Libertarian Topic of the Week 2: Taxes

This is the 2nd of a series of threads on Libertarianism in practice. I’m hoping this helps get us away from endless debate about “what is Libertarianism” by focusing on specific issues instead of broad, sweeping generalizations. I will try to do these once per week, but I can’t promise I won’t miss some weeks.

This week’s topic is: Taxes

This is a topic where I think you are going to see a lot of variation among Libertarians. Many pure Libertarians are going to say that any tax is antithetical to a Libertarian society. That the government may charge fees for services, but cannot tax goods or income or property. Others take a less pure line and agree that some taxes are inevitable.

I’m open to being corrected, but my understanding is that Libertarians believe that taxes, if they exist at all, should be as low as possible, should be as uniform across the population as possible, and should not be used to foster or discourage certain behaviors, and should have the sole purpose of raising revenue to fund essential and legitimate government services. No taxes to support the arts, scientific research, to promote solar power or encourage drilling for oil, or to give money to other countries, or to build up a military in order to protect countries other than our own.

Talk amongst yourselves! I will be curious to see if there are any “no taxes, period” type of Libertarians posting here.

First Debate Point: Is this something that virtually all American Libertarians would agree on? (As noted, I’m not 100% certain, as I think this is a contentious topic. The Libertarian Party’s website has a page devoted to taxes but it only talks about cutting taxes, not eliminating them. I think a significant portion of Libertarians would go the “no taxes” route, but that’s a difficult position to put forward.)

Second Debate Point: Is this a good or bad thing? (I think the blind adherence to “no taxes” is a bad thing, as I don’t think you can have enough of a government to maintain civil society without some level of taxation. However, I do think the government should raise taxes with one goal in mind: raise money to fund essential services and make the tax as simple as possible. I am firmly against the government trying to foster or discourage certain behaviors with the tax code. If we have an income tax, tax all income equally. If we have a consumption tax, tax all consumption equally.)

Third Debate Point: Are there institutions in the private sector that could/should replace the strong arm of the government in taking care of some of the functions it currently performs? (I do think charitable institutions would be better funded if taxes were much lower and welfare was not so readily available thru the government. We could also introduce fee for service policies in some areas, such as the courts for contract law or tort law. But I’m doubtful we could privatize everything, and so cannot take the position that we don’t need any taxes at all.)

n.b.: Although I am a small “l” libertarian, I am not a member of the Libertarian Party, nor do I believe that a pure Libertarian state would be stable and I would not advocate for it.

Link to thread concerning Topic 1: Civil Rights.

(I already asked the mods to correct the thread title. Should be “Week 2”, not “Week 1”)

The title should be “Topic of the Week 2,” no?

It’s not true that virtually all Americans who call themselves libertarians would support taxation, but it is true that virtually all Americans who I’d call libertarians do, if that makes sense. Taxation is an issue where the anarcho-capitalists, many of whom call themselves libertarians, can be distinguished from the actual libertarians.

I personally wouldn’t say a progressive rate is contrary to libertarianism, but many do. When raising revenue, why not go to where the money is? As long as the same rate sheet applies to everyone, I don’t see the problem.

The use of taxes purely for revenue, as opposed to incentivizing or disincentivizing behaviors, I’d fully support.

In my view, government should be like battleship armor: all or nothing. That is, the essential functions should be well-funded and comprehensive, and the non-essential functions shouldn’t be performed at all.

Nothing comes immediately to mind that’s an essential function, that should also be privatized. Turning a function over to the private sector means accepting the possibility that it won’t be performed well, or at all. For the things I want the government involved in, that’s an unacceptable risk. Also, due to the Fourteenth Amendment, the government must provide equal protection under the law, private firms are under so such constraint. Thus, SNAP can’t withhold benefits from atheists, private charities can.

Titled edited at the request of the OP.

I think deregulation of public utilities would be a good test case. Unfortunately, a cursory review of reports on whether it works seems to indicate a good deal of debate in that area too.

