Dan Popp
Just taxes - - Principles 3, 4 and 5
An American tax manifesto
By Dan Popp
In the first installment in this series I asserted that government exists to protect people and property, and that taxes are righteous, or "just," when government is acting within its divine mandate to bring about justice. I supported those statements with references to the Bible, and with quotes from our founders and others.
Then I suggested two principles that could be part of the foundation of a just tax system: Government's Power to Tax Must Be Limited, and Income Taxes Violate Private Property Rights.
Here are the next three of our ten principles:
Principle 3: No Taxation Without Representation
I own myself the friend to a very free system of commerce, and hold it as a truth, that commercial shackles are generally unjust, oppressive and impolitic.... — James Madison
I think all the world would gain by setting commerce at perfect liberty.— Thomas Jefferson
The Revolutionary rallying cry, "No taxation without representation," means that those who pay for the operations of government should have a voice in that government. This appeals to our basic sense of justice. Yet our current system of taxation conflicts with that principle by taxing businesses.
Businesses, of course, can't vote. But they can be taxed. The US has one of the highest corporate tax rates in the world. Hmm. I'm sure there's no connection between that, and the exodus of American companies and jobs.
Taxes are a life-and-death issue for business. How can an enterprise, or even an industry, defend itself against a legislature that can simply tax it out of existence? Well, it can make campaign contributions to buy some friends, and it can lobby. It's easy to rail against "those dirty lobbyists in Washington." But if we were to ban lobbyists — surely one of the most corrupting elements on the current political landscape — we would be committing the greater injustice of taxation without representation.
The solution is simple: Don't ban lobbyists — make them unnecessary. Quit taxing businesses.
Like many righteous ideals, this has beneficial side effects: it would make American businesses more competitive. It would allow the economy to flourish without the "solutions" of the socialist utopians — solutions that by some coincidence always turn out to be much worse then the problem.
But there is another injustice that occurs when we allow government to tax businesses: we create hidden taxes.
Principle 4: No Hidden Taxes
The most dangerous myth is the demagoguery that business can be made to pay a larger share, thus relieving the individual. Politicians preaching this are either deliberately dishonest, or economically illiterate, and either one should scare us. Business doesn't pay taxes.... Only people pay taxes, and people pay as consumers every tax that is assessed against a business. Begin with the food and fiber raised in the farm, to the ore drilled in a mine, to the oil and gas from out of the ground, whatever it may be — through the processing, through the manufacturing, on out to the retailer's license. If the tax cannot be included in the price of the product, no one along that line can stay in business. — Ronald Reagan
The Gipper had it absolutely right — "business doesn't pay taxes...only people pay taxes." A tax assessed on a company becomes an added cost of doing business. Like all expenses, it must be recovered in the price of the product. Since this is undeniably the case, what purpose does it serve to tax any business? As far as I can tell, the only possible reason is to hide yet another layer of taxation on money that's already been taxed. It's a scam — a shell game.
"But wait," as the infomercial guy says, "there's more." The business incurs costs in figuring and collecting its taxes: the salaries and fees of administrative personnel, CPAs and others. These costs, too, must be passed on to buyers. So you the consumer are paying both the tax, and the cost of hiding the tax from you.
If we want "transparency" in this business of taxes, we must forbid the Government to tax businesses.
Objection: But businesses use government services; it's only right that they should pay taxes.
Response: It's the people involved in the business — the employees, shareholders, customers and suppliers — who benefit from government services, and all those people pay taxes already! But even if the corporation could truly come to life as a sentient being, it still wouldn't pay taxes. We might as well say that cats are users of the services of the County Animal Shelter; therefore we must tax cats. Since most cats don't have jobs, this will be difficult to implement in practice.
Hidden taxes are higher taxes on everyone — and we can't even determine how much higher.
As the ultimate tax authority of this nation, We The People cannot make sound choices about taxes if we can't even tell what our taxes are. We can only wonder how much our lives might be improved if ignorance and envy weren't driving our tax policy.
Objection: The founders apparently had no problem with taxes on business — they included "duties, imposts and excises" in the Constitution!
Response: The people of that era hadn't endured generations of government "education." They weren't likely to believe that a business could pay taxes with some magical pile of money that hadn't come from its customers' pockets. Remember that Madison called business taxes, "impolitic." Not so today!
Nor were these constitutional excises piled on top of layer after layer of income taxes, property taxes, sales taxes, licenses, fees, product mandates and tens of thousands of pages of costly regulation. So a business tax in 1789 was not a hidden tax, or a double-dip. Taxes on businesses, reasoned the founders, would be self-limiting: a tax high enough to hinder trade would reduce the Government's take, at which point the greedy Feds would ease up. We can only smile at their naïveté!
