Chapter 4--Binary Intervention: Taxation (continued)
Previous
Section * Next
Section
Table
of Contents
Chapter 4—Binary
Intervention: Taxation (continued)
(4) The Benefit Principle
The benefit principle differs radically from the two preceding criteria of taxation. For
the sacrifice and ability-to-pay principles depart completely from the
principles of action and the accepted criteria of justice on the
market. On the market people act freely in those ways which they
believe will confer net benefits upon them. The result of these actions
is the monetary exchange system, with its inexorable tendency toward
uniform pricing and the allocation of productive factors to satisfy the
most urgent demands of all the consumers. Yet the criteria used in
judging taxation differ completely from those which apply to all other
actions on the market. Suddenly free choice and uniform pricing are
forgotten, and the discussion is all in terms of sacrifice, burden,
etc. If taxation is only a burden, it is no wonder that coercion must
be exercised to maintain it. The benefit principle, on the other hand,
is an attempt to establish taxation on a similar basis as market
pricing; that is, the tax is to be levied in accordance with the
benefit received by the individual. It is an attempt to achieve the
goal of a neutral tax, one that would leave the economic system
approximately as it is on the free market. It is an attempt to achieve
praxeological soundness by establishing a criterion of payment on the
basis of benefit rather than sacrifice.
The great gulf between the benefit and other principles was originally
unrecognized, because of Adam Smith’s confusion between
ability to pay and benefit. In the quotation cited above, Smith
inferred that everyone benefits from the State in proportion to his
income and that this income establishes his ability to pay. Therefore,
a tax on his ability to pay will simply be a
quid
pro quo in exchange for benefits conferred by the State. Some
writers have contended that people benefit from government in
proportion to their income; others, that they benefit in increased
proportion to their income, thus justifying a progressive income tax.
Yet this entire application of the benefit theory is nonsensical. How
do the rich reap a greater benefit proportionately, or even more than
proportionately, from government than the poor? They could do so only
if the government were responsible
for these riches by a grant of special privilege, such as a subsidy, a
monopoly grant, etc. Otherwise, how do the rich benefit? From
“welfare” and other redistributive expenditures,
which take from the rich and give to the bureaucrats and the poor?
Certainly not. From police protection? But it is precisely the rich who
could more afford to pay for their own protection and who therefore
derive less benefit from it than
the poor. The benefit theory holds that the rich benefit more from
protection because their property is more valuable; but the cost of protection may have little
relation to the value of the property. Since it costs less to police a
bank vault containing $100 million than to guard 100 acres of land
worth $10 per acre, the poor landowner receives a far greater benefit
from the State’s protection than the rich owner of
personalty. Neither would it be relevant to say that A earns more money
than B because A receives a greater benefit from
“society” and should therefore pay more in taxes.
In the first place, everyone participates in society. The fact that A
earns more than B means precisely that A’s services are individually worth more to his fellows.
Therefore, since A and B benefit similarly from society’s
existence, the reverse argument is far more accurate: that the differential between them is due to
A’s individual superiority in productivity, and not at all to
“society.” Secondly, society
is not at all the State, and the
State’s possible claim must be independently validated.
Hence, neither proportionate nor progressive income taxation can be
sustained on benefit principles. In fact, the reverse is true. If
everyone were to pay in accordance with benefit received, it is clear
that (a) the recipients of "welfare" benefits would bear the full costs
of these benefits: the poor would have to pay for their own doles
(including, of course, the extra cost of paying the bureaucracy for
making the transfers); (b) the buyers of any government service would
be the only payers, so that government services could be financed out
of a general tax fund; and (c) for police protection, a rich man would
pay less than a poor man, and less in absolute amounts. Furthermore,
landowners would pay more than owners of intangible property, and the
weak and infirm, who clearly benefit more from police protection than
the strong, would have to pay higher taxes than the latter.
