Talk at MO LP Con: Taxation Destroys

The Missouri Libertarian Party Convention in Jefferson City was held at the Double Tree by Hilton Hotel on the top floor, overlooking the State Capitol.

Double Exposure Interior and Exterior at Double Tree

At the social held the night before the  convention, I met Rick Vandeven, the Vice Chair, who had invited me to speak, and I saw Bill Slantz, the current Party Chair,  again, whom I had met as part of the Missouri delegation to the Libertarian Party national convention last year. I spoke with Greg Tlapek, who was the one who determined my "genuine" libertarian status last year by phone so that I could serve as a delegate from our state to the National Convention. 

I was there with my daughter and her boyfriend, who manned my table and the book sales, while I was speaking or doing other very libertarian things. Will Coley, a fellow speaker at the convention, shared our sales table.

We dined with our good friend Rebekah Phillips before the festivities began. 

With Rebekah Phillips

I also saw Ben Brixey and Chris Burros, who won awards for freedom fighting, Mary Gerlt, Cisse Spraggins, and Bill Redpath, who was the third speaker after the business meeting. 

Here is how the MO LP newsletter described some of the highlights of the event. 

Proportional Representation (PR) - Recurring Topic of Convention

"We need Proportional Representation (PR) to get Libertarians elected to state legislatures,"

summarizes the well-informed presentation by Bill Redpath, former Chair 

of the national Libertarian Party and current Treasurer of FairVote.  

"Only one Libertarian has ever been elected to a state legislature running

solely as a Libertarian,"  Bill reported.  He noted there have been Libertarians

elected in states which allow candidates to run on more than one party's ticket.

He described the strategy of working people into state legislatures by running

them first as candidates for lower non-partisan offices as "quaint."

Noteworthy:

• LaDonna Higgins presented particulars of a PR initiative petition currently being circulated in Missouri.

• Winston Apple with Government by the People credited FairVote for help drafting the PR petition language.

• Total Legalization people were present with initiative petitions now circulating for legalization of cannabis.

• Will Coley made an impassioned speech reinforcing the Libertarian call for open borders persuasively dismissing the argument that our immigration policy is OK if people "just obey the law."

• Aya Katz gave an informative talk on taxation, calling for "jubilee" years.

• Ben Brixey presented a libertarian take on Universal Basic Income (UBI) as a way to get from where we are to where we want to be.

• Several new candidates surfaced, as well as volunteers to work the state fair.

Awards Champion of Freedom Award - Outstanding service to the PartyCecil InceElizabeth WellsBenjamin BrixeyChris Burros
Karl Wetzel Award - Lifetime achievement awardSean O'Toole
Mike Bozarth Award - Newly created award for elected libertarians, or prolific publishing Bill Wayne 

My talk was not recorded, so I will just reproduce the gist of it below. 

TAXATION DESTROYS

Taxation destroys. It destroys in the same way and for the same reason as our response to disease destroys our own bodies by activating our immune systems. Taxation is a defense mechanism in response to war or external aggression. Originally, tax was directly related  to war. To prevent other countries, other tribes, and other individuals from attacking our communities, tribute was levied from defeated enemies to make sure that they didn't just turn around and start another border skirmish as soon as the present battle was over. But when taxes are levied against our own citizens, instead of being taken from the enemy, they begin to be more destructive sometimes than war itself. It is a little like many of the symptoms that we experience when we are sick and our body is fighting off an invading organism. Fever isn't caused by the disease. It is our body's way of fighting off a virus. But such symptoms are very taxing, and they sap our own strength. Later, even if we have recovered from the disease, we need to take time to rebuild our strength, after the taxing measures that the body has imposed on itself to get rid of the enemy. We sap our own strength by taxing ourselves. It's not a good way to pay for war. 

The first taxes that we instituted are directly related to repayment of the war debt. Alexander Hamilton -- I understand he is very popular right now and there is a musical about him --- Hamilton  was happy to have us in debt, as without debt there can be no "credit rating" which would allow us to continue to borrow even  more money. In order to service the debt, Hamilton suggested that we tax "pernicious luxuries." Do you know what pernicious luxuries he wanted to tax?

Member of the Audience: Whiskey!

