Dan Popp
Just taxes - - Principles 6, 7 and 8
An American tax manifesto
By Dan Popp
In the first and second articles in this series I laid out five principles that could be part of a just tax system. Always keeping in mind that taxes are permitted so that government can fulfill its divine mandate to protect people and their property against injustice, we continue.
Principle 6: Each Dollar Must Be Taxed Only Once
For example. If the system be established on basis of Income, and his just proportion on that scale has been already drawn from every one, to step into the field of Consumption, and tax special articles in that, as broadcloth or homespun, wine or whiskey, a coach or a wagon, is doubly taxing the same article. For that portion of Income with which these articles are purchased, having already paid its tax as Income, to pay another tax on the thing it purchased, is paying twice for the same thing; it is an aggrievance on the citizens who use these articles in exoneration of those who do not, contrary to the most sacred of the duties of a government, to do equal and impartial justice to all its citizens. — Thomas Jefferson
Surely the wisdom and the justice of this principle are obvious. If the reason for taxes is to fund the legitimate functions of government, one bite ought to do it. The effort wasted in collecting (or avoiding) multiple taxes makes the whole economy less efficient. That brings down everyone's standard of living.
In the above quote, Jefferson was not necessarily advocating an income tax; merely illustrating the principle that the Government should not be double-taxing us. He also makes the very serious accusation that government violates its sacred duties, "to do equal and impartial justice," when it creates unequal levels of taxation.
This leads us to the next tenet.
Principle 7: Taxing Power Must Not Be Used for Social Engineering
A just security to property is not afforded by that government, under which unequal taxes oppress one species of property and reward another species. — James Madison
Many today take it for granted that government may tax different items differently, for purposes having nothing to do with raising revenue. But we know that taxes on any particular product increase the price of that product, and so inhibit its sales. If government can apply tax pressure selectively, it has a weapon it can use to oppress both sellers and buyers. Politicians can reward their friends, hamstring their opponents and manipulate the behavior of everyone, merely by taxing one thing more than another.
Few people scream against a "sin tax" or a "luxury tax." But this ability to tax discriminately in effect gives Congress social engineering powers not granted by the Constitution. Elected officials may decide to tax cookies more than ice cream, or to penalize company A that makes regular cars but not company B that makes "special" cars — hybrid cars, flex-fuel cars, small cars, Detroit cars, purple cars — whatever cars are in favor with our Overlords in Washington. They may even pay some farmers to grow nothing, while punitively taxing other farmers who grow tobacco.
People whose marketplace choices are constricted and channeled by the Government, are not free people. The founders knew that government "discretion," as they called it — this ability to impose imperial whims on Americans — was not to be tolerated.
Any tax must apply to everyone, and everything, in an equal way. It's so tempting for kind-hearted people to want to make bread and milk and shoes tax exempt; but opening that door allows — no, it demands — an official definition of bread. Does "bread" include biscuits? How about doughnuts — with no trans-fats, of course? When we forego a tax on milk, what happens to soy milk? Non-dairy creamer? Milk shakes? Baby formula? Are flip-flops considered shoes? Will $1,000-a-pair designer pumps be tax-free? The camel's nose is in the tent, and he is coming in.
The only way to safeguard all of us from this particularly warped form of tyranny is to disallow any distinctions regarding which things are taxed, and how much.
Principle 8: Progressive Taxes are Both Unfair and Unjust
By rendering the labor of one, the property of the other, they cherish pride, luxury, and vanity on one side; on the other, vice and servility, or hatred and revolt. — James Madison
It's not just some types of products that Big Brother doesn't like; it's some types of people. Then-candidate Barack Obama was asked whether he would lower a certain tax because it has been shown that lowering the tax rate spurs economic activity, resulting in an increase in tax collections. Revealingly, he said he would decline the extra revenue for "purposes of fairness." In case your Magic Decoder Ring is malfunctioning, that means he'll use taxes as a machete to cut down the bad people who have too much.