It
becomes
immediately clear why the benefit principle has been practically
abandoned in recent years. For it is evident that if (a) welfare
recipients and (b) receivers of other special privilege, such as
monopoly grants, were to pay according to the benefit received, there
would not be much point in either form of government expenditure. And
if each were to pay an amount equal to the benefit he received rather
than simply proportionately (and he would have to do so because there
would be nowhere else for the State to turn for funds), then the
recipient of the subsidy would not only earn nothing, but would have to
pay the bureaucracy for the cost of handling and transfer. The
establishment of the benefit principle would therefore result in a
laissez-faire system, with government strictly limited to supplying
defense service. And the taxation for this defense service would be
levied more on the poor and the infirm than on the strong and the rich.
At first sight, the believer in the free market, the seeker after a
neutral tax, is inclined to rejoice. It would seem that the benefit
principle is the answer to his search. And this principle is indeed
closer to market principles than the previous alleged canons. Yet, if
we pursue the analysis more closely, it will be evident that the
benefit principle is still far from market neutrality. On the market,
people do not pay in accordance with individual benefit received; they
pay a uniform price, one that just induces the marginal buyer to
participate in the exchange. The more eager do not pay a higher price
than the less eager; the chess addict and the indifferent player pay
the same price for the same chess set, and the opera enthusiast and the
novice pay the same price for the same ticket. The poor and the weak
would be most eager for protection, but, in contrast to the benefit
principle, they would not pay more on the
market.
There are even graver defects in the benefit principle. For market
exchanges (
a) demonstrate benefit
and (b) only establish the fact of benefit without measuring it. The
only reason we know that A and B benefit from an exchange is that they
voluntarily make the exchange. In this way, the market demonstrates
benefit. But where taxes are levied, the payment is compulsory, and
therefore benefit can never be demonstrated.
As a matter of fact, the existence of coercion gives rise to the
opposite presumption and implies that the tax is not a benefit, but a
burden. If it really were a benefit, coercion would not be necessary.
Secondly, the benefit from exchange can never be measured or compared
interpersonally. The “consumers’ surplus”
derived from exchange is purely subjective, nonmeasurable, and
noncomparable scientifically. Therefore, we never know what these
benefits are, and hence there can be no way of allocating the taxes in
accordance with them.
Thirdly, on the market everyone enjoys a net benefit from an exchange.
A person’s benefit is not equal to his cost, but greater.
Therefore, taxing away his alleged benefit would completely violate
market principles.
Finally, if each person were taxed according to the benefit he receives
from government, it is obvious that, since the bureaucracy receive all
their income from this source, they would, like other recipients of
subsidy and privilege, be obliged
to return
their whole salary to the government. The bureaucracy would
have to serve without pay.
We have seen that the benefit principle would dispense with all subsidy
expenditures of whatever type. Government services would have to be
sold directly to buyers; but in that case, there would be no room for
government ownership, for the characteristic of a government enterprise
is that it is launched from tax funds. Police and judicial services are
often declared by the proponents of the benefit principle to be
inherently general and unspecialized, so that they would need to be
purchased out of the common tax fund rather than by individual users.
However, as we have seen, this assumption is incorrect; these services
can be sold on the market like any others. Thus, even in the absence of
all other deficiencies of the benefit principle, it would still
establish no warrant for taxation at all, for all services
could be sold on the market directly to
beneficiaries.
It is evident that while the benefit principle attempts to meet the
market criterion of limiting payment solely to beneficiaries, it must
be adjudged a failure; it cannot serve as a criterion for a neutral tax
or any other type of taxation.
(5) The
Equal Tax and the Cost Principle
Equality of taxation has far more to commend it than any of the above
principles, none of which can be used as a canon of taxation.
“Equality of taxation” means just that—a
uniform tax on every member of the society. This is also called a head
tax, capitation tax, or poll tax. (The latter term, however, is best
used to describe a uniform tax on voting, which is what the poll tax
has become in various American states.) Each person would pay the same
tax annually to the government. The equal tax would be particularly
appropriate in a democracy, with its emphasis on equality before the
law, equal rights, and absence of discrimination and special privilege.
