A Common Conservative Fallacy

I believe folly serves liberals better than it serves conservatives. Our way is the rational way while liberals tend to rely on their gut-feelings and on their sensitive hearts which make them comparatively indifferent to hard facts. That’s why they voted for  Pres. Obama. That’s why they voted for Mrs Bill Clinton against all strong evidence (known evidence, verifiable, not just suppositions) of her moral and intellectual unsuitability. That’s why many of them still can’t face emotionally the possibility of buyer’s remorse with respect to Mr Obama. That’s why they can’t collectively face the results of the 2016 election. So, conservatives have a special duty to wash out their brains of fallacy often.

It’s the task of every conservative to correct important errors that have found their way into fellow conservatives’ mind. Here is one I hear several times a week, especially from Rush Limbaugh (whom I otherwise like and admire). What’s below is a paraphrase, a distillation of many different but similar statements, from Limbaugh and from others I listen to and read, and from Internet comments, including many on my own Facebook:

“Government does not create jobs,”

and

“Government does not create wealth (it just seizes the wealth created by business and transfers it to others).”

Both statements are important and both statements are just false. It’s not difficult to show why.

First, some government actions make jobs possible that would not exist, absent those actions. Bear with me.

Suppose I have a large field of good bottom land. From this land I can easily grow a crop of corn sufficient to feed my family, and our poultry, and our pig, Gaspard. I grow a little more to make pretty good whiskey. I have no reason to grow more corn than this. I forgot to tell you: This is 1820 in eastern Ohio. Now, the government uses taxes (money taken from me and from others under threat of violence, to be sure) to dig and build  a canal that links me and others to the growing urban centers of New York and Pennsylvania. I decide to plant more corn, for sale back East. This growth in my total production works so well that I expand again. Soon, I have to hire a field hand to help me out. After a while, I have two employees.

In the  historically realistic situation I describe, would it not be absurd to declare that the government gets no credit, zero credit for the two new jobs? Sure, absent government tax-supported initiative, canals may have been built as private endeavors and with private funds. In the meantime, denying that the government contributed to the creation of two new jobs in the story above is not true to fact.

Second, it should be obvious that government provides many services, beginning with mail delivery. Also, some of the services private companies supply in this country are provided elsewhere by a branch of government. They are comparable. This fact allows for an estimation of the economic value of the relevant government services. Emergency services, ambulance service, is a case in point. Most ambulances are privately owned and operated in the US while most ambulances are government-owned and operated in France. If you have a serious car accident in the US, you or someone calls a certain number and an ambulance arrives to administer first aid and to carry you to a hospital if needed. Exactly the same thing happens in France under similar circumstances. (The only difference is that, in France, the EM guy immediately hands you a shot of good cognac. OK, it’s not true; I am kidding.)

In both countries, the value of the service so rendered is entered into the national accounting and it does in fact appear in the American Gross Domestic Product for the year (GDP) and in the French GDP, respectively. The GDP of each country thus increases by something like $500 each time an ambulance is used. Incidentally, the much decried GDP is important because it’s the most common measure of the value of our collective production. One version of GDP (“PPP”) is roughly comparable between countries. When the GDP is up by 3,5 % for a year, it makes every American who knows it, happy; also some who don’t know it. When the GDP shrinks by 1%, we all worry and we all feel poorer. If the GDP change shrinks below zero for two consecutive quarters, you have the conventional definition of a recession and all hell breaks lose, including usually a rise in unemployment.

Exactly the same is true in France. The government-provided French ambulance service has exactly the same effect on the French GDP.

Now think of this: Is there anyone who believes that the equivalent service supplied in France by a government agency does not have more or less the same value as the American service provided by a private company? Would anyone argue that the ambulance service supplied in France, in most ways identical to the service in America, should not be counted in the French GDP? Clearly, both propositions are absurd.

Same thing for job creation. When the French government agency in charge of ambulances hires an additional ambulance driver, it creates a new job, same as when an American company hires an ambulance driver.