Charities also tend to loose a lot of funding during periods of economic trouble, which also happens to be when a lot of people are in need of charity.

Not making sense to me. Why can’t someone who calls for no taxes still think that we can have a functioning government (funded by lottery and/or fees and tariffs and/or voluntary donations, etc) be still called a Libertarian?

If you accept the idea of income taxes, I don’t see that a progressive system is inherently anti-Libertarian, although I suspect few Libertarians would support that.

Maybe I wasn’t clear… I wasn’t thinking of “essential/legitimate services”, but rather services we now see in the US that might be privatized.

First: While I accept that you can be a libertarian and not support any taxes, I don’t think that’s realistic in any arena outside of pure theory. For the purposes of discussion, I would say that taxes are a given.

Second: I agree that taxes should be at a minimum rate to accomplish the essential goals of government. Taxes should not be used to modify behavior, however it is levied.

From this you would see drastic reductions in types of tax deductions. I mentioned in the other thread that the entire non-profit business structure would be eliminated. Charitable donations would not be tax deductible. Businesses would still be allowed to deduct business related expenses, but things like mortgage interest, medical costs over 7.5% of AGI, and other common deductions would be eliminated. Sin taxes would be eliminated.

What would be included in the essential goals of government is a matter of policy I think. As for a progressive system - I’m against it. Everyone should pay the same rate, and no one should be exempt at any level.

Third: I’m with Human Action on this one, though I don’t call it battleship armor. I refer to this practice as min/max. If you’re going to do something, do it all the way. If government is the appropriate place that action should take place, it should be funded sufficiently to accomplish its goal.

I think the government should be out of the education providing business and instead switch to providing the means of education through a voucher system. I think the FDA should be drastically changed to require that new food and drugs not necessarily prove efficacy, but rather prove no harm. I think most types of transfer payments and welfare should be replaced with a form of negative income tax. Government should be out of the marriage business. Government should be out of much of the regulatory business that it engages in, licensing and other types of agencies. I’m sure there’s more that I can’t think of at the moment.

Because charging fees for government services means that many people won’t have access to those services, which precludes legal equality, which is a cornerstone of libertarianism. It creates a platinum level of citizen that can afford to use the government, when the government rightfully exists for the benefit of all citizens.

Agreed, a lot of them love the flat tax, or various wacky schemes.

Oh, I see. Well, it’d be anything that people are willing to pay for, that lends itself to competition in a market (no free rider problems, technical monopoly, etc), and that deprivation of wouldn’t reduce to one to lower class of citizen. Maybe…libraries, zoos, museums, stadiums and arenas, and licensing of (at least some) professions, for a start.

My own view is that taxes are a necessary evil, and thus should only be resorted to to pay for things that are absolutely necessary. If you’re saying, “Wouldn’t it be nice if we…” then taking people’s money away by force to pay for it is not justifiable.

Murray Rothbard and David Friedman are anarcho-capitalists. You’d be hard pressed to deny they are libertarians. There are different types of libertarians just like there are different types of social democrats.

You can’t have a tax without incentivizing or disincentivizing behaviors. Income tax incentivizes tax evasion, disincentivizes work. Sales tax disincentivizes buying things. Tariffs disincentivizes imports

This may be your view but it has little to do with libertarianism. A well-funded and comprehensive police force and military are a recipe for libertarian disaster.

That’s a strange thing for a libertarian to say.

SNAP withholds benefits from the rich. Where’s your equal protection? There is no such principle to government action. It is always arbitrary.

Not really. Government functions should be performed by the government. The same incentives that make government perform poorly are still present when they are privatized.

However, private functions should be performed by the private sector. And really, I don’t think there is much real dispute over what is public and what is private, except between people who want an increasingly smaller private sector. Among libertarians, I doubt you’ll find much disagreement on what is public vs. what is private.

Taxes support the value of the dollar, and prevent inflation. Without the power to tax, how can the government defend the dollar? How can it prevent (presumably) unregulated banks from turning dollars into toilet paper?

