Tuesday, December 21, 2010

Ron Paul on Keeping Taxes the Same

As I said on this blog a week or so ago, the tax-cut debate raging the last couple months is one of the most tragic framing issues I've seen in a long time. I even suffered the pain of reading, and then writing about, Keith Olbermann's regurgitated idiocy on the subject.

Ron Paul explains the doublespeak and fallacious framing in the tax debate at Lew Rockwell's site, and he really knocks it out of the park... Check it out:
"George Orwell warned us about the use of “meaningless words” in politics, words that are endlessly repeated by sloganeering politicians until they have no meaning at all. Meaningless words certainly were on display during last week’s congressional debate over the latest tax bill.

Over and over again we heard trite, empty phrases like “tax cuts for the wealthiest 2%,” “tax giveaways,” “tax earmarks,” and “borrowing money to give to millionaires.” Time and time again the same falsehoods were presented as fact, and reported as such by a credulous media.

But all of these clich├ęs about taxes are based on the presumption that government has a right to all of your income, and so government “gives” you something when it allows you to keep a portion of that income. To this mindset, tax cuts represent a “cost” to government. After all, they argue, money that really ought to go to the most noble of purposes – wealth redistribution via taxation – is being kept by greedy people and corporations who just don’t want to pay their fair share.

Far too many Americans truly believe that tax cuts represent a government giveaway, indistinguishable from an outright subsidy or entitlement payment. To combat this mindset, we need to be clear with our language.

A subsidy, properly understood, occurs when government takes tax dollars and gives them to favored individuals, companies, or industries. A tax cut, by contrast, simply means government takes less from an individual, company, or industry. When government takes less from you, it has not given you anything; it merely has harmed you less. This is the critical distinction that has been lost in the endless, tired debate about tax policy."
I don't think this point could possibly be stated too many times, or loudly enough.

When government takes less of people's money, it isn't "a Christmas present", as some people have claimed. It's not a gift. It's just less theft. There is nothing altruistic about taking other people's money by force, no matter how good your intentions are for what you intend to spend that money on. Cato's president, David Boaz, is an acquaintance and a Facebook friend of mine. A few days ago, he posted the following "status":
"The distinguished economist Alan Blinder says it's a "Christmas present" when the government doesn't raise taxes on the rich. So I've got a present for Dr. Blinder: I'm not going to steal his car."
Again... Yep.

To this end, there are many people very confused about what's going on in that realm right now... It is absolutely shocking to me how many average Americans honestly accept that a tax cut - or even, not raising taxes - is a cost borne by government.

That is positively insane!

What's even more insane is that the government and statist allies have ever actually been able to succeed in convincing people of something so ridiculous in the first place.

Stop for a moment and consider this: Possibly a majority of people in America have accepted an idea that can only be true if they accept the premise that they are serfs, literally owned wholesale by the Federal Government.

Let me repeat: To consider tax cuts to be a government expense requires you to first believe that government owns 100% of your income and anything that you're allowed to keep is "spending".

But is that what you believe? Really? Do you honestly think your existence is a gift from Uncle Sam? Does Uncle Sam sign your paychecks? (Ok, yes, if you're in the military, maybe "he" does... I get that... But please understand, that's not true for most people!)

Your income is earned by providing someone with a good, a service or some productive aspect of your time & labor. Most everyone earns their living this way. The few people for whom that is not true are commonly known as "politicians", and basically anyone who gets their living from special deals and favors from those politicians... Like, oh I dunno... Defense contractors, and many investment bankers. But... Though there are a few people like that, the vast majority of us don't earn our income through wealth transfers provided through government force.
“Despite a voluminous and often fervent literature on “income distribution,” the cold fact is that most income is not distributed: It is earned.” - Thomas Sowell (The Vision of the Anointed)
Now, of course, one other argument I've heard a few times about this is the idea that "well, without government, we'd have no money!" So clearly - since government prints your money in the first place - without them, you wouldn't be paid at all.

Well... Bollocks!

Money wasn't invented by government, friends... I wish we all knew this, but few seem to. Money arose out of the quite understandable need to trade with other people easily and effectively. Direct barter is massively inconvenient. I think this needs no explanation. Money has been used by basically every society in human history. American Indians used it, South American peoples like Aztecs & Mayans used money, we have evidence that certain forms of money existed as long as 100,000 years ago, and commodity monies (like coins) existed at least 3,000 years ago in Mesopotamia.