By the way, don’t think my story trivial. “Services” is a poorly defined category. It’s even sometimes too heterogeneous to be useful (not “erogenous,” please pay attention). It includes such disparate things as waitressing, fortune-telling, university teaching, and doing whatever Social Security employees do. Yet it’s good enough for gross purposes. Depending on what you include, last year “services” accounted for something between 45% and 70% of US GDP. So, if you think services, such as ambulance service, should not be counted, you should know that it means that we are earning collectively about half to three quarters less than we think we do. If memory serves, that means that our standard of living today is about the same as it was in 1950 or even in 1930.

Does this all imply that we should rejoice every time the government expands? The answer is “No,” for three reasons. These three reasons however should only show up after we have resolved the issue described above, after we have convinced ourselves that government does provide service and that it and does create real jobs, directly and indirectly. Below are the three questions that correspond to the three reasons why conservatives should still not rejoice when government enlarges its scope. Conservatives should ask these three questions over and over again:

1 Is this service a real service to regular people or is it created only, or largely, to serve the needs of those who provide it, or for frivolous reasons? Some government services fall into this area, not many, I think. Look in the direction of government control, inspection, verification functions. Don’t forget your local government.

Often, the answer to this question is not clear or it is changing. Public primary and secondary education looks more and more like a service provided largely or even primarily to give careers to teachers and administrators protected by powerful unions. It does not mean that the real, or the expected service, “education,” is not delivered, just that it’s often done badly by people who are not the best they could be to provide that particular service; also people who are difficult or impossible to replace.

2   Is this particular service better provided by government or by the private sector? Is it better provided by government although the provision of the service requires collecting taxes and then paying out the proceeds to the actual civil servants through a government bureaucracy? That’s a very indirect way to go about anything, it would seem. That’s enough reason to be skeptical. The indirectness of the route between collecting the necessary funds and their being paid out to providers should often be enough to make government service more expensive than private, market-driven equivalent services. Note that the statement is credible even if every government employee involved is a model of efficiency.

The US Post Office remains the best example of a  situation where one would say  the private sector can do it better.

Only conservatives dare pose this question with respect to services one level of government or other has been supplying for a long time or forever. The Post Office is inefficient; if it were abolished, the paper mail would be delivered, faster or cheaper, or both. Some paper mail would not be delivered anymore. Many more of us would count it a blessing than the reverse. While there is a broad consensus across the political spectrum that children should be educated at collective expense, there is growing certitude that governments should not be in the business of education. In many parts of the country, the public schools are both expensive and bad. Last time I looked, Washington DC was spending over $20,000 per pupil per year. Give me half that amount and half the students or better will come out knowing how to read, I say. (It’s not the case now.)

3   This is the most serious question and the most difficult to answer concretely: Does the fact that this service is provided by government (any level) have any negative effect on our liberties? This is a separate question altogether. It may be that the government’s supply of a particular service is both inefficient and dangerous to freedom. It may be however that government supply is the most efficient solution possible and yet, I don’t want it because it threatens my freedom. As a conservative, I believe that my money is my money. I am free to use it to buy inefficiently, in order to preserve liberty, for example. I am not intellectually obligated to be “pragmatic” and short sighted.

To take an example at random, if someone showed me, demonstrated beyond a reasonable doubt, that Obamacare would reduce the cost of health care without impairing its quality, if that happened, I would still be against it because of the answer I would give to the third and last question above.

I don’t want a any government bureaucracy to make decisions that are ultimately decisions of life and death on my behalf. The possibility of blackmail is too real. Even thinking about it is likely to make some citizens more docile than they otherwise would be. So much power about such real issues must have a chilling effect on the many.

The rule of thumb is this: Every expansion of government reduces individual freedom. That’s true even if this expansion creates and efficient and effective government agency, say, a real good Post Office we don’t even know how to dream of. And this is not an abstract view. The well-intentioned and in other ways laudable recognition of homosexual marriage was followed in short order by threats and fines against a hapless baker who declined to bake a cake for a gay wedding. We must keep in mind at all times that, of course, the power to fine, like the power to tax, is the power to destroy.