One final thought on this subject: if businesses are not taxed, there's no longer any concern that a church could lose its tax-exempt status if the pastor says the "wrong" thing, or the graver concern that the Government gets to decide what is a church. Churches, businesses, and non-profit groups of all kinds would be tax-free. To those who prize liberty, this alone should be a powerful recommendation.
Principle 5: No Representation Without Taxation
The first requisite of a good citizen in this republic of ours is that he shall be able and willing to pull his own weight. — Theodore Roosevelt
The demand, "No taxation without representation" links government's taxing authority to the citizen's voice. But that coin has a flipside. To be logically consistent, we must also say, "No representation without taxation"!
We have, to our great national peril, divorced the ideas of citizenship and stakeholding.
I believe that the founders would be horrified to see an America in which some people can impose their will on others with no cost to themselves — representation without taxation. I want a soccer field, but I certainly don't want to pay for it. On the ballot is a property tax increase for soccer fields. Since I don't pay property taxes but you do, I can vote myself a very nice gift at your expense.
"When the people find that they can vote themselves money, that will herald the end of the republic," said Benjamin Franklin.
And Madison warned: "The invasion of private rights is chiefly to be apprehended, not from acts of Government contrary to the sense of its constituents, but from acts in which the Government is the mere instrument of the major number of the Constituents."
Only by putting everyone under the same tax yoke can we prevent the majority from legally robbing the minority.
"God forbid!" you may be saying. "How can the poor pay taxes?" Well, surprise: the destitute pay taxes already on everything they buy. They pay the taxes of the businesses that make their bread, their shoes and their clothing, in addition to the visible sales taxes, gas taxes, and others. The question isn't whether the poor are going to pay taxes. It's whether they're going to realize they're paying taxes (and thus be able to do something about lowering them), and whether we allow some citizens to use the tax code to bilk others.
The principle that everyone pays something has precedent in the Bible. Exodus 30, verses 14 and 15 read,
This brings us to the halfway point in this series on "Just Taxes." In the next installment I plan to present the principles, Each Dollar Should Be Taxed Only Once; Taxing Power Must Not Be Used For Social Engineering; and Progressive Taxes are Both Unfair and Unjust
Click here to discuss this article.
© Dan Popp
March 28, 2009
In the first installment in this series I asserted that government exists to protect people and property, and that taxes are righteous, or "just," when government is acting within its divine mandate to bring about justice. I supported those statements with references to the Bible, and with quotes from our founders and others.
Then I suggested two principles that could be part of the foundation of a just tax system: Government's Power to Tax Must Be Limited, and Income Taxes Violate Private Property Rights.
Here are the next three of our ten principles:
Principle 3: No Taxation Without Representation
I own myself the friend to a very free system of commerce, and hold it as a truth, that commercial shackles are generally unjust, oppressive and impolitic.... — James Madison
I think all the world would gain by setting commerce at perfect liberty.
The Revolutionary rallying cry, "No taxation without representation," means that those who pay for the operations of government should have a voice in that government. This appeals to our basic sense of justice. Yet our current system of taxation conflicts with that principle by taxing businesses.
Businesses, of course, can't vote. But they can be taxed. The US has one of the highest corporate tax rates in the world. Hmm. I'm sure there's no connection between that, and the exodus of American companies and jobs.
Taxes are a life-and-death issue for business. How can an enterprise, or even an industry, defend itself against a legislature that can simply tax it out of existence? Well, it can make campaign contributions to buy some friends, and it can lobby. It's easy to rail against "those dirty lobbyists in Washington." But if we were to ban lobbyists — surely one of the most corrupting elements on the current political landscape — we would be committing the greater injustice of taxation without representation.
The solution is simple: Don't ban lobbyists — make them unnecessary. Quit taxing businesses.
Like many righteous ideals, this has beneficial side effects: it would make American businesses more competitive. It would allow the economy to flourish without the "solutions" of the socialist utopians — solutions that by some coincidence always turn out to be much worse then the problem.
But there is another injustice that occurs when we allow government to tax businesses: we create hidden taxes.
Principle 4: No Hidden Taxes
The most dangerous myth is the demagoguery that business can be made to pay a larger share, thus relieving the individual. Politicians preaching this are either deliberately dishonest, or economically illiterate, and either one should scare us. Business doesn't pay taxes.... Only people pay taxes, and people pay as consumers every tax that is assessed against a business. Begin with the food and fiber raised in the farm, to the ore drilled in a mine, to the oil and gas from out of the ground, whatever it may be — through the processing, through the manufacturing, on out to the retailer's license. If the tax cannot be included in the price of the product, no one along that line can stay in business. — Ronald Reagan
The Gipper had it absolutely right — "business doesn't pay taxes...only people pay taxes." A tax assessed on a company becomes an added cost of doing business. Like all expenses, it must be recovered in the price of the product. Since this is undeniably the case, what purpose does it serve to tax any business? As far as I can tell, the only possible reason is to hide yet another layer of taxation on money that's already been taxed. It's a scam — a shell game.