So.. If you eliminated the entire US government today, we'd still have money. We'd still get paid for our work... and not in chickens.

Under almost no circumstances are your wages "given to you" by government in the first place. Wealth isn't "distributed". The government didn't invent the money and they didn't do anything (generally) to provide you with a productive job, and if they do employ you, please recognize that the only way they can do so is by first taking the money they pay you with away from other citizens or by printing new money and devaluing the currency.

So... Seriously... Government does not own you. The 60-70% of your current income that you are legally allowed to keep is not due to government charity or generosity! The opposite is true, in fact. It is from your pockets that government revenue exists at all. Without you, the tax payer, agreeing to fork over 30-40% of your income each year, the politicians who spend that money on their own "legacies", pork projects and kick-backs "favors" for their buddies would not have jobs... Withdrawing your consent from this process is the one thing these people fear the most - and that is, I suspect, why they spend so much effort trying to convince you that up is down, backward is forward, and tax-cuts are government officials generously spending some of their cash on citizens.

But even if you haven't thought about it in a long while... Up is still up; forward is forward; and tax cuts are NOT A GIFT! Not for you, and not even for (most of) the rich people you might envy.Government taking less from people is just that... less theft... and nothing more.



*Disclaimer: Some rich people do live off of government and did not become wealthy by providing a service or good that filled a market need by trading with people voluntarily. These are the people who used government force to redirect cash to their own pockets. I mentioned defense contractors and investment bankers... Defense contractors do not fill any market demand. You and I don't hire Blackwater or send them to go kill Arabs... Politicians do that, with or without our approval. Likewise, a giant reason for the increasing pay disparity in America has to do with the central bank (Federal Reserve) and the entire fractional reserve banking system. When money is printed by the Fed, that money first goes through the pockets of the top - read: well-connected - investment banks. They write the rules for that money's use, and they get to loan it back to individual debtors and to the American taxpayers collectively (by buying government debt) and collecting interest on all of it. They are also allowed to lend out money far in excess of what is actually stored in their "reserves" (thus "fractional reserve banking"), which means their comparative "wealth" (by which I mean, surplus money, not surplus stuff) can grow at immensely faster rates than anyone else's.


Consider: When you loan money to a friend, you can loan at a ratio of 1:1 and no more, whereas the common ratio for banks is 9:1 and at the height of the financial crisis, the five biggest banks were frequently loaning at 20, and even 30:1. In other words, if you only have $100, you can only loan out $100, but If a bank only has $100, it can commonly loan out $900 and reap the profits of $900 worth of interest with only $100 in reserves. They cover bad bets with guaranteed bailouts and passing off losses onto taxpayers via government backed organizations like the FDIC.


It's not just bankers & defense contractors though... It's also the money farmers get from subsidies, people who work in community action programs funded by government, and anyone who's livelihood is provided either by subsidy or protectionism.


It's very hard to separate these people from other rich people when talking about tax cuts, but it's necessary to set aside the wealth people acquire by government protection and special benefits vs. the wealth they acquire by producing and selling goods & services.... It is complicated, but an extremely important distinction to make. More on the wealth gap some other time.

10 comments:

David Blanar said...

"When government takes less of people's money, it isn't 'a Christmas present', as some people have claimed. It's not a gift. It's just less theft."

No. It's neither a Christmas present nor theft.

Oliver Wendell Holmes said "Taxes are what we pay for civilized society", which is right.

We can argue about how much tax is too much; I suspect for you, anything is too much, and it's your right to believe as much. Fortunately, very few people share this view.

You assume government always bad. I'm reminded of those who wring their hands at the prospect of there being no God: they fret it is license to do all manner of sin. My view is it says more about their propensity to misbehave than any larger moral hazzard.

Sean W. Malone said...

Actually, David, I only assume that government is force.

Note:

"Government is not reason; it is not eloquent; it is force. Like fire, it is a dangerous servant and a fearful master" - George Washington

Government is best defined as the one organization with a "legal" monopoly on the use of violence in society.

I think reasonable people can debate whether or not some force is necessary - such as to protect property and persons from theft or murder, to make sure contracts are kept, to make sure people aren't enslaved, etc.