Yes, that's true. But that was not the order in which he had them listed. The pernicious luxuries he thought were sinful enough to tax were tea, coffee, and spirits, in that order. So yes, a nation that became independent by rebelling against a tax on tea immediately turned around and taxed tea. And coffee and whiskey. Because these are such terrible things for people to have, that they would be better off without them. That's the excuse. And in the case of whiskey, it's so very bad that Hamilton did not suggest a mere tariff to protect local merchants from imported goods. He suggested a tax even on Whiskey brewed in the the United States! Which, of course, led directly to the Whiskey Rebellion during the administration of George Washington, which unfortunately we lost -- to the Statists.

Every tax destroys the market on which it is applied, and likewise it creates a black market, as people try to avoid and evade it. The tariff and the Whiskey tax led directly to smugglers, like Jean Laffite. And the Embargo Act encouraged privateering.

In fact, back in the day, during the Quasi-War with France -- yes, we've had undeclared war even under the Founders -- American privateers fought on the French side, while the American Navy was on the side of England, because Adams was  an Anglophile. But the Neutrality law had been passed so that Americans would not be allowed to wage war with countries at peace with the United States. And yet privateering persisted.

How many of you think Jefferson was a libertarian president? [Ambivalent responses from the audience.] Well, Jefferson did not like war, and he wanted to keep the United States out of it. So he sponsored the Embargo Act, which basically said that we would stay out of international commerce. It's a little like telling women they can avoid rape by staying home. Instead of protecting our ships, the Navy and the Revenue Cutter Service were there to punish any who dared leave port and engage in international commerce. Of course, the American people did not go in for that. So this led to smuggling and also to privateering on behalf of smugglers.

Jean Laffite became a smuggler due to the Embargo Act, and he was also a privateer. Once the Embargo Act had been repealed, the tariffs were again in place, and Americans in New Orleans, rich and poor alike, flocked to the sales Laffite held at Barataria of tax free goods. Everyone likes a bargain! Taxation creates healthy black markets.

But when President Madison, unable to take the aggression of the English against our ships any longer, declared war against England, while completely unequipped to fight that war -- it was the smuggler and privateer Jean Laffite who saved the United States.

The British came to Laffite and offered to give him a title and land in their colonies, if only he helped them to defeat the Americans. Laffite sent word to the Americans about the location of the British. And what did the Americans do? They sent the Navy to attack Laffite, while leaving the British to carry out their planned attack on Ft. Bowyer and Mobile. Commodore Patterson of the Navy looted Laffite's stores and captured his ships, because Laffite was a dangerous smuggler and an enemy of the State, as he sold duty free goods. The American  Navy left Mobile defenseless in so doing. And when New Orleans was under attack, it was Laffite who came and donated flints and gunpowder, artillery and men to General Jackson's army. Without Laffite, the United States would have lost the Battle of New Orleans. Yet after the war,  all Laffite got was an empty pardon. His ships were not returned to him. They had been sold at auction for quick cash. He received no restitution for the goods looted from him.

This is how taxation works. It does not just destroy free markets by taxing goods. It also destroys the thing that the taxation is meant to benefit. When the Navy took Laffite's light vessels in their raid, they did not use these ships to fight the British. They sold them for money! They not only deprived Laffite of the ships he owned. They also deprived the American citizenry of the defense that those ships could have afforded us!

Every tax destroys the thing it taxes. Tariff destroys the ability to buy cheap goods from abroad, and it has the effect to keep local prices high. So the tax destroys what it seeks to protect.  By protecting the local economy from outside competition, you encourage high prices on domestic goods, which in turn will stifle local commerce. Tax on income, which was first introduced during the Civil War by both sides, then repealed, then re-instituted in the twentieth century -- an income tax destroys the market for commerce and the exchange of goods and services for currency. Social Security tax is the most regressive tax there is. It's a tax on the working poor -- for being poor and working. Sales tax discourages sales. Property tax makes owning property unaffordable. Inheritance taxes are a tax on death. FICA is a tax on employing people, and it encourages employers to go abroad to avoid it. And the ACA is a tax on existence!

There is no way to avoid the ACA, short of not existing. Do you exist? Then buy health insurance, and if you don't, if you can't, then we will tax you!

I know a young man who was eighteen years old last year, and working for a living, at the same time as he was also going to high school. His parents had moved out of state, but he chose to stay and finish high school where he had started. And he was living in an apartment with a roommate, attending high school, but also working full time. And no, he could not afford health insurance. So when he came to file his taxes at the start of this year, he checked the box that said he did not have health insurance. And the IRS kept all his withholding!