"But wait," as the infomercial guy says, "there's more." The business incurs costs in figuring and collecting its taxes: the salaries and fees of administrative personnel, CPAs and others. These costs, too, must be passed on to buyers. So you the consumer are paying both the tax, and the cost of hiding the tax from you.
If we want "transparency" in this business of taxes, we must forbid the Government to tax businesses.
Objection: But businesses use government services; it's only right that they should pay taxes.
Response: It's the people involved in the business — the employees, shareholders, customers and suppliers — who benefit from government services, and all those people pay taxes already! But even if the corporation could truly come to life as a sentient being, it still wouldn't pay taxes. We might as well say that cats are users of the services of the County Animal Shelter; therefore we must tax cats. Since most cats don't have jobs, this will be difficult to implement in practice.
Hidden taxes are higher taxes on everyone — and we can't even determine how much higher.
As the ultimate tax authority of this nation, We The People cannot make sound choices about taxes if we can't even tell what our taxes are. We can only wonder how much our lives might be improved if ignorance and envy weren't driving our tax policy.
Objection: The founders apparently had no problem with taxes on business — they included "duties, imposts and excises" in the Constitution!
Response: The people of that era hadn't endured generations of government "education." They weren't likely to believe that a business could pay taxes with some magical pile of money that hadn't come from its customers' pockets. Remember that Madison called business taxes, "impolitic." Not so today!
Nor were these constitutional excises piled on top of layer after layer of income taxes, property taxes, sales taxes, licenses, fees, product mandates and tens of thousands of pages of costly regulation. So a business tax in 1789 was not a hidden tax, or a double-dip. Taxes on businesses, reasoned the founders, would be self-limiting: a tax high enough to hinder trade would reduce the Government's take, at which point the greedy Feds would ease up. We can only smile at their naïveté!
One final thought on this subject: if businesses are not taxed, there's no longer any concern that a church could lose its tax-exempt status if the pastor says the "wrong" thing, or the graver concern that the Government gets to decide what is a church. Churches, businesses, and non-profit groups of all kinds would be tax-free. To those who prize liberty, this alone should be a powerful recommendation.
Principle 5: No Representation Without Taxation
The first requisite of a good citizen in this republic of ours is that he shall be able and willing to pull his own weight. — Theodore Roosevelt
The demand, "No taxation without representation" links government's taxing authority to the citizen's voice. But that coin has a flipside. To be logically consistent, we must also say, "No representation without taxation"!
We have, to our great national peril, divorced the ideas of citizenship and stakeholding.
I believe that the founders would be horrified to see an America in which some people can impose their will on others with no cost to themselves — representation without taxation. I want a soccer field, but I certainly don't want to pay for it. On the ballot is a property tax increase for soccer fields. Since I don't pay property taxes but you do, I can vote myself a very nice gift at your expense.
"When the people find that they can vote themselves money, that will herald the end of the republic," said Benjamin Franklin.
And Madison warned: "The invasion of private rights is chiefly to be apprehended, not from acts of Government contrary to the sense of its constituents, but from acts in which the Government is the mere instrument of the major number of the Constituents."
Only by putting everyone under the same tax yoke can we prevent the majority from legally robbing the minority.
"God forbid!" you may be saying. "How can the poor pay taxes?" Well, surprise: the destitute pay taxes already on everything they buy. They pay the taxes of the businesses that make their bread, their shoes and their clothing, in addition to the visible sales taxes, gas taxes, and others. The question isn't whether the poor are going to pay taxes. It's whether they're going to realize they're paying taxes (and thus be able to do something about lowering them), and whether we allow some citizens to use the tax code to bilk others.
The principle that everyone pays something has precedent in the Bible. Exodus 30, verses 14 and 15 read,
-
Everyone who is numbered, from twenty years old and over, shall give the contribution to the LORD. The rich shall not pay more and the poor shall not pay less than the half shekel, when you give the contribution to the LORD to make atonement for yourselves. (NASB)
This brings us to the halfway point in this series on "Just Taxes." In the next installment I plan to present the principles, Each Dollar Should Be Taxed Only Once; Taxing Power Must Not Be Used For Social Engineering; and Progressive Taxes are Both Unfair and Unjust
Click here to discuss this article.
© Dan Popp
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