I freely deny it, actually. Anarchism isn’t libertarian, because anarchism doesn’t result in liberty, it results in subjugation to the strongest warlord in your area. My cite is all of human history.

But those incentives are not the purpose of those taxes, which is the distinction I made.

And the lack of same is a recipe for insurrection, civil war, warlords, slavery, ethnic cleansing…all the evils one finds in societies without a strong, central governments.

It’s also true. Consider city parks, for instance. If privatized, most would be used for development, such as building apartments on them. For one thing, it’s difficult to keep people from using a park without paying for it, and for another, usage fees are unlikely to be equivalent to the rent on an office building or apartment complex. If an electorate wants parks, they’d be wise to hand control of them to the government. A private market for city parks would probably fail to deliver parks.

Everyone who qualifies (and applies for) for SNAP receives it. It can’t be withheld on the basis of race, religion, sexual orientation, national origin, or other arbitrary criteria. Income isn’t an arbitrary criterion for a poor-relief program to have.

Private charities are under so such constraints. So, again, privatization carries the risk that the function won’t be performed well, or at all. Charitable relief of unpopular or socially isolated groups is one such example.

Mere tautology.

Incorrect. Government, or at least democracies, even when they are acting at their most efficient capacity only force a change in governmnent performance when the mass of voters who want a change breaks past 50%. Even then, they only have to cobble together this >50% mass one day every few years. Theoretically can operate at 100% disapproval for 99% of their term, and do something to cobble together a winning electorate. In practice, democracies operate for most of their life in a state in which the majority of voters disapprove of their actions. Obama has been hovering below 40% approval for a majority of his term.

This is not true of a business. They operate on the margins. If 10% of Wal Mart’s customers boycott them for even a short period of time, it would force them to change business practices. Again democracies, even in a perfect system require >50%.

Another useless tautology.

I’m sure you will find much dispute. There are self-proclaimed libertarians who support the welfare state. There are self-proclaimed libertarians who support the warfare state. Milton Friedman wanted government to control the money supply. That is a huge intervention, and one many libertarians disagree with. So your assertion of consensus is a bit premature.

In a libertarian society, the government would not control the money supply.

You are not the gatekeeper. Murray Rothbard was a libertarian. David Friedman is a libertarian.

The government is the strongest warlord, bud. A long time ago warlords wised up and realized it was more efficient to tax a conquered people than to loot and destroy it. This is the origin of the state. Please do not tell me you believe government started out as a community meeting.

Mine too.

From the government’s perspective, revenue creation is the *only *impetus for *any *tax it levies. If it taxes things such as alcohol, gas, or carbon, it does this because it can get away with it. It can get away with it because of different reasons. Protestantism, environmentalism, egalitarianism, or simply because it is hidden from view or because the taxed are a minority.

If there is no need for revenue, these things would not be taxed therefore, revenue creation is the reason for levying the tax, ideology is the reason for the nature of the tax.

This is old hat. Old hat and wrong. A civil war is a war for control of the state apparatus. Warlords is shorthand for an army that collects tribute, i.e. the state. Ethnic cleansing happens when one ethnic group has control of the state. The Soviet Union had a strong central government. All of the European imperial powers had them. Communist China. Etc. Etc.

This was simply not a well thought out post.

A private market for incarcerating minority youths for voluntary exchange would likely fail to deliver such a service. If an electorate wants to enslave youths, they’d be wise to furnish the police department with plenty of nightsticks.

A private market for corporate welfare would likely fail to deliver corporate welfare. If an electorate wants to give money to bail out the global elite, they would be wise to hand control of their wallets to government.

A private market for city parks would fail if that land has higher value uses. Plain and simple. Even a consequentialist libertarian would recognize this. Consider lots adjacent to a city park. They could lobby the city government to keep the park for their own benefit. In this case they would be ripping off non-users of the park, driving property prices higher. You are going on about a protectionist scheme that would have no place in a libertarian society.

Sure it is. The standards for qualification are arbitrarily created by the government.

