Nobody likes paying taxes. We grouse about them, even as we admit that they, like death, are inevitable. If we are honest with ourselves, we will also admit that they are necessary. Do we wish to live in a society without policemen, courts, jails, roads and other public infrastructure, and military defenses? If not, taxes are an essential part of our lives.
There are some who would argue that this is not so. Frank Chodorov, an American libertarian journalist of the early 20th century, wrote an essay entitled “Taxation is Robbery” that was originally published as part of his autobiography.(1) In this essay, Chodorov makes a very logical argument. First, he points out that taxation is by definition compulsory. Then he points out that if a “single unit of society” were to take our property by force, we would “unhesitatingly call the act robbery, a malum in se”. Robbery is defined by an ethical principle which the law “may violate but not supersede”. Therefore, taxation is by definition robbery.
That’s all nice and logical, but the problem is that something that sounds airtight on paper doesn’t always work out very well in real life. Lets imagine that Mr. Chodorov were actually living in the purely voluntary society that he dreamed of. He is sitting at home, minding his own business, when a couple of thugs break into his house, beat him up, and make off with all his valuables. What does he do about it? He goes to the phone and calls the police. He gets no answer, because there are no police. Since his society is purely voluntary, there are no compulsory taxes, and therefore no public revenue out of which to maintain a police service.
Mr. Chodorov leaves his house and by chance he comes across the men who robbed him. His recent experience with home invasion has taught him to never go unarmed and he is able to apprehend the men. Off he goes looking for a judge who will give him justice under the law. He never finds one, of course, for the same reason that the police did not come when he called them.
Eventually, one of the men he has apprehended asks him “Hey buddy, what do you think you are doing holding us captive like this?”
Chodorov responds “You have got a lot of nerve. You broke into my house, beat me up, and stole all my possessions”.
“Yeah, so what?”
“So what? It’s against the law.”
“There is no such thing as the law buddy. This is a voluntary society. Law is by definition compulsory. You cannot force another free individual to behave the way you want him too. There are no laws here.”
A society without taxes is a society without laws. Laws are as compulsory as taxes are. Indeed, they are even more so. Government can impose a voluntary tax. A sales tax on a non-essential item is voluntary. You don’t need the item, you don’t have to buy it, if you don’t buy it, you don’t pay the tax. You do not get to opt out of obeying the law however. You either obey the law or pay the penalty when you break it. If the compulsory nature of taxation makes it “robbery”, does the compulsory nature of law make all of us who live under law, slaves?
Samuel Johnson, the leading figure of eighteenth century English literature, saw the foolishness of this kind of liberal thinking when it was in its infant stage. In a pamphlet, originally published in 1775, entitled Taxation No Tyranny (2) Dr. Johnson argued that it was, a fundamental principle “considered, by all mankind, as comprising the primary and essential condition of all political society” that:
the supreme power of every community has the right of requiring, from all its subjects, such contributions as are necessary to the publick safety or publick prosperity.
Dr. Johnson wrote this tract in response to the rebellion of the American colonists, their position of “no taxation without representation”, and the arguments of their Whig supporters in Parliament. It is important to remember that while the tax Acts passed by Parliament following the Seven Years War were the catalyst of the crisis, the debate was not about the merits or demerits of any particular tax. The American colonies were challenging Parliament’s right (3), as a governing body, to pass taxes. It is to this, that Dr. Johnson was responding by arguing that the American colonies which had been founded by English citizens under a Crown charter, and who had enjoyed from the beginning British military protection of their settlements and trade, could not reasonably expect to enjoy the rights and liberties of English citizens while rejecting the duties of such.
Unfortunately, a question which Dr. Johnson did not raise, was at what point taxation goes beyond “such contributions as are necessary to the publick safety or publick prosperity” and becomes an abuse of government authority on the part of corrupt officials determined to squeeze every last drop of blood out of us possible. That such a point exists, there can be no question, and that we have crossed the line a long time ago in Canada, Britain and the United States, I suspect Dr. Johnson, were he alive today, would fully agree.
Government today, has expanded its role in society, far beyond its traditional functions of administering the law, providing for the common defense, and maintaining the infrastructure of the commonwealth. It now seems to see its role as being that of an all-purpose provider – providing us with education, health care, income security and everything else we may need or want. There are some who seem to see only a positive side to this – that with government providing education, health care, etc. these things are now universally available in a society, rather than limited to those who can afford them. There are, however, three major negatives which far outweigh this questionable positive. The first is that the quality of education and health care goes down when government is the provider. The second, is that the more the government provides for us, the more intrusive it becomes and the less freedom we have. (4) The third negative, and the one we are interested in here, is that it drives taxes through the roof.
The rise of the nanny state in the 20th and 21st centuries occurred, not coincidentally, simultaneously with the introduction of the income tax. Today, the income tax is something we are all used to, however much we dislike it. We look for every deduction possible, we race to get our tax paperwork in on time, we save our receipts for years in case the government audits us, and we grumble and complain about it, but we seldom think about how recent an innovation it is.