I told him that Trump had just announced that this part of the law would not be enforced this year, so he did not have to check the box. But he said he had already filed and it was too late. So the IRS kept the money they owed him, as a tax penalty, because he had no health insurance.

And they are saying that if we repeal that law, people will die!

PREACHING TO THE CONVERTED

I don't have to tell you that taxation is theft. -- that taxation destroys. We're Libertarians. We already know all of that. The question is: What can we do to convince everybody else?

Whenever I talk with fellow Libertarians about this, I hear that it's our job to "educate" the public. That makes it sound as if we think everybody else is just ignorant, and if we only present them with the facts, they'll suddenly understand. They'll see the light. And then they will join us and vote just like us.

I don't think it works that way. I have news for you. Other people are not stupid. They don't vote the way they do, because of ignorance. They are just as smart as we are. They are just as educated as we are. And we have to stop deluding ourselves this way.

Democrats are not stupid. Republicans are not stupid. Maybe even Green Party members are not stupid. They are not voting the way they do, because they don't understand how it damages other people. They are voting the way they do, because they believe that in the short run, it will help themselves.

And before we start moralizing against that, let's keep in mind that the free market is based on an ethic of immediate, short term self interest. And it works! It works, because that's the mechanism that we, as human beings, evolved under. We have not evolved so that each of us will see the big picture and so we can centrally plan for ourselves and everybody else. We evolved to do what was good for us in the immediate moment, and freedom works, because when everybody is minding his own business and doing what is good for himself, in the long run that is what is best for everybody! We help ourselves, and it ends up helping other people, too.

The problem is when the government de-couples cause and effect, and then most people who vote on a tax have no skin in the game.  They vote for taxes, but they don't experience those taxes. Instead, they are told they benefit from the revenue. We can't fix this by asking people to be altruists. They're human, just as you and I are human. And every one of us would choose our own well-being and that of our family, as we understand those things, over some sort of abstract justice or common good.

What we have to do is make sure that everybody has skin in the game when they are voting about taxation.

SKIN IN THE GAME

What does it mean to have skin in the game in the context of taxation? It means that you are voting to tax yourself just as much as your neighbors.

Take social security. It's a tax on the young. It's a tax on the working poor. Why on earth are there so many people who support this regressive tax? Why do so many Democrats support it? And Republicans, too?  Is it because they are ignorant of how it plunders the people who can least afford to lose any part of their income? Hardly. It's because they feel they would have too much to lose if this tax were repealed.

An older person who has been paying social security tax all his life ---

[At this point a white haired gentleman in the audience raised his hand. I called on him, and he said: "That's me. I've been paying into social security all my life....]

A person who has paid in all his life feels that he is vested in that money -- that it belongs to him, and he should receive the benefits he paid for. And I agree. He should definitely get not only what he paid in -- he should be paid back with interest. If that money were somewhere in the Treasury, just waiting to be redistributed, it should be given back to the people who paid in. But it's not there! It's not there at all. So the person who is vested in social security, who has paid in all his life, while his money was being given to other people, he thinks it's only fair that right now, young people should have to pay so that he can have his retirement  -- which he paid for. Yes, he is owed that money. But the young people of today are not the ones who owe him!

And most people in that situation, from a purely pragmatic position of self-interest, would choose to continue forcing young people to pay a highly regressive tax to fund their current retirement, because they are "owed". Because they paid in. Because they had had no choice at the time, so why should it be any different today for somebody else?

But the young people paying in today are in all likelihood never going to see that money again. By the time they are old, the system will have entirely collapsed. The first people who got their social security benefits hardly paid anything in. They got a big windfall. And the last people to pay in to social security will get nothing in return. That's the system.That's how it works.

But you can't ask the average Democrat or Republican to give up their social security benefits that they paid for out of an altruistic interest in the well being of the young. That's not going to happen.

Another example of skin in the game: Property taxes. If everybody who votes on property taxes actually had to pay property taxes, then the taxes would never go up.

I own a house in a very poor county. Texas County, Missouri. And in addition to the house I live in, I own  a house that I am currently trying to sell. I bought it to house interns who volunteered for Project Bow. But at one point, after the internship program ended, I had a woman who volunteered to sit with Bow, my chimp, if I would let her move into my other house. And it seemed like a pretty good deal. There was just one problem. She was a Liberal.

