The Topsy-Turvy Liberal View of Taxation
By Anthony Gregory • Saturday July 2, 2011 6:56 PM PDT • 10 Comments
Obama insists that the United States can’t afford to maintain corporate tax cuts. As with all modern liberals, when he says the U.S. can’t afford it, he means the government can’t afford it without cutting spending. With nearly four trillion dollars of expenditures a year, I suppose it’s very understandable that the president, as most of his ideological ilk, view tax cuts—signifying where the government is refraining from taking privately owned money in the first place—as a reasonable “cost” to “society,” that ought to be phased out, long before the empire, police state, and trillions of dollars in domestic goodies are trimmed back more than a nominal amount.
It is not only liberals. Some conservatives also spread this myth that tax cuts are the same as subsidies—an area of government spending, rather than an area where the government is seizing less than it potentially could—as we saw a few months ago, when a dozen conservative lobbying groups signed on to a petition demanding the end of tax credits for certain energy interests. This is an unfortunate and retrogressive retreat from the early American conception of taxation, an ideal that animated a revolution over 230 years ago and that is ostensibly being celebrated this very weekend. Taxation, after all, is the government using force and the threat of force to exact revenue from the private sector. It is warmed over tribute, a practice embraced by the ruling classes going back at least to ancient Egypt. The American colonists resented tax rates that were miniscule by today’s standards. And at their best, they saw taxation as an instrument of tyranny, rather than something to ensure was never lifted because society could not “afford” it.
Some will argue, validly, that corporate interests do in fact benefit from state intervention—various monopoly privileges, direct subsidies, regulatory advantages, preferential treatment, government contracts, protections from common law liability, and so on and so forth. But then the answer should be to eliminate these advantages, not counter them with tax increases. Indeed, if Obama thinks corporations have it too easy, and also wants honestly to deal with the deficit problem, he should work to eliminate or prevent, now and in the future, the vast agricultural subsidies that distort the market and mostly end up in the hands of rich corporate farming interests, the cushy contracts doled out via the military-industrial complex, the enormous bailouts and moral hazard pervading the financial sector, the stimulus spending that goes to favored businesses, the energy subsidies, the auto bailouts, the grossly over-zealous federal enforcement of patents, and the hundreds of other ways that the federal government actively redistributes money from the poor and middle class to the politically connected rich. Some of the left would even join him in much of this endeavor.
But he has no interest in that, and neither do most mainstream liberals, or most conservatives for that matter, because cutting tax credits, rather than eliminating corporate benefits, expands the power of the state. Ridding of corporate welfare and privilege would mean scaling back state power and diminishing the ability of politicians to play favorites, secure campaign assistance, and attempt to centrally plan the economy.
Taxation is a process whereby the government actively confiscates wealth that it didn’t earn. Even most of the somewhat corrupt businesses that, in our mixed economy, do not make all their profits due solely to free market principles but with the help of state intervention, are paragons of moral virtue and economic efficiency compared to the state itself. The state’s taxing power and thus its budget should be scaled back as much as humanly possible, for every dollar it takes without any ethical claim to it, it uses to solidify its own power and, in most cases, spends inflicting mayhem on the economy and social order. The liberals of the early American era—classical liberals, of the Jeffersonian sort—recognized these basic truths, and in their more honest moments, opposed the taxing power as a matter of principle, and did so in defense of the common man. Today’s liberals have turned the great American tradition—identifying taxation’s immorality and opposing the institution—on its head, calling tax breaks an instance of government spending that “we” cannot “afford.” Don’t be fooled by this sleight of hand. Taxes are one of the major prices we pay to see government wreck civilization, and reductions, cuts, exemptions and credits, although often implemented for disingenuous reasons, are nevertheless islands of freedom in a sea of tyranny.
Tags: American History, Bailouts, Budget and Tax Policy, Corruption, Natural Law, Socialism, Taxation, The State 
Other than the temporary reduction in the payroll tax, I cannot think of a single policy enacted by the Obama administration that advances the cause of individual liberty. Every action is intended to enslave the people.
Our government is a menace to society and is ruining civilization itself. Who or what can possibly kill this ravenous monster?
Steve Hogan | Jul 3, 2011 | Reply
I’m getting tired of hearing the libertarian argument that special tax treatment for certain taxpayers is a glorious thing as it allows the taxpayer to keep some of their own money.
I suspect Rothbard advanced the notion that every tax break or tax deduction is sacred at a time in his career when he sought to appeal to the “starve the beast” conservatives.
Well, libertarians know that the beast can’t be starved as long as the beast can borrow or create fiat money.
Libertarians should also know that most special tax treatment, including home mortgage interest deductions, are bought and paid for by the groups, corporations or individuals that benefit (Realtors and lenders in the case of mortgage deductions).
Often, these beneficiaries, as well as legislators, consider these deductions or credits to be subsidies – despite the actual dictionary definition of “subsidy” not including tax deals. I don’t think any libertarian can deny that special tax treatment often produces the same results as a subsidy – cash in the pocket of the beneficiary.
Considering that legislation offering special tax treatment is often bought and paid for, do libertarians want to take the position that the freedom to retain property is for only those who can afford lobbyists and significant campaign contributions?
In cases where the government creates special tax treatment to encourage certain behavior, do libertarians want to promote the idea that freedom to retain property should hinge on government approved behavior?
Considering that corporations pass along the costs of doing business, including taxes, to consumers, advocates of freedom should call for the elimination of taxes on all corporations (and individuals) as opposed to extolling tax credits as some sort of free market action as some libertarians and conservatives seem to be arguing.