In Canada, the income tax was introduced in 1917. In the United States, the first income tax was passed in 1861 but the permanent income tax was not brought in until 1913 when the Sixteenth Amendment Passed. In Great Britain, the first income tax was introduced in 1799. (5)
The income tax raises far more government revenue than any other kind of tax. Why did governments in the English-speaking world wait so long to introduce them? The reason is that an income tax says something about the status of the people who pay it. It says that the product of their industry, whether they be farmers, businessmen, merchants or laborers, belongs primarily to the government rather than to themselves, that the government has first claim on their income, and will assert its rights by collecting a percentage of their income in taxes. This is the relationship, between a master and a slave. The English-speaking peoples, however, had long considered themselves to be free peoples, subjects but not slaves of their kings. Income tax was not for them.
Income taxes were therefore initially introduced as “temporary” measures to pay for wars. (6) In Canada, the Borden government brought in the income tax to raise funds for the first World War. They promised Canadians that the tax was temporary and would be lifted after the war was paid for. In Britain, Pitt the Younger made similar promises, when he introduced the first income tax at a time Britain was at war with revolutionary France. In the United States the Republicans brought in the first income tax to fund the North’s war with the South. (7)
The English-speaking peoples would never have accepted income taxes if they had not been introduced as emergency measures. The problem with government, however, is that things which begin as “temporary” often tend to become permanent.
What are the objections to an income tax?
First and foremost, there is the already mentioned objection that it is a form of slavery. This is not true of other forms of taxation. A poll-tax is the government charging you for the right to vote in elections. A head tax is the government billing you for the right to live under the security its laws provide. A sales tax is the government charging you for the use of the market system which is only possible because the rule of law protects property rights, enforces contracts, and penalizes fraud. (8). A tariff is the government charging people outside the country for access to a country’s domestic market. None of these taxes imply a master-slave relationship between government and people. The income tax, which asserts the governments prior “right” to the product of industry, does. (9)
Secondly, income tax enables the government to take much larger amounts from us than it otherwise would. The government can only charge so much in sales tax. If it raises the sales tax too high it drives people out of the legitimate market. Thus, sales taxes are set at a considerably lower rate than income taxes (10) and since the rate you pay in sales tax is charged on the price of what you are purchasing, a 5% sales tax will not take 5% of your income.
At present, the Canadian government charges 15% on the first $40, 970 of taxable income, 22% on the next $40, 970, 26% on the next $45, 080 and 29% on all taxable income over $127,021. Those are the federal tax rates and do not include the provincial income tax rates. In my province, Manitoba, the provincial income tax starts at 10.8% on $31, 000 of taxable income, goes up to 12.67% for the next $36, 000, and then to 17.4% on all income above $67, 000 (11) Thus, someone in Manitoba, is paying in federal and provincial income taxes combined, over 25% on their first $40, 000, and it gets considerably higher after that. (12)
That is obscene! At the lowest tier in the income tax system, we are already paying over a quarter of our income in taxes, in income tax alone. If the government were to try to take that much from us through other forms of taxation the rates would be so high they would never get away with it.
Thirdly, income tax requires a large government bureaucracy to collect the taxes, keep extensive records on people, and to investigate people if they are suspected of “cheating on their taxes.” Apart from being expensive, the problem with a bureaucracy like this is that it can be used by government to harass and persecute law-abiding citizens. (13)
A fourth objection to income tax, is that it punishes industry. Frank Chodorov argued that this is true of all forms of taxation and he may be correct on that, but it is not true of all kids equally. The income tax is particularly punitive of industry. The more productive you are, the more you earn, the more the government takes from you. This is a problem that could conceivably be removed by taxing all income at a flat rate but a flat tax will still have all the other objectionable qualities of an income tax.
From these objections it can be seen that the income tax is indeed an oppressive tax that demands of people far more than “such contributions as are necessary to the publick safety or publick prosperity” and reduces free people to the slavery which the American colonists claimed the significantly smaller customs and duties that the Parliament of the 1760’s and ‘70’s was reducing them to. It ought to be abolished, and replaced with a sales tax or tariffs, set at a rate high enough to raise revenue to support the essential functions of government, but low enough as to not seriously effect the economy. Government should be trimmed down to where it is small enough to be supported on these smaller taxes. It is there to provide society with the protection of the rule of law, with defences against foreign enemies, and the maintenance of roads and public properties. It is not there to provide every citizen with his every need and wish.