It would embody the principle: “One vote, one tax.”
It would appropriately apply only to the protection services of the
government, for the government is committed to defending everyone
equally. Therefore, it may seem just for each person to be taxed
equally in return. The principle of equality would rule out, as would
the benefit principle, all government actions except defense, for all
other expenditures would set up a special privilege or subsidy of some
kind. Finally, the equal tax would be far more nearly neutral than any
of the other taxes considered, for it would attempt to establish an
equal “price” for equal services rendered.
One school of thought challenges this contention and asserts that a
proportional tax would be more nearly
neutral than an equal tax. The proponents of this theory point out that
an equal tax alters the market’s pattern of distribution of
income. Thus, if A earns 1,000 gold ounces per year, B earns 200
ounces, and C earns 50 ounces, and each pays 10 ounces in taxes, then
the relative proportion of net
income remaining after taxes is altered, and altered in the direction
of greater inequality. A proportionate tax of a fixed percentage on all
three would leave the distribution of income constant and would
therefore be neutral relative to the market.
This thesis misconceives the whole problem of neutrality in taxation.
The object of the quest is
not to
leave the income distribution the same as if a tax had not been
imposed. The object is to affect the income
“distribution” and all other aspects of the economy
in the same way as if the tax were really a free-market price.
And this is a very different criterion. No market price leaves relative
income “distribution” the same as before. If the
market really behaved in this way, there would be no advantage in
earning money, for people would have to pay proportionately higher
prices for goods in accordance with the level of their earnings. The
market tends toward uniformity of pricing and hence toward equal
pricing for equal service. Equal taxation, therefore, would be far more
nearly neutral and would constitute a closer approach to a market
system.
The equal-tax criterion, however, has many grave defects, even as an
approach toward a neutral tax. In the first place, the market criterion
of equal price for equal service faces the problem: What is an
“equal service”? The service of police protection
is of far greater magnitude in an urban crime area than it is in some
sleepy backwater. That service is worth far more in the crime center,
and therefore the price paid will tend to be greater in a crime-ridden
area than in a peaceful area. It is very likely that, in the purely
free market, police and judicial services would be sold like insurance,
with each member paying regular premiums in return for a call on the
benefits of protection when needed. It is obvious that a more risky
individual (such as one living in a crime area) would tend to pay a
higher premium than individuals in another area. To be neutral, then, a
tax would have to vary in accordance with costs and not be uniform.
Equal taxation would
distort the allocation of social resources in defense. The tax would be
below the market price in the crime areas and above the market price in
the peaceful areas, and there would therefore be a shortage of police
protection in the dangerous areas and a surplus of protection in the
others.
Another grave flaw of the equal-tax principle is the same that we noted
in the more general principle of uniformity: no bureaucrat can pay
taxes. An “equal tax” on a bureaucrat or politician
is an impossibility, because he is one of the tax consumers rather than
taxpayers. Even when all other subsidies are eliminated, the government
employee remains a permanent obstacle in the path of equal tax. As we
have seen, the bureaucrat’s “tax payment”
is simply a meaningless bookkeeping device.
These flaws in the equal tax cause us to turn to the last remaining tax
canon:
the cost principle. The cost
principle would apply as we have just discussed it, with the government
setting the tax in accordance with costs, like the premiums charged by
an insurance company.
The cost principle would
constitute the closest approach possible to neutrality of taxation. Yet
even the cost principle has fatal flaws that finally eliminate it from
consideration. In the first place, although the costs of nonspecific
factors could be estimated from market knowledge, the costs of specific
factors could not be determined by the State. The impossibility of
calculating specific costs stems from the fact that products of
tax-supported firms have no real market price, and so specific costs
are unknown. As a result, the cost principle cannot be accurately put
into effect. The cost principle is further vitiated by the fact that a
compulsory monopoly—such as State protection—will
invariably have higher costs and sell lower-quality service than freely
competitive defense firms on the market. As a result, costs will be
much higher than on the market, and, again, the cost principle offers
no guide to a neutral tax.