I'm happy to debate the merits of different ideas like that, but you're probably right that my threshold for what uses of force I find acceptable are significantly lower than yours.

Likewise, we can argue on whether or not taxation is "necessary" to keep a "civilized society" running... Of if perhaps there are other ways - voluntary ways - to accomplish comparable ends.

But it's just rhetorical nonsense to call it anything but what it is - which is quite clearly theft.

Distorting ideas and definitions in metaphorical or poetic ways is a great means of keeping people from calling a spade a spade, and thus keeping people from understanding reality better.

A definition of theft:
— n
1. [criminal law] the dishonest taking of property belonging to another person with the intention of depriving the owner permanently of its possession

This definition rather aptly describes taxation. Property (money, in this case) is taken by force against the will of the property owner, and then used for whatever purposes the people doing the taking want.

Of course, the justification is that the money taken (on pain of jail, or eventually on pain of getting shot, beaten or kidnapped by the police if you resist imprisonment) is going to be put to "good use". But that certainly doesn't make it any less theft, it just means that it's a specific context in which many people accept that theft is ok.

Unfortunately, as long as most people don't recognize taxation as theft, then there's really no end to what some of those people think is acceptable to drain away from the productive parts of an economy for their own - presumably "noble" - ends. I personally think we need to radically change the way we discuss government and taxation.

Whatever you want done in society, the first question that needs to be asked is: "Are you ok with doing X thing at gun-point?"

If not... Then government isn't the answer.

(See: http://www.youtube.com/watch?v=PGMQZEIXBMs)

For far too many people, far too much of the time, such a direct question is simply unasked, and if it is, then it's pretty appalling to me to see the number of cases in which some people are cavalier about using violence to achieve their own ends.

I would argue, however, that the fact that most people will only support the use of violence if it's done by someone else (police, military, etc.) suggests that they actually don't feel comfortable with it at all - but are happy to ignore it if it suits their purposes.

Sean W. Malone said...

Also..... Isn't your analogy to hand-wringing about god kind of... Well... Backward?

I'm suggesting that for the most part people don't need a top-down controller to run their lives for them.

Both the highly religious and fans of central planning & state authority believe otherwise.

So it is actually you who is arguing that humanity cannot be trusted to run their own affairs, and thus if there is any truth to your view about individual's propensity to misbehave, then I think you should probably look inward.

For many people worried about their own ability to control themselves or to successfully make their own choices, some pick "God" to do it for them, and some pick the secular version of god: the state.

I think that people respond to incentives... not that that's a very controversial idea... So when the incentives provided by the system are strongly weighted in favor of voluntary and mutually beneficial exchange, that's what they do. But when the incentives are to use force to get their way - directly as through armed robbery, or indirectly through getting government to do the robbery for you through vehicles like the IRS or through mandates or protectionism, regulation or controls placed on your competitors, etc. - people will, in fact, use the force instead.

A smaller government generally allows for less opportunity for force to be the dominating feature of human interaction.

David Blanar said...

By the definition quoted, tax is not theft: it is not dishonest. The government is quite clearly stating its intentions, there's nothing dishonest about it.

Regardless, I don't recognize taxation as theft. I see tangible benefit in the public services I consume, made possible through taxation. You call it violent aggression. Fine. We'll agree to disagree. Out of interest, do you believe voting a violent act? It is the imposition of one group's will over another and would seem to qualify.

Your analogy between God and government is flawed though. God (if he exists) is a supernatural being with omnipotent powers, accountable to none. This is simply not true with representative governments.

The state is not God; it is made up of men. The point you didn't make - but which you could - is that humans created government, the same way they did religion. As such, both insitutions are subject to the incipient abuse and corruption associated with our all-too-apparent human frailty.

People do respond to incentives, but that's a meaningless phrase.

Correct me if I'm wrong, but what you actually mean is that people respond to *financial* incentives. It's true: some people do. But not everyone. How do you propose to deal with those individuals?

Sean W. Malone said...

@David: I have multiple points to respond to, so I'll go about it by the numbers.

1. The point of what makes something theft or not is not fundamentally the issue of honesty about the use of the stolen property, but the force itself. If I mug you in a dark alley and take your watch... it doesn't suddenly become acceptable or "not theft" if I tell you I plan to give the watch to my father for his birthday.

