In the last post (Economics of Taxation 101) we looked at the subject of taxes with the emphasis on the economic effects of the various taxation schemes. There are also some fundamental considerations of Liberty and Property rights that are relevant to taxation mechanisms.
As was desirable in the previous post, we will divide the taxation types into direct taxes and indirect taxes. The latter are primarily use taxes or consumption taxes, and as such can in many cases be avoided with some inconvenience by not using or consuming from the markets. The direct taxes are imposed on the individual or his property and usually cannot be avoided. These latter are a direct affront to the freedom of those that are taxed, in that failure to pay such taxes will subject the individual to loss of property or liberty by the taxing authorities. Thus direct taxes are in principle a declaration by the government involved that some or all of each person is the property of the government. The extreme example of this is the conscription of individuals for military service, where even the life of the taxed is the property of the government.
Aside from conscription, the worst example of direct taxation is the Income Tax, where some portion of the labors of the individual and any return on his savings and investment is declared the property of the taxing government. Thus any person that contributes to the economy in labor or in capital is in fact no less a serf than the medieval peasant. The claim that Americans are ‘free’ is merely a fiction useful for keeping the peasants in line.
Retail consumption taxes are the best example of indirect taxes that can be avoided, and as such are defensible to the extent that they are fees for maintaining the convenience and privilege of a free market. The infrastructure and legal system that is necessary for a properly functioning free market economy is not without costs, and sales taxes are entirely justifiable on that basis. This does not, however, apply to taxes that are designed to distort the market in favor of products or producers that are preferred by the taxing agencies, or to tax revenues that are used for unrelated purposes.
Any taxes that end up affecting the prices of goods and services are indirect in that one can avoid them by producing for one’s own consumption rather than consuming from the markets. However, the justification for any such taxes is murky at best, in that money is fungible and is very likely to be diverted from justifiable maintenance of the market environment to ‘fraud, waste and abuse’. The typical government is usually the source rather than the solution to this problem.
Real estate taxes are a second major source of abuse of direct taxation. They can be justified to some extent by the ‘user fees’ argument, in that there is a certain amount of burden to the infrastructure of every piece of real property. The costs of maintaining services used by the property owner such as water, sewer, electricity, communication, and transportation are reasonable to consider as due from the property owner. To the extent that these costs, such as for roads, are necessarily provided by the government they justify some use taxes. Real estate related costs may even be in part determined by the area or the road frontage. In particular, parameters such as resident population, transient population and transient traffic loads are appropriate in determining the proper level of taxation to provide necessary government support for the property. On the other hand, taxation based on market value and improvements is a classic example of the state declaring that the property is really state owned and that the ‘owner’ has only an exclusive lease on it as long as the ‘rent’ (tax) is paid. Again, any property that is unused and presents no burden to the local infrastructure should be essentially tax free, and any real estate taxes should only be imposed as user fees.
A final affront to the taxpayer is the loss of privacy. Direct taxes are the perfect excuse for the government to pry into every nook and cranny of the citizen’s existence. The Income Tax, as usual, is the worst offender, where the government has its nose into your bank accounts, your employer’s records, etc., purported to make sure that no one is hiding taxable income. Real estate taxes based on market value gives the local busybodies an excuse to case your home and even peer into your windows to make sure that you haven’t improved (heaven forbid) your abode. Personal property taxes can be carried to the extreme of (in West Virginia) requiring the resident to list not only virtually every asset but even dogs and horses, and in years past sheep.
The bottom line is that, as was pointed out above, the American citizen is far from ‘free’, in spite much rhetoric to the contrary. The government owns your liberty, your butt, your income and your property, and will relieve you of any or all of it at any sign of a lack of genuflection. It might be possible to improve or even correct this situation with a knowledgeable citizenry and some major additions to the Constitution, but it’s very unlikely.
No comments:
Post a Comment