A final flaw is common to both the equality and the cost theories of
taxation. In neither case is
benefit
demonstrated as accruing to the taxpayer. Although the
taxpayer is blithely assumed to be
benefiting from the service just as he does on the market, we have seen
that such an assumption cannot be made—that the use of
coercion presumes quite the contrary for many taxpayers. The market
requires a uniform price, or the exact covering of costs, only because
the purchaser voluntarily buys the product in the expectation of being
benefited. The State, on the other hand, would force people to pay the
tax even if they were not voluntarily willing to pay the cost of this
or any other defense system. Hence, the cost principle can never
provide a route to the neutral tax.
(6) Taxation
“For Revenue Only”
A slogan popular among many “right-wing” economists
is that taxation should be for “revenue only,” and
not for broad social purposes. On its face, this slogan is simply and
palpably absurd, since all taxes are levied for revenue. What else can
taxation be called but the appropriation of funds from private
individuals by the State for its own purposes? Some writers therefore
amend the slogan to say: Taxation should be limited to revenue
essential for social services. But what are social services? To some
people, every conceivable type of government expenditure appears as a
“social service.” If the State takes from A and
gives to B, C may applaud the act as a “social
service” because he dislikes something about the former and
likes something about the latter. If, on the other hand,
“social service” is limited by the
“unanimity rule” to apply only to those activities
that serve some individuals without making others pay, then the
“taxation-for-revenue-only” formula is simply an
ambiguous term for the benefit or the cost principles.
(7) The
Neutral Tax: A Summary
We have thus analyzed all the alleged canons of tax justice. Our
conclusions are twofold: (1) that economics cannot assume any principle
of just taxation, and that no one has successfully established any such
principles; and (2) that the neutral tax, which seems to many a valid
ideal, turns out to be conceptually impossible to achieve. Economists
must therefore abandon their futile quest for the just, or the neutral,
tax.
Some
may ask: Why does anyone search for a neutral tax? Why consider
neutrality an ideal? The answer is that all services, all activities,
can be provided in two ways only: by freedom or by coercion. The former
is the way of the market; the latter, of the State. If all services
were organized on the market, the result would be a purely free-market
system; if all were organized by the State, the result would be
socialism (see below). Therefore, all who are not full socialists must
concede some area to market activity, and, once they do so, they must
justify their departures from freedom on the basis of some principle or
other. In a society where most activities are organized on the market,
advocates of State activity must
justify departures from what they themselves concede to the market
sphere. Hence, the use of neutrality is a benchmark to answer the
question: Why do you want the State to step in and alter market
conditions in this case? If market prices are uniform, why
should tax payments be otherwise?
But
if neutral taxation is, at bottom, impossible, there are two logical
courses left for advocates of the neutral tax: either abandon the goal
of neutrality, or abandon taxation itself.
d.
Voluntary
Contributions to Government
A few writers, disturbed by the compulsion necessary to the existence
of taxation, have advocated that governments be financed, not by
taxation, but by some form of voluntary contribution. Such voluntary
contribution systems could take various forms. One was the method
relied on by the old city-state of Hamburg and other
communities—voluntary gifts
to the government. President William F. Warren of Boston University, in
his essay, “Tax Exemption the Road to Tax
Abolition,” described his experience in one of these
communities:
For five years it was the good
fortune of the present writer to be domiciled in one of these
communities. Incredible as it may seem to believers in the necessity of
a legal enforcement of taxes by pains and penalties, he was for that
period . . . his own assessor and his own tax-gatherer. In common with
the other citizens, he was invited, without sworn statement or
declaration, to make such contribution to the public charges as seemed
to himself just and equal. That sum, uncounted by any official, unknown
to any but himself, he was asked to drop with his own hand into a
strong public chest; on doing which his name was checked off the list
of contributors. . . . Every citizen felt a noble pride in such
immunity from prying assessors and rude constables. Every annual call
of the authorities on that community was honored to the full.