An efficient but ethically objectionable government service is not something I worry much about, in the case of Obamacare specifically, by the way. It is inefficient, ineffective and dangerous to individual liberty all at once.

Conservatives don’t do enough to proclaim that their opposition to big government has an ethical basis, that it’s a moral position independent of the quality of big government. This silence makes if easy for liberals to caricature conservatives as just selfish grouches who don’t want to pay taxes.

Most of the time, I don’t want to pay taxes because I don’t want to be forced. I would gladly give away twice the amount of my taxes if there were a way to do it voluntarily instead of paying taxes.

I am so opposed to this kind of force that I think even the undeserving and obscenely rich should not be despoiled by the government. It’s an ethical position, not a pragmatic one. And, it sure cannot be called “selfish.” (WTF!)

My favorite posts at NOL this year

Last week I promised y’all a post on my favorite reads at NOL this year. I almost always keep my promises, so below is a long-ish list of essays I really enjoyed reading and learning from this year.


My absolute favorite essay of 2016 at NOL was Barry Stocker’s analysis of the attempted coup in Turkey. Dr Stocker has spent a quarter of a century in the Turkish-speaking world and all of his acquired wisdom of the region is on display in the piece. Barry didn’t post much here this year, but I am hoping that, given the geopolitical situation in his neck of the woods (Dr Stocker teaches political philosophy at Istanbul Tech), he’ll be able to provide much more insight into the challenges the region will face in 2017.

Jacques, who has become sidetracked ever since Donald Trump became the GOP nominee, had an excellent post titled “A Muslim Woman and the Sea” that everyone should read. I don’t agree with it, but the quality of his writing almost demands that you read through the entire piece. In it is the peaceful nostalgia for both youth and French Algeria, the almost careless way he describes his surroundings, and the slow, deliberate manner in how he attacks his enemies. It is all on display for you, his audience, to devour at your leisure. Dr Delacroix is a world-class storyteller.

Mark Koyama’s piece on Jewish communities in premodern Europe garnered a lot of praise, but I found his post on medieval China to be much more fascinating. In the post, Dr Koyama summed up his recent paper (co-authored with UCLA Anderson’s Melanie Meng Xue) on literary inquisitions during the Qing era (1644-1912). What they did was tally up the number of times the state dragged scholars and artists to court in order to accuse them of delegitimizing the Qing government. This had the unfortunate (but predictable) effect of discouraging discussion and debate about society in the public sphere, which stifled dissent and emboldened autocratic impulses.

Chhay Lin had a number of great posts here, some of which were picked up by major outlets like RealClearWorld and 3 Quarks Daily, and Notes On Liberty is lucky to have such a cool cat blogging here. My favorite post of his was the one he did on his childhood in a Cambodian refugee camp along the Khmer-Thai border. What an inspiring story! I hope there are more to come in 2017. (Chhay Lin, by the way, splits his time at NOL with SteemIt, so be sure to check him out there).

Zak Woodman had lots of good posts in his debut year (including NOL‘s most-read article), but the two I enjoyed most were his thoughts on empathy in cultural discourse and his Hayekian take on safe spaces. Both pieces took a libertarian line on the freedom of speech, but Mr Woodman’s careful articles, which are as much about being true to the original meaning of some of the 20th century’s best thinkers as they are about libertarianism, suggests that he has a bright future ahead of him as one of the movement’s deeper thinkers (he’s an undergraduate at UM-Ann Arbor). I look forward to his thoughts in 2017.

Bruno Gonçalves Rosi burst on to NOL‘s scene this year with a number of posts (in both English and Brazilian Portuguese). His blistering critiques of socialism were fundamental and – to me, at least – reminiscent of the debates between libertarians and statists here in the United States in the 1970s and 1980s. My favorite of Dr Rosi’s 2016 posts, however, was his reflection of the 2016 Rio Paralympics that took place in the late summer (at least it was late summer here in Texas). Bruno brilliantly applied the Games to the famous argument about inequality between 20th century American philosophers Robert Nozick and John Rawls. I hope the piece was but a glimpse of what’s to come from Dr Rosi, who also has a keen interest in history and international relations.

