle this proto-welfare state and considerably reduce taxes collected for funding poor relief. Meanwhile, Thomas Jefferson, James Madison, James Monroe and Andrew Jackson vetoed bills aiming to raise taxes for “internal improvements” (infrastructure), saying they lacked constitutional authority to approve them.

Such colossal debacles as Indiana’s Mammoth Internal Improvement Act forced almost all US states to impose constitutional bans on state-funded internal improvements by the 1860s. A ban on government-financed infrastructure was also enshrined in the Confederate Constitution:

Neither this, nor any other clause contained in the Constitution, shall ever be construed to delegate the power to Congress to appropriate money for any internal improvement intended to facilitate commerce; except for the purpose of furnishing lights, beacons, and buoys, and other aids to navigation upon the coasts, and the improvement of harbors and the removing of obstructions in river navigation; in all which cases such duties shall be laid on the navigation facilitated thereby as may be necessary to pay the costs and expenses thereof.

In the early 19th century the US Congress was even considering abolishing all federal taxes, except import duties. The concept of free trade, which came into the limelight in England, implied levying tariffs only for fiscal purposes and abandoning all protectionist measures.

After retreating by the mid-19th century, government has ever since been on the offensive. Half-measures such as classical liberal restrictions on taxation were beneficial but they were a logical contradiction, since they attempted to reconcile a right principle (fighting government robbery) with a wrong one (the alleged necessity of taxation per se). Thus, these measures sowed the seeds of their own demise and destruction. To crush despotism, we need to mount a full-frontal, head-on, all-out attack on the ultimate and fundamental principle of taxation itself. Any compromise will only hurt the libertarian cause. Robbery is robbery. A is A.

The principle that we should espouse is the one put forward by Ayn Rand: no taxation – for any purposes whatsoever, with or without representation, with or without the sanction of a royal despot or a mob of democratic buffoons.

Arguments against the idea of voluntary government funding revolve around the idea of man as irrational and incapable to understand the necessity of a proper government on his own (without coercion). The argument is self-contradictory, since those who do the coercing and taxing claim to understand the necessity of a government. It is quite clear that in a free society there will be enough people who will understand that voluntarily government funding would be beneficial for them. Most people will be free riders but that is not a problem at all.


Anonymous said...

A very radical notion, the idea of no taxation. Indeed, the theory would put forth that man is a rational being capable of learning from the disastrous consequences of withholding funds for his property's defense and any oversight of funding impartial institutions of law and order. There appears to be much intellectual labor required to flesh out such a scheme, and I would be grateful for any possible leads to follow the reasoning on how such an economic regime (if one might call a free market a "regime") with no taxation would work in practice.

Reaganx said...

Actually, I considered it a difficult problem until recently but I no longer do. In a free society, the elite will be rational by definition, since an irrational people can never achieve liberty nor even understand it. Since they will be rational, there will be no problem with government funding. But if they are irrational, they won’t achieve freedom anyway.
Of course, to create a rational elite, our culture has to change. And it has indeed changed many times in that direction, though not far enough – consider the Greeks, the Renaissance, the Enlightenment etc. Now we’re moving in the opposite direction and have to turn back.
P.S. That doesn’t imply that I advocate abolishing taxation immediately. This has to be a gradual process.