Does anyone besides Karl Marx believe that's a legitimate use of the power to tax?
The word "fair" means, "applying to all impartially." So a tax that takes more money from those better able to pay is unfair by design. It's a "feature, not a flaw," as the software designers say. Progressive taxes exist for the same reason Willie Sutton robbed banks: "Because that's where the money is."
It would be silly to argue that people use more government services as they gain wealth or earning power, so that an individual's taxes are proportional to the benefits he derives. There's no justification there. We have to conclude that progressive taxes are just another form of the most spectacular failure in human history: Marxism.
Alexander Hamilton, in Federalist No. 35, condemned those who would, "...sacrifice any particular class of citizens to the procurement of revenue." Today it's the "top 5%" who are condemned.
Punishing those who provide greater value to their fellow citizens is not only unfair and unjust, it's unwise. Consider the case of the luxury yacht tax. In 1990 the millionaires in Congress got on their "Soak the Rich" soapbox and slapped an additional tax on certain consumer items over $100,000.
In consequence, sales of big American yachts sank. Yay! That must have taken the wind out of the sails of those greedy rich people! Hardly. The affluent merely bought other toys from other places. The ones who suffered were those who had been employed in building the boats — the middle-income men and women whose skills were no longer in demand because of the politics of envy.
While your honorable Congressman is beating his chest about being a "champion of the middle class," he's actually putting you out of work, creating more government dependents, twisting economic incentives that would have increased your quality of life, and undercutting both the means and the motive for charity.
Who could object to such "patriotism," "compassion" and "fairness"?
If the same tax percentage were applied across the board, the rich would still pay more than those less well off. But the tax would be both fair — impartially applied to all — and just — tailored to individual circumstances.
Next time we'll wrap up this series with the principles, Taxes on Savings Are an Economic Cancer, and All Taxes Hurt Everyone (The Poor are Hit Hardest), plus my Conclusion.
Click here to discuss this article.
© Dan Popp
April 7, 2009
In the first and second articles in this series I laid out five principles that could be part of a just tax system. Always keeping in mind that taxes are permitted so that government can fulfill its divine mandate to protect people and their property against injustice, we continue.
Principle 6: Each Dollar Must Be Taxed Only Once
For example. If the system be established on basis of Income, and his just proportion on that scale has been already drawn from every one, to step into the field of Consumption, and tax special articles in that, as broadcloth or homespun, wine or whiskey, a coach or a wagon, is doubly taxing the same article. For that portion of Income with which these articles are purchased, having already paid its tax as Income, to pay another tax on the thing it purchased, is paying twice for the same thing; it is an aggrievance on the citizens who use these articles in exoneration of those who do not, contrary to the most sacred of the duties of a government, to do equal and impartial justice to all its citizens. — Thomas Jefferson
Surely the wisdom and the justice of this principle are obvious. If the reason for taxes is to fund the legitimate functions of government, one bite ought to do it. The effort wasted in collecting (or avoiding) multiple taxes makes the whole economy less efficient. That brings down everyone's standard of living.
In the above quote, Jefferson was not necessarily advocating an income tax; merely illustrating the principle that the Government should not be double-taxing us. He also makes the very serious accusation that government violates its sacred duties, "to do equal and impartial justice," when it creates unequal levels of taxation.
This leads us to the next tenet.
Principle 7: Taxing Power Must Not Be Used for Social Engineering
A just security to property is not afforded by that government, under which unequal taxes oppress one species of property and reward another species. — James Madison
Many today take it for granted that government may tax different items differently, for purposes having nothing to do with raising revenue. But we know that taxes on any particular product increase the price of that product, and so inhibit its sales. If government can apply tax pressure selectively, it has a weapon it can use to oppress both sellers and buyers. Politicians can reward their friends, hamstring their opponents and manipulate the behavior of everyone, merely by taxing one thing more than another.