Lode Cossaer is probably busy with his very intriguing dissertation (“the institutional implications of the tension between universal individual rights and group self governance”), but he did manage to find some time to dip his feet into the blogging pool with a few insightful posts. My favorite was his explanation of Donald Trump’s Carrier move, which was blasted from all sides of the political spectrum (including libertarians) for being a prime example of “crony capitalism.” Cossaer, in his own delightfully contrarian manner, pointed out that there is a trade-off between the rule of law and lower taxes. This trade-off might not be pretty, but it exists regardless of how you feel about it. Lode, in my opinion, is one of very few thinkers out there who can walk the tight-rope between Rothbardian libertarianism and plain ole’ classical liberalism, and he does so ruthlessly and efficiently. I hope we can get more contrarianism, and more insight into Cossaer’s dissertation, in 2017.

Vincent has been on a roll this month, and I simply cannot choose any single one of his 2016 posts for recognition. His pêle-mêle comments on the debate between historians and economists over slavery is well-worth reading, especially his insights into how French Canadians are portrayed by economic historians in graduate school, as are his thoughts on the exclusion of Native Americans from data concerning living standards in the past. These posts highlight – better than his more famous posts – the fact that economists, along with political philosophers and anthropologists, are doing way better historical work than are traditional historians. Dr Geloso’s post on fake news as political entrepreneurship did a wonderful job, in my eyes, of highlighting his sheer passion for history and his remarkable ability to turn seemingly boring topics (like “political entrepreneurship”) into hard talking points for today’s relevant policy debates.

Federico is still practicing corporate law in Argentina, so every article he writes at NOL is done so in his free time. For that I am deeply grateful. His early August question, “What sort of meritocracy would a libertarian endorse, if he had to?” was intricately stitched together and exemplifies Federico’s prowess as one of the world’s most novel scholars of Hayekian thought. I also enjoyed, immensely, a careful, probing account of human psychology and our ability to act in this short but rewarding post on homo economicus. I look forward to a 2017 filled with Hayekian insights and critical accounts of social, political, and economic life in Buenos Aires.

Rick spent the year at NOL blogging about whatever the hell he wanted, and we were all rewarded for it. Dr Weber is obviously emerging as important conduit for explaining how “politics” works in democratic societies, and perhaps more importantly how to be a better, happier person within the American system. I hope Rick continues to explore federalism though a public choice lens, but I also suspect, given Dr Weber’s topics of choice this year, that Elinor Ostrom would have been interested in what he has to say as well. 2017 awaits! Here is Rick breaking down Trump’s victory over Clinton. You won’t get a finer explanation for why it happened anywhere else. Oh, and how about a libertarian argument for an FDA?

Michelangelo, who is now a PhD candidate in political science at UC Riverside, won my admiration for his brave post on safe spaces and the election of Donald Trump. While 2017 may be composed of uncertainties, one thing that is known is that Trump will be president of the United States. We need to be wary and vocal (just as we were with Bush II and Obama).  Michelangelo was in top form in his piece “…Why I Don’t Trust the Police,” so much so that it stuck with me throughout the year. It is libertarianism at its finest.

William Rein, a sophomore (“second-year”) at Chico State, has been impressive throughout the year. His thoughts do very well traffic-wise (literally thousands of people read his posts), and it’s all well-deserved, but I thought one of his better pieces was one that was relatively slept on: “Gogol Bordello & Multiculturalism.” Mr Rein points out that Political Correctness is destroying fun, and the election of Donald Trump is merely the latest cultural challenge to PC’s subtle tyranny. William weighed in on the safe spaces concept as well and, together with Zak’s and Michelangelo’s thoughts, a coherent libertarian rationale has formed in response to this cultural phenomenon. If you want to know which clouds young libertarian heads are in, NOL is a great place to be.