Besides which, I absolutely beg to differ on the assumption that governments are remotely honest about their use of taxed money anyway.

They are not.

People who believe their taxes are going towards their eventual retirement or for new roads are in fact seeing that money go to other causes entirely which they don't often realize - such as, for instance, spying on American citizens without warrants.

You are suggesting, rather absurdly, that government is even remotely transparent about their actions in spite of all evidence to the contrary. How much of your tax dollars went into funding the bombing of people in Yemen, and the subsequent cover-up where the US government told everyone it was actually Yemen who bombed themselves? I bet you would have no way to find out even if you tried.

2. Saying you don't see it as theft because you benefit from the results is a patently fallacious idea.

If I buy a stolen Audi at half the price, I am benefiting a lot... but uh... still theft. You are merely justifying a forcible means of accomplishing an end that you want by re-framing the method into something more socially palatable than what people think of as "stealing".

Likewise, you are ignoring the myriad unseen costs. Public services which you benefit from come at the expense of all manner of other arrangements of resources. You instantly discount the idea that a voluntarily generated arrangement would provide the same services in a different & possibly more effective way. That, I think, is a mistake.

I'm happy to take a minarchist position and debate the relative merits of certain programs, but let's start with accurate premises, shall we? Government is at every fundamental root: violence. Taxes can only be collected on threat of force - imprisonment, and in the extreme, death.

Understood in proper terms, it should make us all question exactly how big a role we want violence to take in our lives.

3. Your voting question is a more interesting one.

One view is certainly that by voting, you are giving your support to a system backed by violence. I agree with that, generally...

However, practically speaking, I also think that given that the system is what it is, it can be a way to limit the violence inherent in society. If you vote consistently to limit state power, to reduce state control over individual's decisions, and to stop various acts of aggression, then voting can be a net positive.

But yeah... I mean, if your view of why you should vote is to make sure your team gets into power and directs the apparatus of the state towards all the stuff you like at the expense of the losers...

But no, voting isn't exactly a violent act. It's more akin to being a conspiratorial act determining what the aims of future violent acts are supposed to be. Like a group of pirates deciding how to divide the spoils of their next raid.

I should be clear that this is only with respect to government as it is... Since voting is a decision-making method, and not intrinsically linked with forcible actions, its not voting that would be a problem. If you and your buddies are out to eat, and you each vote to decide the place that would not be a violent act (unless you handcuff and drag along your buddy who doesn't want to go).

Sean W. Malone said...

4. My god analogy was quite apt - because it is about the tendency of some people to want authority figures controlling their (or other people's) behavior. It has nothing to do the quality or accountability of the authority. It's just illustrative of the desire of some to have, or be controlled.

Note that some use invocation of god to dictate other people's lives, just as some invoke god to give themselves a "reason" to act a certain way.

As an atheist... I would, and have often, made the connection between gods & governments both being constructed by men. In fact, for most of "civilized" human history, the church and the state were identical. Now we have the secular agents of control and the religious... different flavors, same ice cream.

The only real difference at this stage in American history, by the way: looking to religion and god to provide answers and direction for your life is voluntary. People who don't wish to follow the rules of one god do not have to.

5. Correcting you: Under no circumstances was I saying that people only respond to financial incentives.

Human action is directed towards the pursuit of individuals' unique values. Financial incentives certainly matter, but they are hardly the only factors in people's decision making process.

That is the best of all reasons to support pluralistic markets and individual liberty. I have utterly no problem "dealing with those people"... I have absolutely no idea why you'd think I, or more broadly, my philosophy would have any kind of a problem with that.

David Blanar said...

You think taxes theft, fine. Just stick with that. Using the dictionary definition got you in all sorts of muddle.

The reason I'm unimpressed by your (repeated) analogy of stolen assets is straight-forward: I don't consider it theft. I'm happy to give my money voluntarily, in which case you cannot define it as theft.

Yes, taxation is compelled by the state. But that doesn't necessarily make it theft; after all, the state compels me to do other things which I don't believe immoral or improper. For example, wearing seatbelts is a pretty good idea. You (may) call it the abdication of liberty; I call it the social contract.