(1) Frank Chodorov, Out of Step: The Autobiography of an Individualist (New York: Devin-Adair, 1962). It can also be found as the second essay in the anthology The Paleoconseratives: New Voices of the Old Right, edited by Joseph Scotchie and published by Transaction Publishers (New Brunswick, New Jersey) in 1999, or as an etext at the Ludwig Von Mises Institute’s website: http://mises.org/etexts/taxrob.asp
(2) J. P. Hardy, ed., The Political Writings of Dr. Johnson, (London: Routledge & Kegan Paul, 1968) pp. 100-132. It can also be found online here: http://www.samueljohnson.com/tnt.html
(3) Poor old King George III is still much-abused in history books which often recycle uncritically, 18th century American claims that he was attempting to set himself up as a tyrant, but Johnson set the record straight ages ago:
The other position is, that "the crown," if this laudable opposition should not be successful, "will have the power of taxing America at pleasure." Surely they think rather too meanly of our apprehensions, when they suppose us not to know what they well know themselves, that they are taxed, like all other British subjects, by parliament; and that the crown has not, by the new imposts, whether right or wrong, obtained any additional power over their possessions.
(4) To demonstrate how this works, look at current anti-smoking legislation as an example. It is an obnoxious and oppressive abuse of power for governments to tell business and other property owners that they cannot decide for themselves whether to allow smoking on their property and in their own establishments. However, government can argue, when there is a universal, single-payer health system, that it has the right to pass laws like these, in the name of decreasing the cost to the public of treating emphysema and lung cancer. The more the government provides for the public, the more intrusive its regulations become, although it has disguised this loss of freedom by undermining the authority of other social institutions such as the family and the church.
(5) The tithe, in Ancient Israel and the Medieval Church, was not the same thing as an income tax, being paid to religious authorities rather than the secular power.
(6) In Britain and the United States, the first income taxes were temporary in a sense. Pitt’s tax was abolished by Addison, who replaced it with another one, itself abolished at the end of the Napoleonic Wars. Robert Peel brought the income tax back in 1842, again promising it was temporary, but this time it stuck. In the United States, the initial income tax was repealed in 1872, and temporarly brought back by the Democrats in the 1890’s until the Supreme Court ruled unapportioned income tax to be unconstitutional in 1895, and so the Sixteenth Amendment had to be passed before the income tax could be brought back in 1913.
(7) The income tax would become the preferred tax of progressives and socialists. It is interesting, therefore, that the first income taxes were brought in by Conservative governments in Canada and Great Britain, and by the Republicans, widely if probably erroneously, regarded as the American “conservative” party, in the United States. Let this be a warning to conservatives. What you introduce as a temporary measure in times of war, may be used by progressives for other purposes in times of peace
(8) Liberal economists, for all their talk of “laissez-faire” and the wonders of the “free market”, often fail to realize that the market simply would not function very well in the absence of law.
(9)In chapter 2 of The Communist Manifesto, entitled “Proletarians and Communists”, Karl Marx and Friedrich Engels list a series of measures that they regards as “unavoidable as a means of entirely revolutionizing the mode of production”. The second is “A heavy progressive or graduated income tax.” In practice, Communist countries reduced their populations to slaves of the Communist Party. Progressives in the West frequently offered the naïve opinion that this was because the Soviets or the Maoists or the Khmer Rouge were “not really Communists”, they were really fascists who were not living up to the ideals of Marx. In fact, however, universal slavery was a goal of Communism from the beginning.
(10) Unless, of course, the tax is on something like alcohol or tobacco, which the government wishes to punish you for using without actually declaring it illegal.
(12)Astonishing as these percentages are, these are not the highest rates in income tax that people have had to put up with. Before the Reagan presidency, the top tax rate in the United States was 70%, from 1951 to 1963 the top tax rate in the USA was 91%, and it was even higher briefly in the 1940’s. These are not the percentages an American would have had to pay on his total income, only on the highest bracket of his income, but even still it is amazing to think that a government would have the audacity to charge so much. Consider, however, the following:
Another means of reducing inequality was to tax both the profits of a firm and the personal capital gains of the owners. This could raise an individual’s tax rate to astronomical heights, approaching or even exceeding 100 percent. The height of absurdity was reached in 1976, when Sweden’s most famous citizen, film director Ingmar Bergman, was arrested on charges of tax evasion. The case was complex, involving the director’s corporate as well as personal earnings. The bottom line was that Bergman was being taxed at a rate of 139 percent. - Thomas Fleming, Socialism, (Benchmark: Marshall-Cavendish, 2008). p. 73.
(13) Dr. Mario Pei, in his book The America We Lost (New York: World Publishing, 1968) points to the example of gangster Al Capone, who the state of Illinois had been unable to punish for his actual crimes, but was finally incarcerated by the American federal government on charges of tax evasion. This, Dr. Pei argued, was nothing to rejoice over, for while Capone was hardly a law-abiding citizen, what could be done to him, could be done to others. Compare Edmund Wilson’s autobiographical account in The Cold War and the Income Tax: A Protest (New York: Farrar, Straus, and Giroux, 1963).