Edwin initiated the best debate of the year here at NOL with his post on classical liberalism, cosmopolitanism, and nationalism. Barry replied (in my second-favorite post of his for 2016), and Dr van de Haar responded with a third volley: “Classical Liberalism and the Nation-State.” At the heart of their disagreement was (is?) the concept of sovereignty, and just how much the European Union should have relative to the countries comprising the confederation. Dr Stocker concluded the debate (for 2016, anyway) with a final post once again asserting that Brexit is bad for liberty. For Edwin and Barry, sovereignty and international cooperation are fundamental issues in Europe that are not going away anytime soon. NOL is lucky to have their voices and, like Dr Stocker, I hope Dr van de Haar will be able to provide us with many more fascinating and sometimes contrarian insights in 2017.

Lucas Freire wasn’t able to post much here this year (he is doing postdoc work in South Africa), but his post on economics in the ancient world is well worth reading if you are at all interested in methodology and the social sciences. Dr Freire has continually expressed interest in blogging at NOL, and I am almost certain that 2017 will be his breakout year.

Those are my picks and I’m sticking to ’em (with apologies to Rick). Notewriters are free to publish their own lists, of course, and if readers would like to add their own in the ‘comments’ I’d be honored (you can always email me, too). The post I most enjoyed writing this year, by the way (thanks for asking…), was a snarky one questioning the difference between Saudi Arabia and Islamic State. Thanks for everything.

On the trade off between the rule of law and lower taxes

The recent Carrier deal has caused some controversies in liberty-oriented circles. For example, The Mises Institute published a defense of the deal, arguing (along other lines, please read the article yourself):

there is nothing inherently wrong with an administration focused on keeping jobs in America — especially if this is accomplished by relieving tax and regulatory burdens.

The point I wish to make here is a general point, so I won’t go into the specifics of the Carrier deal. Among other reasons: I don’t know the specifics of the deal (I don’t know the content and I don’t know how the deal came to pass.) What I wish to do here is to argue the general case on how to view these kinds of tax exceptions.

The point we ought to remember, I think, is that there are a trade offs between two important liberal values, although they are important in different ways. On the one hand, we have the idea of rule of law, the idea that the law is general, not specific, applies to everyone rather than some, and that it’s not designed to favor some because it should serve an open-ended order. Things that contribute to such a legal order are ipso facto prima facie good, things that take away from such a legal order are ipso facto prima facie bad.

On the other hand we have the idea that taxes are bad. Things that lower taxes are prima facie good, things that increase taxes are prima facie bad.

But neither of these things trump all other considerations. Let me give you two examples.

  • Suppose there was a law that said that the taxes on, for example, business started by family members of politicians are automatically exempted from taxes. Would this be a good law?
  • Suppose there was a law that said that everyone has to be drafted and has to serve mandatory military service overseas, except the family members of politicians. Again: would this be a good law?

In both of these questions, the answer depends on the liberty-inspired framework you use to answer the question. If you think the value of the rule of law outweighs the value of individual liberty of those family members (who are, after all, not responsible for the actions of their political family members) than you think these are bad laws. If you think the increase in individual liberty for those family members is more important than the violation of a rule of law principle, than you think these are good laws. My point is not to say how one should determine this, my point is that there are two liberty-inspired frameworks that can justify an outcome, and both of these frameworks are relevant in determining what kind of laws we ought to support.

To make the issue slightly more applicable: is the increased damage on the rule of law (created by allowing a specific exception on the general laws on taxes) larger or smaller than the benefits that allow a company to have less taxes?

Some people have tried to argue by analogy – for example, comparing it to the draft. The problem is that analogies quickly run into the problem of changing the relative values of the two important concepts. For example: is it a good thing that women are exempted from the draft? Yes, this seems like obviously a good thing. Would it be a good thing that male children of politicians would be automatically exempted from the draft? This seems like less obviously a good thing.

Would it be a good thing if white people were automatically exempted from the draconian drug laws? Maybe it would, but maybe that also lowers the chance of getting rid of the drug laws altogether. Different margins matter in these kinds of evaluations.