From where I sit, taxation is often viewed in a topsy turvy manner by liberals, conservatives, and even many libertarians – especially of the Fair Tax ilk.
Tom Blanton | Jul 4, 2011 | Reply
Tom Blanton said: “I’m getting tired of hearing the libertarian argument that special tax treatment for certain taxpayers is a glorious thing as it allows the taxpayer to keep some of their own money.”
If you were one of those receiving the tax break you wouldn’t be whining right now. Grow up.
Don | Jul 5, 2011 | Reply
330 years ago? 1681, by my reckoning. Even I can’t remember back THAT far, but I totally accept that taxes were extortion then as they are now.
Your money or your life.
N. Joseph Potts | Jul 5, 2011 | Reply
Thanks, Joseph! I’ve corrected it.
Anthony Gregory | Jul 5, 2011 | Reply
If you were one of those receiving the tax break you wouldn’t be whining right now. Grow up.
First, I’m not whining – I’m arguing against a certain dogma. Second, I wonder how you know that I don’t take advantage of every deduction possible. Certainly you can’t mistake me for one who wants to tax the other guy, as I have clearly advocated eliminating taxes for individuals and corporations.
I certainly don’t criticize anyone for minimizing that amount of taxes they pay. I am criticizing some libertarians for the government policies they advocate. However, I’ll be the first to thumb my nose at those who cling to their government programs while wanting others to pay for them.
Third, I have grown up. A number of years ago I realized that there is no such thing as a tax break as long as there is no spending break. What you don’t pay today, you will pay tomorrow – one way or the other. I’m also old enough to realize that when certain groups receive special tax treatment, you have a society where some people are more equal than others.
My advice to all libertarians, and conservatives who whine constantly about taxes, is that if you really want to keep more of what you earn, advocate for the reduction of government spending. Better yet, advocate for the elimination of government spending.
Finally, if I want to hear about how wonderful tax cuts and tax breaks are, I’ll just tune in to any right-wing propaganda talk show where I can hear as much of that crap as I want – along with other ideas like increasing military spending, saving social security, enforcing immigration, and waging a failed drug war.
Tom Blanton | Jul 6, 2011 | Reply
Name calling helps no cause. Be careful the labels we apply. I am not just a libertarian, I am a Libertarian. I am also a contradiction; I am an elected Libertarian (or at least I was).
Tom makes good points, but needs to learn a bit of civility and salesmanship. Belittling your readers wins very few followers.
With that said, the issue of tax-breaks remains one of the most difficult issues that I face, and faced while serving in office.
On the one hand, “any tax break is one less dollar that the beast gets his hands on”, but at the same time, “every tax break is off-set by an increase elsewhere” – As Tom tried to point out. Without a spending cut to match the tax break, some other poor dumb sucker pays that tax. And therein lies the rub.
As I age, I have become more cynical. From time to time I have in moments of disgust and anger spouted that I would like to see all tax breaks ended, and the tax burden raised to 100%. Then at least we could get this revolution started and try out that Constitution thing that I hear so much about.
In short, while serving on the board of my town, I voted both for, and against tax breaks (mostly against). I TRIED to be just and fair in those decisions, coming at the decision from a perspective of “all men are created equal.” If it was an individual tax that one group was paying, but no one else was, I voted in favor. When it was giving a special group a break while forcing others to pay it (i.e. PIFs {Public Improvement Funds} and STDs {Special Taxing Districts}), I not only voted against, but lobbied hard against.
At it’s core, taxes are a conundrum for most libertarians. We want an end to taxes, but since we can not abolish them all at once, how do we reduce the tax burden? To that I refer to Tom’s point – any tax break must be offset by a spending cut. To which I add, “as long as that break affects all equally. In other words, if the government cut spending by 1 billion, and gave 1 billion in special interest tax breaks, I would still be opposed. I can understand why others would take it as a lopsided victory, but a victory nonetheless, but at this point in my life, I just want to see basic human dignity, and that means treating all humans as if they were created equal.
I know, I’m a dreamer.
For the record, there is no such thing as a “fair tax”, but barring following the Constitution, and respecting the Supreme Court’s decision that ‘cash in exchange of labor’ is NOT “Income”, I’ll settle, at least for the time being, for an “equal tax.”
joe4liberty | Jul 6, 2011 | Reply
“Finally, if I want to hear about how wonderful tax cuts and tax breaks are, I’ll just tune in to any right-wing propaganda talk show where I can hear as much of that crap as I want – along with other ideas like increasing military spending, saving social security, enforcing immigration, and waging a failed drug war.”
What if you want to hear about how wonderful tax cuts are, but also how evil military spending, Social Security, immigration controls and the drug war are? That’s my take.
Anthony Gregory | Jul 6, 2011 | Reply
I’m sorry if I offended any libertarians, it was not my intent. I don’t think I am guilty of name calling unless one considers the word “libertarian” a pejorative. For what it’s worth, I have considered myself a libertarian since 1978, have voted for LP candidates from 1980 until 2008. I could not stomach Barr/Root and gave up voting.
Perhaps that may explain my disappointment when I hear libertarians employ the tax cut rhetoric of the right, defend special tax treatment for certain groups or individuals, and claiming that special tax breaks that serve as a politically acceptable substitute for subsidies are OK, but direct subsidies are bad when there really isn’t a hell of a lot of difference.
Tax cuts are wonderful indeed – when they are across the board for everyone. I’ve never heard from any libertarian that government should pick the winners and losers in society, yet special tax treatment for favored taxpayers is exactly that.
Tom Blanton | Jul 8, 2011 | Reply