Shoe industry privitization carries the risk that we would be walking around barefoot. You assume government charities accomplish their goals “well, or at all”. Deciding they do requires you to make bizarre arbitrary distinctions. How many chicken nuggets does one need to be fed “well”. Pure fluff.

This waters down libertarianism to nothing. A social democrat believes his system results in liberty. A communist too. Anarcho capitalism is simply consistent libertarianism. It frees you from making bizarre contortions and accepting as truth platitudinous legal motifs such as “equality under the law”.

Put simply, equality under the law would mean that if i could not tax you, you could not tax me. Nor could you assemble a group of other individuals and hire someone to tax me. This is the pure libertarian position. Advocated by libertarians such as Murray Rothbard.

Equality under the law will not be attained as long as there is a state, and its courts hold a monopoly on dispute resolution.

Apparently not. There are a lot of libertarian camps. That’s ok. It can’t be any worse than what we have now.

The ideal would be no tax. The other criteria I have for judging a tax would be how intrusive is the tax. I think the income tax is if not *the *root of all evil, one of the big roots. I actually don’t have a problem taxing certain behavior more than others per se. I’d rather have government snooping on all liquor stores’ books rather than every business under the sun. Of course, there wouldn’t be much revenue, but the idea is the fewer businesses being audited by the government, the better. Ideally though, a generalized, low tariff coupled with fees for services would be best. Have the government on the docks of the country monitoring imports, away from civilized folk. They can even get their homeland security on if they want. This would all be coupled with a massive cut in spending.

We don’t need taxes at all, but there would have to be a gradual shift.

What about consumption that increases the burden on government, and therefore the general populace?

I am, in fact, the gatekeeper of whom I consider to be a libertarian or not.

One strong warlord that the subjects vote on > anyone with some men and some rifles doing whatever they can get away with.

Then please, detail all those stateless societies where individual rights were protected.

Those reasons are the impetus. If a religious electorate votes in candidates that tax alcohol to discourage its use, or an environmentalist electorate votes in candidates that tax gas-guzzling vehicles, the impetus behind that isn’t raising revenue. Revenue would be secondary to the motive of discouraging behavior. Even if there was no need for this revenue, the taxes would exist if the electorate wants those behaviors discouraged.

And of course, tax incentives are used to encourage behavior, such as the credit for buying electric cars.

Strong central states can devastate their populations, but they can also be Enlightened democracies. Conversely, stateless societies don’t have this upside. Show me the Enlightened, stateless society where people have meaningful individual rights.

A strong central state is necessary, but not sufficient, for the protection of individual rights. I can point to the United States, or Western Europe. What can you point to?

By which you evidently mean it didn’t accord with your thinking.

Correct. So you see my point, private markets can’t automatically deliver every service an electorate might want. Some services, due to free-rider problems, technical monopolies, and so on, are simply better performed by the state.

That’s what I said, yes.

If the electorate wants parks, they have to physically exist somewhere. Why should the wishes of the electorate to use a given piece of state-owned land for a park be denied, because it might benefit people who own the surrounding lots? If the people want parks, the government should deliver parks, because the private sector is unlikely to.

Within narrow limits. Do you think a law forbidding SNAP benefits to Muslims would be upheld as constitutional?

Shoes don’t have a free rider problem, or a technical monopoly, or network effects, or anything else that would cause one to suspect that a private market for shoes would fail.

Government charities provide defined benefits to defined recipients. We can debate those criteria, but there’s no systemic breakdown between the government and the recipients; benefits do indeed get delivered.

What waters down liberty to nothing, is being free from a state, but utterly subjugated to the local warlord, or just being murdered. Anarchism fails to account for the fact that power will always exists, and arbitrary, unaccountable power is the worse kind. It then advocates for a society in which all power is arbitrary and unaccountable. Until mind-control is achieved, anarchism won’t work.

Can you give an example of what you are talking about?

Do you care to respond to my demolition of your idea of “equality under the law”? That way I can respond in full when I have time.