The gift method, however, presents some serious difficulties. In
particular, it continues that disjunction
between payment and receipt of service which constitutes one
of the great defects of a taxing system. Under taxation, payment is
severed from receipt of service, in striking contrast to the market
where payment and service are correlative. The voluntary gift method
perpetuates this disjunction. As a result, A, B, and C continue to
receive the government’s defense service even if they paid
nothing for it, and only D and E contributed. D’s and
E’s contributions, furthermore, may be disproportionate. It
is true that this is the system of voluntary charity on the market. But
charity flows from the more to the less wealthy and able; it does not
constitute an efficient method for
organizing the general sale of a service. Automobiles, clothes, etc.,
are sold on the market on a regular uniform-price basis and are not
indiscriminately given to some on the basis of gifts received from
others. Under the gift system people will tend to demand far more
defense service from the government than they are willing to pay for;
and the voluntary contributors, getting no direct reward for their
money, will tend to reduce their payment. In short, where service (such
as defense) flows to people regardless of payment, there will tend to
be excessive demands for service, and an insufficient supply of funds
to sustain it.
When the advocates of taxation, therefore, contend that a voluntary
society could never efficiently finance defense service because people
would evade payment, they are correct insofar as their strictures apply
to the gift method of finance. The
gift method, however, hardly exhausts the financing methods of the
purely free market.
A step in the direction of greater efficiency would have the defense
agency charging a set price instead of accepting haphazard amounts
varying from the very small to the very large, but continuing to supply
defense indiscriminately. Of course, the agency would not refuse gifts
for general purposes or for granting a supply of defense service to
poor people. But it would charge some minimum price commensurate with
the cost of its service. One such method is a voting
tax, now known as a poll tax.A poll tax, or
voting tax, is not really a “tax” at all; it is
only a price charged for
participating in the State organization.
Only those who voluntarily
vote for State officials, i.e., who participate in the State machinery,
are required to pay the tax. If all the State’s revenues were
derived from poll taxes, therefore, this would not be a system of
taxation at all, but rather voluntary contributions in payment for the
right to participate in the State’s machinery. The voting tax
would be an improvement over the gift method because it would charge a
certain uniform or minimal amount.
To the proposal to finance all government revenues from poll taxes it
has been objected that practically no one would vote under these
conditions. This is perhaps an accurate prediction, but curiously the
critics of the poll tax never pursue their analysis beyond this point.
It is clear that this reveals something very important about the nature
of the voting process. Voting is a highly marginal activity because (a) the voter obtains no direct benefits
from his act of voting, and (b) his
aliquot power over the final decision is so small that his abstention
from voting would make no appreciable difference to the final outcome.
In short, in contrast to all other choices a man may make, in political
voting he has practically no power over the outcome, and the outcome
would make little direct difference
to him anyway. It is no wonder that well over half the eligible
American voters persistently refuse to take part in the annual November
balloting. This discussion also illuminates a puzzling phenomenon in
American political life—the constant exhortation by
politicians of all parties for people to vote: “We
don’t care how you vote,
but vote!” is a standard
political slogan.
On its face, it makes
little sense, for one would think that at least one of the parties
would see advantages in a small vote. But it does make a great deal of
sense when we realize the enormous desire of politicians of all parties to make it appear that the
people have given them a “mandate” in the
election—that all the democratic shibboleths about
“representing the people,” etc., are true.
The reason for the relative triviality of voting is, once again, the
disjunction between voting and payment, on the one hand, and benefit on
the other. The poll tax gives rise to the same problem. The voter, with
or without paying a poll tax, receives no more benefit in protection
than the nonvoter. Consequently, people will refuse to vote in droves
under a single poll-tax scheme, and everyone will demand the use of the
artificially free defense resources.
