I just wanted to share two points that I’ve found important to my journey in retrospect.
The first was in my AP government and politics class. Our teacher, when teaching, told us that “states rights” ought not to be called “states rights” at all, but rather “states powers” because states didn’t have rights. Though the guy, in his own words, didn’t care for libertarianism, the idea really stuck with me, because I realized right then that indeed the only power of the government is the power to compel, not the right to compel. As such, any government power is an encroachment on individual liberty and rights.
The second point was me reading the Fair Tax Book by Boortz. This was back when I was mostly a minimal-welfare libertarian (not yet quite a minarchist). As I read this book, I saw some great advantages to the Fair Tax (without having studied economics). However, something else also stuck with me. I asked myself “How is a tax on consumption fair? Why should I pay for items I buy? How is that moral?” Then, I stopped and wondered “Hey, why is the income tax considered fair? They don’t own my income. My income is essentially my trade of hours of life for money. They’re taking away my life here!” At that point, I realized that taxation wasn’t something fair. I didn’t go to minarchy just yet, but the idea took root in my mind.
Your AP instructor was absolutely correct and your inferences are right on. Only humans can have rights. I hate the “States Rights” discussion. The interesting tidbit here that until the 14th Ammendment that really gave power to the Federal Govenrment, the states had to power to grant rights.
As for the “Fair Tax”, Murray Rothbard has a short chapter available on this website that debunks the whole idea that some form of consumption tax is superior to some form of income tax. My take on any consumption tax is here:
From Rothbard: A consumption tax in its simplest form moves the supply curve for any taxed good to the left. Assuming no changes in demand, that means that the market clearing amount will drop. And suppliers will reduce their future production to accomodate the new calcuations of future demand despite the fact that the market clearing price will go up.
From Rothbard: If suppliers could raise prices they would do so immediately with or without the tax. If I supplied a good and I could raise the price and not affect my quantity sold, I would do so.
From Rothbard: From 1 and 2 above is not clear at all that a consumption tax would result in more economic growth over the current a tax on earnings, winnings, investment returns and corporate profits. There are many reasons for this. One example is the corporate profits tax. It is not clear at all that if a company supplies a good that is taxed that the company would produce more and invest more in futher production with the consumption tax than with the corporate tax.
From Bogart: With any consumption tax there will be a run on the capitol as suppliers try to get their good onto the list of “Untaxed” goods. So there will be just as much corruption and power playing under a consumption tax as any other. See below about the Fair Tax that supposedly prohibits this.
From Bogart: What is worse with the consumption tax is that it is easy to avoid on exchanges through used goods, secondary markets and barters. So the govenrment will have just as big of a bureaucracy trying to track down tax cheats as it does. Furthermore individuals will have to do just as much paperwork to satisfy tax enforces that they are not doing lots of transactions without paying the taxes. If you think I am wrong then get behind a farmer in a line at a tool discounter and see if there is a lot of state level paperwork that goes into a farmer trying to skip paying sales taxes.
From Bogart: All of these issues happen with or without fiat currency, but with fiat currency and the business cycle a consumption tax is horrible. During recessions consumption will decrease. So tax revenues will decrease. As tax revenues decrease the central banks will print more money. So as bad as the bailouts and central bank behavior was with the drop in revenue, the drop in consumption tax revenue will be worse.
Onto the Fair Tax:
Mises Website. The Fair Tax is a 30% tax on top of the untaxed price, not the 23% the people claim. So just by thier theme they are already telling lies about it.
Mises Website. The Fair Tax has this crazy pre-bate. That simply means that Washington still has all of the power to hand out favors and demand lots of paperwork from the people receiving the pre-bate.
Bogart: There is no way that Washington ever hungry to get more money and distribute more favors will eventually start mofiying the Fair Tax to not including items or begin including items.
Bogart: The Fair Tax if implemented will destroy or massively reduce activity in certain industries. That 30% tax will certainly curtail or cut back on peoples home buying. Think of what this will do to the already devastated construction industry where the capital gains tax on investment property will change to this stupid Fair Tax. So instead of paying capital gains at 20% on gains. The owner would have to sell for at a minimum of 30% over the original purchase price - transaction costs. So if a person purchased a home for 100K then that person would have to sell it for 100K - 6K realestate - 2K closing costs - 1K Transfer Tax = 91K x 1.3 = 118300. Can you sell your home for that much? Anything less and you are LOSING money.
Sorry for the diatribe, but the folks proposing these consumption taxes are complely misinformed. I lose a lot of respect for people like Peter Schiff who on his radio show spouts off the advantages of a consumption tax.
First off, there was a lot of discussion about this tax issue in the Herman Cain 9-9-9 thread, particularly starting here, with the Schiff/Wenzel debate.
I definitely encourage anyone interested in the tax discussion to check it out.
I don’t see how this supports the claim that consumption tax is worse (or at least not better than) an income tax.
