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The income tax: The grand comeuppance

By Daniel M. Ryan
web posted August 17, 2009

In 1954, a book by Frank Chodorov appeared with the bracing title The Income Tax: Root Of All Evil. His argument isn't inconsistent with the subtext to the subtitle. Although he argues that the income tax is evil because it violates a crucial American norm of liberty, his work could be read as an explanation of why the love of confiscated money is the root of all political evil. Of course, in order to read it in that way, the reader has to be convinced that governmental confiscation of private property is evil regardless of the form. This perspective makes no difference between confiscation done under due process of law, as passed by both lower and upper houses and officially assented to by the Head of State, and a less restrained confiscation. The libertarian disposition would see no essential difference between (say) a wealth tax duly enacted in the above manner, and a wealth-tax resolution that neither saw the upper house nor was presented to the Head of State's pen but was nevertheless enforced on the citizenry.

This disposition leads to a detachment from the civic process than many would consider odd. The term "out of it" may come to mind. In America, the term often used is "ideologue." It could be considered politically passive, and there are pragmatic reasons to frown on it. If there's no crucial difference, then there's no especial reason to get angry if confiscation proceeds beyond the bounds of civic restraints. The only way to turn up the heat would be to get emotional, perhaps excessively so, to compensate for a certain credibility lack. If someone believes that all taxes are to some degree evil, then (s)he has a lot to complain about nowadays. In everyday life, those who complain a lot are pegged as people who just like to complain. They're often ignored outside of their in-group, even when they have something immediately pressing to complain about.

There's another civic drawback to going libertarian. If you truly believe that the root of all taxation is theft, then you'll become resigned to it. Once the money's been forked over, it's gone for good. It's out of your hands, and in the government's. If the government be a thief, then there's no point in acting like the money's going to come back because it won't. Might as well hope for a mugger to be generous after the mugging.

Despite the typical libertarian's volubleness on the subject, his or her actions with respect to taxes are quite passive – almost quietist. This workaday meekness goes a long way to explain why the libertarian worldview has grown so much in a high-tax era while having so little influence…and posing so little threat to government. It also explains why, for the foreseeable future, libertarians will be little more than a small minority. Ordinary citizens don't like to think of the government as a robber writ powerful. Doing so makes one give up on the chance of directing the tax money. The chief barrier to growth in libertarians – not libertarianism – is normal control needs. We need to believe that taxation is a voluntary contribution, or a means of collecting money for common uses, or an exaction that's nevertheless politically legitimate, because doing so means it's also legitimate to get (some of) it back as services or monetary dispensations. Denying that taxation is robbery also lets us try for a say in how the tax money is spent. A real libertarian can't do so without feeling dirty, if not complicit.

This point explains the paradox of influence coexisting with political powerlessness. To an angry taxpayer, libertarians are a great resource for complaints. After all: if you're going to complain, who better to see than the 'born complainer'? If you're sick of being the pasty ['pazi'] in the tax game, who better to encourage than radical critics of all government action? You may have no intention at all of abolishing the State, but allying with people who do might get you a better deal from the tax till. Like every critic, libertarians pick their spots and tend to focus on what they consider the most egregious. If you're not a farmer, or a "bankster," or a union man, or a government employee, or are any of the above but with little sense of shame, you too can co-opt libertarian arguments for your own uses. Those uses can be for lowering your taxes, but also can be for the aim of getting more of the tax proceeds directed your way. After all: you're not Goldman Sachs, are you? Why should they be so lucky and not you?

Anyone who doubts that America is a middle-class entitlement State will have that doubt diffused by looking at the contents of a typical Congressman's or Senator's mailbag. No evidence of libertarian passivity in there!

Those who built great political dreams on the income tax should have a look too. Those complaints are a direct product of the income tax. The extent that those complaints make government dysfunctional is the extent to which the income tax itself has made government dysfunctional. Call it the Nemesis of the Fair Share, not to mention the Nemesis of Relative Poverty. There are lots of taxpayers who make less than a senior-level "tax eater."

Whether or not Chodorov's characterization rings true, it can be said with some informal justice that the income tax is "The Great Comeuppance." By taking so much from so many, it has ratcheted up the politicization of the citizenry many-fold. Thanks to the income tax, many angry citizens have a common-sensical right to be angry. At the very least, the desire to get even gives them a tenaciousness which would not be there had the income tax not been. A wag who describes the income tax as a "tax on politicians' ears" wouldn't be that far off the mark. The only mollifier is ingrained deference to authority.

Despite the economic inefficiencies inherent in tariffs, they had a political benefit that the income tax lacks. There's only one way to avoid paying the income tax: renounce all economic ambition and stay poor. Few would do so if they had a choice.

On the other hand, the tariff provided a way to shush up anyone who had a tax-rooted axe to grind. "Instead of complaining, why don't you do something about it? There's no need to take a vow of poverty: just buy the home goods and stick a sock in it. The government won't be wasting any of your precious dimes, so you can stop bellyaching and tell yourself how smart you are." Although not economically accurate, it worked well to keep otherwise malcontented citizens quiet. Back in those days, any would-be malcontent would be hushed up by social pressure. Now, thanks to near-universal taxation, any such malcontent is likely to be seen as useful. All (s)he has to do is be willing to share the bellyache... ESR

Daniel M. Ryan blogs these days about low P/E stocks.

 

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