Few people scream against a "sin tax" or a "luxury tax." But this ability to tax discriminately in effect gives Congress social engineering powers not granted by the Constitution. Elected officials may decide to tax cookies more than ice cream, or to penalize company A that makes regular cars but not company B that makes "special" cars — hybrid cars, flex-fuel cars, small cars, Detroit cars, purple cars — whatever cars are in favor with our Overlords in Washington. They may even pay some farmers to grow nothing, while punitively taxing other farmers who grow tobacco.
People whose marketplace choices are constricted and channeled by the Government, are not free people. The founders knew that government "discretion," as they called it — this ability to impose imperial whims on Americans — was not to be tolerated.
Any tax must apply to everyone, and everything, in an equal way. It's so tempting for kind-hearted people to want to make bread and milk and shoes tax exempt; but opening that door allows — no, it demands — an official definition of bread. Does "bread" include biscuits? How about doughnuts — with no trans-fats, of course? When we forego a tax on milk, what happens to soy milk? Non-dairy creamer? Milk shakes? Baby formula? Are flip-flops considered shoes? Will $1,000-a-pair designer pumps be tax-free? The camel's nose is in the tent, and he is coming in.
The only way to safeguard all of us from this particularly warped form of tyranny is to disallow any distinctions regarding which things are taxed, and how much.
Principle 8: Progressive Taxes are Both Unfair and Unjust
By rendering the labor of one, the property of the other, they cherish pride, luxury, and vanity on one side; on the other, vice and servility, or hatred and revolt. — James Madison
It's not just some types of products that Big Brother doesn't like; it's some types of people. Then-candidate Barack Obama was asked whether he would lower a certain tax because it has been shown that lowering the tax rate spurs economic activity, resulting in an increase in tax collections. Revealingly, he said he would decline the extra revenue for "purposes of fairness." In case your Magic Decoder Ring is malfunctioning, that means he'll use taxes as a machete to cut down the bad people who have too much.
Does anyone besides Karl Marx believe that's a legitimate use of the power to tax?
The word "fair" means, "applying to all impartially." So a tax that takes more money from those better able to pay is unfair by design. It's a "feature, not a flaw," as the software designers say. Progressive taxes exist for the same reason Willie Sutton robbed banks: "Because that's where the money is."
It would be silly to argue that people use more government services as they gain wealth or earning power, so that an individual's taxes are proportional to the benefits he derives. There's no justification there. We have to conclude that progressive taxes are just another form of the most spectacular failure in human history: Marxism.
Alexander Hamilton, in Federalist No. 35, condemned those who would, "...sacrifice any particular class of citizens to the procurement of revenue." Today it's the "top 5%" who are condemned.
Punishing those who provide greater value to their fellow citizens is not only unfair and unjust, it's unwise. Consider the case of the luxury yacht tax. In 1990 the millionaires in Congress got on their "Soak the Rich" soapbox and slapped an additional tax on certain consumer items over $100,000.
In consequence, sales of big American yachts sank. Yay! That must have taken the wind out of the sails of those greedy rich people! Hardly. The affluent merely bought other toys from other places. The ones who suffered were those who had been employed in building the boats — the middle-income men and women whose skills were no longer in demand because of the politics of envy.
While your honorable Congressman is beating his chest about being a "champion of the middle class," he's actually putting you out of work, creating more government dependents, twisting economic incentives that would have increased your quality of life, and undercutting both the means and the motive for charity.
Who could object to such "patriotism," "compassion" and "fairness"?
If the same tax percentage were applied across the board, the rich would still pay more than those less well off. But the tax would be both fair — impartially applied to all — and just — tailored to individual circumstances.
Next time we'll wrap up this series with the principles, Taxes on Savings Are an Economic Cancer, and All Taxes Hurt Everyone (The Poor are Hit Hardest), plus my Conclusion.
Click here to discuss this article.
© Dan Popp
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