Home Taxation
Unit 07

The goal of this unit is to:

It should be clear under the premise of self-ownership that the removal of property from its owner against their will is a fundamental violation of their rights; a “garbage in” that is bound to lead to “garbage out.” Such is taxation in all its forms. Yet taxation is the very lifeblood of government; additional confirmation, were any needed, that government is wholly irrational.

Taxation is the heart of the business of government and always has been; though it was not until the “New Deal” of the 1930s that its spokespersons were honest enough to say so openly. The full quote is: “Tax and tax, spend and spend, elect and elect!” by one of United States President Franklin D Roosevelt’s closest aides, Harry Hopkins. The idea was — and is — to maximise taxes from all and to spend what is collected on parts of the population where it will most likely yield votes favourable to the ruling party, so helping perpetuate its rule.

The nature of taxation

The right for every person to own and operate their own life means that any and all actions a person takes are their’s too, along with the consequences; so for example if they carve some driftwood into a chair, that chair is their property; they have as good a right to own that chair as they do to own their person and life.

Take the logic a step further: If they decide to make another chair and, since they are able to sit on only one chair at a time, to sell the second for some medium of exchange — with which they might buy food or clothing — then the proceeds of that sale are also absolutely their’s, and nobody else’s. And so are any objects they may buy in addition to consumable food, such as a bicycle; all are their exclusive property, as much as they are their own self–owner. “Property rights”, in other words, derive directly from the right to life and are just as immutable.

In market transactions like those just mentioned they may contract to exchange property, on a basis that is strictly voluntary on all sides. This leads to an increase in overall wealth, because everyone has an unique scale of values; some prefer a chair to a bicycle, some vice versa. “Price” is a mechanism for ensuring that all such exchanges are “fair”; that is, the exchange occurs only if both parties are willing to pay or accept the price agreed.

But taxation is not an agreed price; it is a removal of property without the essential element of voluntary agreement. It is, therefore, theft — an outright violation of fundamental rights. To steal some of a person’s property is to steal some of the person.

Government spokesmen try to disguise this ugly truth by pleading that taxing and spending brings some benefit to society. Here are some common examples:

Wealth distribution in a free society

The beauty of a free–market society is that every penny of what everyone earns reaches him or her by voluntary agreement. If one does not want to pay the offered price for some item or service then they do not do so — they do without; because they prefer to do without than to paying the price! Participants always win, therefore; everyone always gets what they prefer.

Should it happen that a manufacturer of $200 hammers finds that far too few people buy at that price to yield them the profit they seek, they will lower it until they do. Standard business procedure! Only if they completely miscalculated market demand — at their own risk — will they lose; provided the price at which their stock of hammers will sell is higher than what it cost them to make or buy them, they will gain.

From this comes a key principle: Those who best satisfy the needs and wants of other people will earn the highest reward.

"Reward” means either profit or salary; businesses that serve their customers best will make the most profit, and employees who give the best value to their employers will earn the highest salaries. All this is true provided that no third party interferes to redistribute what is earned, through taxes that punish the most productive, and is a truly elegant result of the free market. Nothing could be more fair than that!

But what, some may ask, of the unfairness that some people, being extraordinarily talented or hardworking, may become “filthy rich”? Again, since every cent was earned by voluntary exchange, the premise is absolutely false: It is not unfair in any degree!

Still what, they insist, of the unusually untalented, or bone idle. Will they not starve to death?

There is nothing inherently unfair in those who will not work starving themselves — those who are too proud to offer service to their neighbours in exchange for food or money; on the contrary, that is perfectly just. The alternative is to steal from their neighbours, violating their self–ownership — and that would indeed be grossly unfair. Still, that does leave the question of those unable to work.

The essence of all free–market transactions is that they are voluntary. Normally there will be an exchange; but so long as they are voluntary, there need be no exchange. This is called a “gift.” Arguably, the giving of a gift brings its own reward in exchange, in the warm feeling of self–respect that results. Whether that is so or not, gift–giving is a time–honoured practice of human beings and a perfectly sound component of a free–market society. It may be called “charity” and the gift of help to someone unable to cope for themselves is a very commonplace activity even when government steals massive sums of money on the false promise of spending it to help the poor. In periods of lower taxation, charitable and well directed giving was even more potent. So it will be again, and more so, when society becomes entirely free.


How can it be “fair” when some are thousands of times richer than others?

How can it be fair that people become successful and rich just because they were born with more talents than others? Surely taxation is needed to produce more equality of results?

A large minority of government spending is financed by borrowing. Is this tax? Why, or why not?

So presuming the accumulated government debt would still to be around when government is no longer wanted, bond holders will have to whistle for their money. Is that fair and right?

Is inflation a tax? Why, or why not?

What are the different kinds of tax?

It is often said that any tax reduction should not favour “the rich“, because the rich can obviously afford to pay taxes more easily than others. Is that correct? Why, or why not?

It is all very well saying that if a service is “essential” the market would provide it. But what about the “free rider” problem? There are some services like national defence which cannot be priced for discrete sale to large numbers of individuals. Do they not need to be furnished by government and paid for by taxes?

It is all very well saying that trillions a year in redistribution should not take place. But what about the millions of people dependent on such money — welfare recipients, for example?