The wrong thing to think is that all policies are pro tanto good just because they increase liberty on some margin for some people, especially if this allows for the prolonging of bad policies by the current ruling class. Some policies can be bad on some margins and good on others and reasonable people can disagree whether the complete net effect of this is good for all.

Maybe it’s a good thing that some people are exempted from evil laws (such as taxes), but it’s not good that the political class gets to choose who does so. Because those who will be exempted will be those who are connected to the political class. So one can absolutely like lower taxes, oppose politicians’ power to choose who is exempted and oppose that, and still be happy for a company that they got a tax cut. (Unless, of course, the company itself is evil. This is certainly possible if they are partners in, for example, the wars that the USA commits.)

So tl;dr. As I posted somewhere on facebook:

Rule of law and lower taxes are two good things. A president (or important person connected to the ruling class such as the president elect) getting to pick and choose winners isn’t desirable, but a tax break is. A higher tax isn’t desirable, but a rule of law is.

Trying to argue the case based on principle seems wrong. It depends on the margins. In the case of the draft, the margin *against* rule of law seems important enough to say it’s a clear victory for liberty to not have women included.

In the case of tax breaks, this is less obvious and reasonable people can come out on different sides of this, I think.

Can we use tax data to measure living standards (part 2)?

Yesterday, my post on the differences in per capita income and total income per tax unit caused some friends to be puzzled by my results. To their credit, the point can be defended that tax units are not the same as households and the number of tax units may have increased faster than population (example: a father in 1920 filled one tax unit even though his household had six members, but with more single households in the 1960s onwards the number of tax units could rise faster than population for a time).

The problems regarding the use of tax units instead of households is not new. In fact, it is one of the sticking point advanced by skeptics like Alan Reynolds (see his 2006 book) and, more recently, by Richard Burkhauser of Cornell University (see his National Tax Journal article here).

Could it be that all the differences between GDP per person and income per tax unit are caused by this problem? Not really.

There is an easy to see if the problem is real. Both measures are ratios (income over a population). Either the numerator is wrong or the denominator is wrong. Those who view tax units as the problem argue that the problem is the denominator. I do not agree since I believe that the numerator is at fault. The way to see this is simply to plot total income reported by all tax units and compare this with real GDP. What’s the result?

Even with tax-reported income being deflated with the Implicit Price Deflator (IPD) instead of the consumer price index, we end up with a difference (in 2013) of roughly 3 orders of magnitude between GDP and tax-reported income relative to the 1929 base point. Basically, GDP has increased by a factor of 14.749 since 1929 while IPD-deflated tax-reported income has only increased by a factor of 11.546.

TaxData

As a result, I do not believe that the problem is the tax unit issue. The problem seems to be that tax data is not capturing the same thing as GDP is!

Basic income: a debate where demand magically disappears!

For a few months now, the case for the basic income has resurged (I thought it died with Milton Friedman in 2006, if not earlier). In the wake of this debate, I have been stunned by the level of disconnect between the pundits and what the outcome of the few experiments of basic income have been. The most egregious illustration of this disconnect is the case of the work disincentive.

To be clear, most of the studies find a minor effect on labor supply overall which in itself does not seem dramatic (see Robert Moffitt’s work here). Yet, this is a incomplete way to reflect on the equilibrium effect of a massive reform that would be a basic income.

Personally, I think that there is a good reason to believe that the labor supply reaction would be limited. At present, many tax systems have”bubbles” of increasing marginal tax rates. In some countries like Canada, the phasing out of tax credits for children actually mean that the effective marginal tax rate increases as income increases from the low 20,000$ to the mid 40,000$. As a result, a basic income would flatten the marginal tax rate for those whose labor supply curve is not likely to bend backward. In such a situation, labor supply could actually increase!

Yet, even if that point was wrong, labor supply could shift but without any changes in total labor provided. Under most basic income proposals, tax rates are dropped significantly as a result of a reduced bureaucracy and of a unified tax base (i.e. the elimination of tax credits). In such a situation, marginal tax rates are also lowered. This means greater incentives to invest (save) and acquire human capital. This will affect the demand for labor!