[laughter]

So I said: "Now, there's just one thing. If I let you live in my house rent free, then you need to promise me that if there is a bond election, or an election to raise property taxes, that you won't vote to raise my taxes. Because that could really hurt me." We live in a school tax district where there are only 363 people, so every vote counts. But she said: "I can't promise you that. There might be a really good reason to raise taxes!"

[laughter]

So I did not let her live in my house rent free.

This conversation opened my eyes to what is happening with property taxes. Because later, a friend of mine, married with four children, who lives in the Saint Louis area, complained to me that all her neighbors must be stupid, because they kept voting to raise the property taxes. "The referendum puts the tax hike in terms of cents on the dollar, so they don't seem to realize it will cost them thousands of dollars at the end of the year."

But I was not convinced that stupidity was the reason. I did some research on the demographics of the voters in her school district. Not all were homeowners. Some people who owned property in  the district lived outside the district and were not eligible to vote there. And some of the people who lived there did not own any house. And there was also low income housing, where the people who lived did not even pay their own rent. People who don't pay property taxes are not stupid. They vote for tax hikes not because they don't understand the mechanism. They vote because they want a nice school for their children, and they don't care how much other people will have to pay to make that happen.

People are not stupid. Low income people are not stupid. We won't change their minds by explaining things to them. They already know.

[A this point a woman in the audience raised her hand and asked: "But in the case of renters, don't you think they realize that the landlord is going to have to raise the rent if the taxes go up?"]

In the case of honest renters, yes, they most likely expect their rent will go up if the taxes go up. But there are places, like New York City, where there is rent control, and the rent can't go up, no matter how high the property taxes are. And in addition to that, there are the people who are in fact living in rented houses, but the government is paying their rent. So if someone else is paying the rent, even if you are a renter, then it's no skin off your nose if the property taxes -- and even the rent -- go up.

[The audience member who had asked the question nodded.]

I've had libertarian friends talk about the benefits of voluntaryism and how we should proselytize for that. But if we try to sell people the idea that they should  vote against their own immediate self-interest, then we are no better than missionaries trying to sell altruism. It will not work.

In order for people to vote for a free market, the tax system has to be fair. Otherwise, we have the old pitted against the young,  the poor against the rich, the sick against the healthy, and everybody loses

A FAIR TAX IS A TAX THAT LENDS ITSELF TO REPEAL

Many libertarians, such as Governor Gary Johnson, support a repeal of income tax and its replacement with a national sales and use tax called the Fair Tax. I do not. But I do acknowledge that as our local sales tax is currently set up, it is the fairest tax that we have. My goal is to eliminate tax altogether, but I think it will be easier to do that when taxes are fair. And sales tax is most fair right now because it apples to everybody the same way: young and old, rich and poor, healthy and unhealthy. Because of this, it's still possible to occasionally take a sales tax holiday, and for that holiday to affect everyone the same way. When we all have the same amount of skin in the game, we are more likely to cooperate with one another to keep from being skinned.

In Missouri, we have a law already on the books that allows local municipalities, tax districts, townships and counties to take a tax holiday for back to school sales. But oddly enough, fewer and fewer local taxing entities are taking advantage of the tax holiday.

Last year, I wanted to buy my daughter, who was then a senior in  high school, a laptop to use in school. I was hoping to buy it in Houston, Missouri, at the local Wal*Mart. But it turned out that neither Texas County nor Houston had taken advantage of the tax holiday. So I had to drive all the way to Rolla to buy the laptop and take advantage of the tax break.

http://stonegaitinstitute.org/2016/08/12/why-are-local-governments-opting-out-of-tax-holidays/

[At this point in the talk, I turned to Rebekah, who had written up the above piece,  to ask her: "Rebekah, you spoke to the local tax officials in my county about this. What was the reason they gave you for not taking the tax holiday?"

Rebekah: They wanted the revenue.]

They wanted the revenue!! We live in a poor county. We have poor constituents. But they wanted the revenue! If they had taken the tax holiday, people from outside our county might have come in to our stores to buy things, bringing with them many more dollars, some of which would have been taxed in our local gas stations and fast food restaurants. There would have been more revenue for all, including the local government. But our local representatives  would not let that happen.

If you are a libertarian candidate in Missouri for local office, talk to your constituents about tax holidays. This is an issue that everyone can get behind, because it affects everyone equally. If we take a local tax holiday, consumers win, merchants win, and even local government wins. It's a win-win-win proposition.

