Equal self ownership

John Locke in his Second Treatise of Government had two premises for natural moral law: independence and equality. Independence means that we think and feel individually. Equality is about moral worth. There is no inherent master/slave status in human nature. There is no inherent superiority or inferiority among the races, sexes, or other categories of human beings. The moral default is therefore equality.

This is the concept recognized by Thomas Jefferson, when he wrote that all persons are created equal. This is the concept of equality before the law. Human equality is a premise for natural moral law, or the universal ethic.

When one person imposes coercive harm on another, he makes himself master, and the other is a slave. This is inconsistent with equality. The universal ethic begins with our subjective values, and then provides a moral production function resulting in moral rules for the universal ethic. One’s personal ethic or subjective value that being coercively harmed is evil gets passed as a universal ethic moral rule that coercive harm to others is evil. But mere offense becomes transformed as morally neutral, since one has not been invaded.

For the full treatment, see my book The Soul of Liberty.

America’s War of 1812

I am anti-war, but if war there must be, then the people should be honest about its financing, and pay for the war while it goes on rather than pushing the finance to future generations.  The War in Iraq was fiscally dishonest in that the costs were not in the official federal budget, and it was paid for by borrowing.  The World Wars and Civil War were also paid for in large part by with war bonds and money creation.  As this year is its bicentennial, it is worth looking at how the War of 1812 was financed.

At first, Congress doubled the tariff to pay for the war, but since trade shrunk during the war, tariff revenue shrank rather than grew.  The US Constitution empowers Congress to levy a direct tax if it is apportioned by state population.  So Congress levied a direct tax on property, mostly on real estate.  The states could take a 15 percent discount if they collected the taxes themselves and transferred the revenues to the federal government.  Most states took advantage of this, which spared the federal government the expense of assessing the real estate and taxing the landowners.  Another federal tax was levied in 1815 to pay for the war of 1812, and then the federal property tax terminated.

Adam Smith wrote that wars should be paid for by taxes rather than borrowing, so that the people would not favor a war unless it was needed such as to defend against foreign aggression.  If the War in Iraq had been finance by taxes, it would most likely not have started!

The use of real estate taxes for the War of 1812 is a lesson for public finance.  If taxes there must be, then instead of a national sales tax or flat-rate income tax, the federal government could tax the states rather than the people.  Let the states pay, at their option, their share of the budget based on their share of population.  This works best if there is a federal tax on land value rather than on income or goods.  If all states did this, there would not have to be any federal tax bureaucracy.

Unfortunately, as Hegel observed, people and governments do not learn the right lessons from history.  At least libertarian candidates should learn from the War of 1812.  Two hundred years ago, the federal government was able to pay for national defense without an intrusive income tax.  We don’t need stinking taxes on wages and goods.  Let the states finance the federal government.  Let the states then have whatever public finance system they want. Political power would then flow back from the federal to the state level, and this decentralization would be good for liberty.  Remember the War of 1812!

Releasing Income Taxes

Disgusting!  is my reaction to calls to candidates to release their income tax returns.

First of all, income tax records are supposed to be able to be kept private.

I can understand wanting to know candidates’ special-interest connections, but these usually do not show up in tax records.

Also, criticism of the low tax rates paid by some candidates is unwarranted. It is not a crime to seek to minimize one’s taxes. Moreover, given an income tax, there are good reasons why dividends and capital gains have lower tax rates. Dividends are already taxed by the corporate income tax. Long-term capital gains have already been taxed by inflation.

Ron Paul said regarding his taxes that his income was low compared to other candidates. What he should have said is, “my taxes are none of your business!” Moreover, the income tax should be abolished. Calls to reveal income tax forms imply approval of income taxation.


A Libertarian sales-tax party?

Is the Libertarian Party becoming a sales tax party?  The past several LP candidates for president have favored excise taxes.  I don’t recall any of them declaring, “Taxation is Theft!”  Now we have former New Mexico governor Gary Johnson as a leading candidate for the LP nomination for president, having abandoned the quest for the Republican Party nomination.  His tax plan as a Republican was a national sales tax, and that remains his tax plan as a Libertarian.

The main organization pushing for a national sales tax calls it a “Fair Tax.”  That is excellent propaganda, but a sales tax is no more fair or just than a tax on wages.  A sales tax violates free trade, makes products more expensive, and indirectly taxes wages and other incomes.  The advocates claim that a shift from income to sales taxes would not raise prices, since the income tax already raises prices, but they are wrong, because much of the burden of a tax on wages is on labor.  A sales tax has about the same excess burden or deadweight loss as an income tax.  Income taxes punish savings, but sales taxes punish borrowing, and there is no logical reason to favor savings over borrowing.  Savings and borrowing should be voluntary individual choices not skewed by taxes or subsidies.

The “Fair Tax” plan exempts business purchases, putting the burden on households.  That invites massive tax evasion, as folks would claim to be buying stuff for a business.  The response of government would be a sales tax gestapo.  If you did not have a receipt for your purchase and could not prove it was for business, you could go to prison.

If the Libertarian Party becomes a sales tax party, it will be unpopular and get little support.  Historically, sales tax advocacy has been a political loser.  This may well be why Gary Johnson got so little support as a Republican candidate for president.  If the LP nominates a sales taxer, I for one will promote the Free Earth Party (http://free-earth.foldvary.net/) as a truly libertarian alternative.