A paper in the Journal of Socio-Economics by  Karl Widerquist makes this crucial point. None of the experiments actually could estimate the demand-side reaction of the market. Obviously, a very inelastic labor demand would mean very little change in hours worked and the reverse if it was very elastic. But what happens if the demand curve shifts? Widerquist does not elaborate on shifts of the demand curve, but they could easily occur if a basic income consolidates all transfers (in kind and conditional monetary) allows a reduction in overall spending and thus the tax take needed to fund activities. In that case, demand for labor would shift to the right. A paper on the health effects of MINCOME in Manitoba (Canada) shows that improvement in health outcomes are cheaply attained through basic income which would entail substantial health care expenditures reduction.

I have surveyed the articles compiled by Widerquist and added those who have emerged since. None consider the possibility of a shift of the demand curve. Even libertarian scholars like Matt Zwolinski (who has been making the case forcibly for a basic income for sometime now) have not made this rebuttal point!

Yet, the case is relatively straightforward: current transfers are inefficient, basic income is more efficient at obtaining each unit of poverty reduction, basic income requires lower taxes, basic income means lower marginal tax rates, lower marginal tax rates mean more demand for investment and labor and thus more long-term growth and a counter-balance to any supply-side effect.

I hope that the Bleeding Heart Libertarians will take notice of this crucial point in favor of their argument!

Natural Rights and Taxation

A moral right is a correlative or flip side of a moral wrong. The right to have X means that it is morally wrong or evil to deny the holder from having X by stealing or destroying it. The right to do X means it is evil for others to forcibly prevent a person from doing X.

People have the natural right to do anything that does not coercively harm others, and the natural right to be free from coercive harm. Natural rights are based on natural moral law, as expressed by the universal ethic. By the universal ethic, all acts, and only those acts, which coercively harm others are evil. I and others have written on natural moral law, easily searched on the Internet.

A legal privilege is a special power or income granted to particular people because of their political status. A king is privileged because of his inheritance and laws regarding this. A slave owner is privileged to own another human being. There are no privileges in natural moral law, since one of the premises from which the universal ethic is derived is human moral equality, an equality of moral worth, implemented as equality before the law and equal legal rights.

In the Constitution of the United States, the 9th Amendment states, in its entirety, “The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.” The other rights are common-law and natural rights. Therefore the U.S. Constitution recognizes natural rights, and all laws in the USA should be consistent with the 9th Amendment, although in practice, the 9th is ignored and not widely understood.

This brings us to two court cases. In Murdock v. Pennsylvania, 319 U.S. 105 (1943), the Supreme Court stated that a law requiring solicitors to purchase a license was an unconstitutional tax on the Jehovah’s Witnesses’ right to freely exercise their religion. The Court ruled that “The state cannot and does not have the power to license, nor tax, a Right guaranteed to the people,” and “No state shall convert a liberty into a license, and charge a fee therefore.”

In another case, the Court ruled similarly, that “If the State converts a right (liberty) into a privilege, the citizen can ignore the license and fee and engage in the right (liberty) with impunity.” (Shuttlesworth v. City of Birmingham, Alabama, 373 U.S. 262).

The principles behind the statements of the Court have to apply generally. The federal and state governments may tax privileges, but may not tax a natural right. Since people have a natural right to engage in labor for wages, taxes on wages violate natural rights and therefore the Constitutional rights recognized by the 9th Amendment. Taxes on trade and goods also violate natural rights, which is why state laws claim, incorrectly, that, when they impose a sales tax, they are taxing the privilege of selling goods. (For example, it is written that “California assesses a sales tax on sellers for the privilege of doing business in California.”)

If natural rights are violated by taxing wages, the same applies to the products of labor and the income from the products. Thus a person has the natural right to fully keep and trade produced goods and the financial counterparts as shares of companies and their incomes.

The U.S. Constitution does provide government with the power to tax. Article I, Section 8, states, “The Congress shall have power to lay and collect taxes, duties, imposts and excises.” The 16th Amendment restricts the income tax to being levied as an indirect tax, but otherwise did not alter or add to the powers of Article I.