Yes, you don't want to give your money voluntarily, which is fine. I can understand that. But this view colours your attitude towards taxes, so let's agree that we live in a world of obligations and responsibilities, some of which aren't pleasant but a means to an end. You've already (rightly) agreed that government delivers some programmes of 'merit'. Okay.

I would never suggest governments are completely transparent, about taxes or anything else. That would be, as you say, absurd. But I neither demand nor expect full transparency; trust in public servants is the foundation of representational democracy.

Again, with respect, your God analogy is fundamentally flawed. You conflate God with the State. I understand your rhetorical point (seeking control through authority) but it's hardly useful beyond that and confuses what I think it the real issue of interest, which is: while God operates infallibly without petition or recourse, government is the opposite; it is an instituation of man, thereby flawed, and it demands our constant oversight and correction.

Sean W. Malone said...

If you are happy to give your money voluntarily, then why cannot that be the method of paying for your ideal government?

Why do you require the forced participation of everyone else?


Frankly, the purposes for which I believe government has even a remotely legitimate role are areas that could be paid for out of a thimble in the ocean of overall tax-revenue collected by the state.

Most of the taxes everyone pays are going either towards killing people, typically in other countries and often with nebulous connections to any meaningful "threat" to individual Americans' security, and often which are only threats because of America's constant military intervention world wide... OR... To wealth transfers within the United States - most of which go towards favoring certain organizations & businesses, often at the expense of many of the poorest among us.

This is certainly true in the sense that people who's total income is very small spend a higher percentages of that income on basic material goods - and because there are SO many manipulations of the market (between subsidies, tariffs, regulations, licenses, protectionism and of course, through the monetary system itself) that negatively effect consumers in order to favor special interests, goods are generally poorer quality and more expensive than they otherwise would need to be.

Take, for instance, the tariffs that keep out foreign steel... There are thousands of products Americans need & use every day that require steel... Being forced to pay higher prices for foreign steel protects US steel producers from competition to a degree, but anyone who needs something with steel in it pays more than they would otherwise have to for it... So... Cars are more expensive, bicycles, computers, machines of all kinds... and on & on... for everyone. As a result, while there may be a net benefit for the steel industry, the vast majority of people have more expensive goods AND less access to other jobs as a result of less capital being available to hire new employees.

I'm on a tangent a bit, but the point is that most economic interventions have serious costs that few bother to consider - and those costs almost always most negatively impact America's poor...

So this is what taxes are going to in the main. Why support that? Why pretend that you're voluntarily contributing to it?

Sean W. Malone said...

By the way...

I utterly reject the notion of the "social contract" as it actually makes zero sense at all.

There is no "contract" I am aware of that would fit the standards of a citizen's relationship with his government.

A. No one signs or agrees to it.
B. People are said to have agreed de facto at birth essentially - violating all known contract law theory which suggests one needs to be a competent adult in his right mind to agree to the terms of a deal
C. The terms of the contract are strict and binding for one party (the citizen) and entirely open to interpretation, re-write or change by the other party (the state) with largely no consequences at all.


On that note... IF there was any kind of a contract that I had with the US government, I would think that the terms of the contract would be the Constitution - which means that the US government is in breach of said contract in EACH instance of writing a law or statute that violates that document.

That list is incredibly long.

No, no... Social contract theory has some spectacular holes. And of course, historically speaking, the general idea of the social contract comes in defense of the state, after it had already been imposed and maintained through violence.

David Blanar said...

The social contract is not literal of course, but a metaphor, and an important one. You may choose to reject it conceptually -- which doesn't cost you anything, per se -- but I suspect this perhaps unintentional hypocricy on your part; it is, after all, the Golden Rule extrapolated to a societal scale.

I am, however, sympathetic to the complaint that (too many) taxes go towards killing people.

We could probably get into a debate about Machiavelli at this point, for it's a very hard number to agree: is one death at the hands of the taxpayer too much? One hundred? One million? I could argue the federal death penalty meets your criteria but I've yet to find an opt-out on my 1040 for those ill-fated dollars.

You'll accuse me of dodging your query about volunteer revenue propping up my ideal government if I leave it; yet it's a mischevious question, for legitimate states derive - and maintain - their power through the ability to enforce laws. Yes, this necessitates violence, but it makes sense: indeed, we don't leave secure air space to chance.