True, but as I pointed out here, businesses could simply start charging for things they used to give away for free. I see this as a way to at least partially shifting new costs forward to the consumer…precisely what Rothbard argues cannot be done.
It is also not clear that it wouldn’t.
It is not clear that it would produce more with a corporate tax. But on that note, Dave commented on Peter Schiff’s comments on the profits tax here.
Why does there have to be such a list?
I don’t see how you can simply assume this would be the case. Especially if your only support is:
I’ve watched people skip sales taxes in virtually the same time it takes to ring up any normal sale. I’ve seen people walk up to a register at Office Depot with 5 computers at over $1000 each, flash a card, and have the tax automatically deducted in a few seconds. You wouldn’t even notice if you weren’t paying attention.
And I still don’t see how this is supposed to support your claim anyway.
…because tax revenues don’t decrease when people have reduced income…like when they are unemployed…like during a recession.
…because there wasn’t a drop in income tax and capital gains tax revenues during the latest bust.
I don’t necessarily disagree with any of this, but it still does nothing to prove that the current tax system isn’t worse.
Then prove him wrong…In your entire “diatribe” I fail to see one piece of evidence that suggests the current tax situation is better than what Schiff proposes.
any government power is an encroachment on individual liberty and rights.
right. so chase down any ambulance and block them from getting to the hospital to protest such violation of individual liberty and rights. if the person gets treated at the hospital and lives, everybody loses. if business have the ability to reaspond and serve clients, noone has any individual rights and liberty. we must not be allowed to contract out for emergency services in our local community.
what government have you grown up with where all the government did was compel? the one i grew up in has services that only happen when people give consent. in cases where there would not be consent, i’m not sure sure a private business would do something very different. if someone is found lying in the street from a heart attack, most people would get care first then deal with it later as supposed to making sure a contract of consent was signed in 10 pages before giving care.
True, but as I pointed out here, businesses could simply start charging for things they used to give away for free.
This is somewhat misleading…they used to give product ‘Y’ ‘for free’ ? or isnt is that they gave product Y as part of a package, Customers bought X+Y package at cost Z. The banks proposition was to have the customer pay $Z, and get X, oh and you also get Y ‘for free’ !
(thats called marketing , but there are no ‘free lunches’)
The same argument that says Business can’t shift the tax on Y directly onto the customer (but rather are incentivised to disinvest, reducing supply, and only then indirectly increasing sale price) . shows that they couldnt arbitrarily charge more for X either.
So when you see the price of X rise, like bank services that used to be part of a package. Just think how bad its gotten, that a product that could piggy back as a marketing tactic on the back of a main product, is now better split off and treated as its own product, allowing product Y to remain marginally more appealing to any customers who still want Y, but not so keen on paying extra for X+Y
That’s a decent point, but I still wouldn’t be surprised if you could end up getting more revenue by simply charging for things you used to offer complimentary, than if you simply try to proportionally raise your prices on your normal sales goods.
That’s a concise way of summing up my analysis. In essence to protect revenue on product X , the happy fiction that you offer package X+free Y!
has to be discarded. If the customer always thought of ‘X+free Y’ as a complete product, then from their perspective the splitting out, causes X to be inferior to X+Y, essentially we are saying that the quality of the ‘headline product’ falls as a result, and if the customer wanted X+Y (i.e. the old quality) they must pay the premium for Y to restore it.
(there is some equivocation on ‘product’ in here but im sure you get my drift).
but to go back to a defence of Rothbard viz, direct transfer of costs, verses indirect.
In the above analysis the business is not directly transfering cost. Those customers that would pay for X+Y at orginal price, will not pay more for X+Y, whilst the structure of production has not changed… if they would then the business would have already been charging more for X+Y. (i.e. this is the Rothbardian analysis). Now since taxation hits revenue (or hits their costs of production) and causes them to be less profitable, they would tend to shed capital, thus reducing supply, thus repricing X+Y higher… now high enough that to sell ‘X+Free Y!’ just makes no sense when buy X, and pay the premium for Y if you want it to, is the best sales strategy. But this has been caused indirectly, and not by directly transfering the tax.
The FairTax is a terrible idea. That said, I think all of Bogart’s and Rothbard’s points stand.
The solution to the tax issue is confederalism. Limit the Federal govt’s taxation, monetary, and borrowing powers to:
borrowing silver by weight (and purity) or borrowing gold by weight (and purity),
taxing the states based upon population,
any debts owed by and not paid off by the federal govt after every year should become owed to every creditor by the States based upon their population. Every State can then pay their share to each creditor, or some can repudiate it or reduce interest paid, so the Creditors don’t get too much tax revenue.
The next least harmful things, in order, are a head tax (everyone pays $100 or so to stay out of jail), a fixed amount per acre of land (like $100/acre), or fixed amount per squarefoot of housing (like $1/ft^2).
any government power is an encroachment on individual liberty and rights.
You misunderstood my argument. The only power government has that market participants don’t is the power to coerce. That is all. The power of government is the power of coercion.