There is an apparent contradiction. Article I empowers government to tax imports and goods, and other taxes, but the 9th Amendment prohibits taxing acts which are natural rights.

Clearly the founders did not oppose taxing as such. But the letter and spirit of the law have to go beyond the intents of the founders. The Constitution also did not explicitly outlaw slavery, despite its recognition of preexisting rights. When slavery was later abolished, this was in accord with justice as prescribed by natural moral law and the 9th.

If a parent says to a child, you may go outside and play, and also says, do not throw rocks at the squirrels, the permission to play does not imply that anything goes. Thus when the Constitution authorizes taxes, but then, in an Amendment, says, by implication as recognized by the Supreme Court, that government may not tax a right, then the power of taxation has been constrained.

The U.S. Constitution creates an imposed but limited government, and the founders recognized the need for revenues. The sources of government revenue boil down to two original sources: labor and land. There is human exertion, and there is what nature provides.

Since human exertion and its gains are a natural right, the only source left is nature’s resources, land. Thus the moral question is whether the ownership of land is a natural right. This issue is, of course, much disputed. In my judgment, the moral law of property is, “To the creator belongs the creation, and where there is no creator, the benefits belong to the people in equal shares.” The universal ethic is based on the premise, from the nature of humans being, as John Locke wrote, “all equal and independent,” the independence being that thinking and feeling occur individually.

The benefits of land are measured as its economic rent. Therefore, the rent belongs to the people, and by natural moral law, the individual right of the possession of land is conditional on paying the rent to the rightful owners, the people. A tax on land rent does not violate the natural rights of the title holder.

Although the rent really belongs to the people and not to an imposed government, since government is already an imposition, it violates natural rights the least when rent is used for public revenues to pay for public goods that generally benefit the people. The people receive the rent in kind rather than in cash.

If consistently implemented, the 9th Amendment, backed up by the Murdock case, implies that the income tax as well as excise taxes should not tax the right of labor and trade. The greatest challenge of humanity is to recognize the full spectrum of human natural moral rights.

—————————————————

A similar article by me appears in progress.org as “Rights and Privileges”.

Republican Tax Plans are Misguided

Predictably, Republican candidates are showcasing tax plans offering goodies for everybody. When some spoilsport has the nerve to point out the worsening deficit that would result, the most common retort is that the tax cut will spur economic growth enough to overcome the higher deficit. Some day. Somehow.

Of course lower tax rates will spur growth so that the loss in tax revenue will be less than proportional to the cut in tax rates. But it is foolish to think that we’re ensconced on the far side of the Laffer curve, for those who know that phrase, which simply means that tax rates are so high that cuts will produce higher revenue.

What about the claim that a flat tax is fairer than the graduated rates we have now? Perhaps, but how does one judge the fairness of any tax? The usual answer is that taxes should be based on the taxpayer’s ability to pay. But that is a nebulous concept at best. It means that somehow we figure out how much income is necessary and how much is up for grabs by politicians  Do we need a cell phone, cable TV, air conditioning? Who’s to say?

At least a flat tax would treat everybody alike. Or would it? Under a flat tax, where everybody hands over the same percentage of their income, those who earn a lot pay more money than those who don’t. Why? Do the high earners consume more government services? Are high earners bad people who deserve punishment?

I concede that some tax schemes could be fairer than others. For example, much as I might like the idea of complete tax exemption for septuagenarian European-American males, I’ll grant that would be a bit unfair. But in the end no tax can be entirely fair because taxation is coercive activity: stealing if you like.

Don’t get me wrong: I like tax cuts, preferably across the board, but targeted cuts are fine with me too. But the focus on the tax code is misplaced. The root problem is the amounts of real goods and services that are consumed by politicians and bureaucrats. Whether they are financed by taxation or borrowing is a secondary issue.

Republicans should be drawing up lists of programs to reduce or eliminate. “Defense” spending should be at the top of the list. The list should be broad enough that everybody’s ox is gored. Who knows, this approach might actually gain some traction with the fed-up electorate.