But that's not all we can do.

TAX HOLIDAYS, TAX FREE ZONES, JUBILEE YEARS

Tax holidays are one way we can get a very small taste of freedom. But there are other ways that we can try to work toward. All operate on the same principle: that where all are released equally from the yoke of taxation, there is a chance to further the cause of liberty.

Tax free zones are an idea I have been working on that is based on the model of duty free zones. Suppose we could designate an unicorporated area of the state -- someplace where no business is currently being conducted, because it is almost uninhabited -- as a sales tax free zone. Can you imagine how many people will flock to that place just do their shopping? Can you see how many new businesses would be opened overnight?  By demonstrating the way freedom works in a small way in a tiny area, we can create an oasis of freedom that will make others want to follow suit. Think of Laffite's Barataria, but without the threat of assault from the Revenue Service!

And once we have been able to model taxlessness on a small scale locally by eliminating sales tax periodically, we can then proceed on a grander scale, with Jubilee Years when everyone is freed from the Income Tax for one year out of seven.

Rather than demanding our freedom all at once, we can ask that we be given no fewer rights than Hebrew slaves had in the Old Testament to be set free on the seventh year of our service. (For English version: see Exodus 21:2)

Can you imagine how much good relief from taxation for only one year out of seven might do?


WE LEARN LIBERTY BY EXPERIENCING LIBERTY

We don't achieve liberty by explaining economic theory or preaching that we should do unto others as we would have them do unto us. Perspective shifting is hard, and people cannot imagine themselves in other people's shoes. They are not altruists, and they will not willingly give up benefits that they currently receive at someone else's expense. But people feel all too well those things that happen to themselves. Being freed from the yoke has an immediate and lasting impact. Liberty has to be tasted, before  people hunger for it.

The problem is not education or lack of education . It's experience. Americans right now are possibly the least educated people in the Western world, but those who are much better educated long to come here, if they live in a place that is less free. My father when he came to the United States was a world class physicist, but he had never seen such freedom. There were coins in circulation made of real silver! You could go to a store and buy a gun, no questions asked. Flying lessons were so cheap! He'd always wanted to fly, and even though there were already some regulations, it was still so much easier than anywhere else. This is what made him want to come here -- not education.

The Founding Fathers were the same. They had been left free as Colonists to live much more freely than the people back home in Britain. They were like children enjoying a day without maternal supervision. And when the mother country wanted to put them under its thumb, they rebelled.

Yes, the Founding Fathers were much better educated than the average American today, but perhaps the causation is misconstrued. Maybe they were better educated because they were free, rather than free because they were educated.

Give people a taste of freedom, and they will want more. That's what we need to do with tax holidays, tax free zones, and Jubilee Years. Once the people taste freedom, they will long to be free all the time.

Questions

 '

Ben Brixey: Don't you think that if there's a year without tax, then the next year they will just raise the tax to make up for that?

Answer: Yes. You are probably right. But think how much more pronounced the difference between the tax free year and the next year will be, if they do that! It will make people rebel, which is what we want!

[laughter]

Greg Tlapek: Spanish retirement is called  jubilación, It refers to when someone works an entire lifetimes and goes into retirement. What is the connedtion to the Jubilee Year?

Answer: In the Old Testament, many of the provisions for humane treatment were intended for slaves. That's because the OT describes a society where slavery was legal. But because it was legal, provisions in the law were written in to protect slaves from being overworked. So, for instance, the  Sabbath was not meant to protect free men. It was for your slave and your ass and your ox. It was for those poor souls who could not  on their own decide when to take a break or when they could stop working. There were also provisions to set slaves free every seventh year. And I think we could use the same idea --as we are slaves to the government -- to take a year off. Retirement in the example you mentioned is also a kind of setting free from work.


Linguistic Note:   The word Jubilee year in English has two possible, conflicting derivations. It derives from Hebrew יובל, ram or by extension ram's horn, but it sounds also a lot like the latin word to be jubilant or happy. The grand Jubilee refers to a fifty year celebration, right after seven times seven years (49) of smaller jubilees, when not only Hebrew slaves were set free, but even foreign ones were released. I don't think we need to go too deeply into the intricacies of this ancient  law to borrow this term for a tax holiday of one year in seven.
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