Both the
gift and the voting-tax methods of voluntary financing
of government, therefore, must be discarded as inefficient. A third
method has been proposed, which we can best call by the paradoxical
name voluntary taxation. The plan
envisioned is as follows: Every land area would, as now, be governed by
one monopolistic State. The State’s officials would be chosen
by democratic voting, as at present. The State would set a uniform
price, or perhaps a set of cost prices, for protective services, and it
would be left to each individual to make a voluntary choice whether to
pay or not to pay the price. If he pays the price, he receives the
benefit of governmental defense service; if he does not, he goes
unprotected.
The leading
“voluntary taxationists” have been Auberon Herbert,
his associate, J. Greevz Fisher, and (sometimes) Gustave de Molinari.
The same position is found earlier, to a far less developed extent, in
the early editions of Herbert Spencer’s Social
Statics, particularly his chapter on the “Right to
Ignore the State,” and in Thoreau’s Essay
on Civil Disobedience.
The voluntary taxation
method preserves a voluntary system, is (or appears to be) neutral
vis-à-vis the market, and
eliminates the payment-benefit disjunction. And yet this proposal has
several important defects. Its most serious flaw is inconsistency. For
the voluntary taxationists aim at establishing a system in which no one
is coerced who is not himself an invader of the person or property of
others. Hence their complete elimination of taxation. But, although
they eliminate the compulsion to subscribe to the government defense
monopoly, they yet retain that monopoly. They are therefore faced with
the problem: Would they use force to compel people not
to use a freely competing defense agency within
the same geographic area? The voluntary taxationists have never
attempted to answer this problem; they have rather stubbornly assumed
that no one would set up a competing defense agency within a
State’s territorial limits. And yet, if people are free to
pay or not to pay “taxes,” it is obvious that some
people will not simply refuse to pay for all protection. Dissatisfied
with the quality of defense they receive from the government, or with
the price they must pay, they will elect to form a competing defense
agency or “government” within the area and
subscribe to it. The voluntary taxation system is thus impossible
of attainment because it would be in unstable equilibrium. If the
government elected to outlaw all competing defense agencies, it would
no longer function as the voluntary society sought by its proponents.
It would not force payment of taxes, but it would say to the citizens:
“You are free to accept and pay for our protection or to
abstain; but you are not free to
purchase defense from a competing agency.” This is not a free
market; this is a compulsory monopoly,
once again a grant of monopoly privilege by the State to itself. Such a
monopoly would be far less efficient than a freely competitive system;
hence, its costs would be higher, its service poorer. It would clearly not be neutral to the market.
On the other hand, if the government
did
permit free competition in defense service, there would soon no longer
be a central government over the territory. Defense agencies, police
and judicial, would compete with one another in the same uncoerced
manner as the producers of any other service on the market. The prices
would be lower, the service more efficient. And, for the first and only
time, the defense system would then be neutral
in relation to the market. It would be
neutral because it would be a part of the market itself!
Defense service would at last be made fully marketable. No longer would
anyone be able to point to one particular building or set of buildings,
one uniform or set of uniforms, as representing “our
government.”
While “the government” would cease to exist, the
same cannot be said for a constitution or a rule of law, which, in
fact, would take on in the free society a far more important function
than at present. For the freely competing judicial agencies would have
to be guided by a body of absolute law to enable them to
distinguish
objectively between defense and invasion. This law, embodying
elaborations upon the basic injunction to defend person and property
from acts of invasion, would be codified in the basic legal code.
Failure to establish such a code of law would tend to break down the
free market, for then defense against invasion could not be adequately
achieved. On the other hand, those neo-Tolstoyan nonresisters
who refuse to employ violence even for defense would not themselves be
forced into any relationship with the defense agencies.
Thus, if a government based on voluntary taxation permits free
competition, the result will be the purely free-market system outlined
in chapter 1 above. The previous government would now simply be one
competing defense agency among many on the market. It would, in fact,
be competing at a severe disadvantage, having been established on the
principle of “democratic voting.” Looked at as a
market phenomenon, “democratic voting” (one vote
per person) is simply the method of the consumer
“co-operative.” Empirically, it has been
demonstrated time and again that co-operatives cannot compete
successfully against stock-owned companies, especially when both are
equal before the law. There is no reason to believe that co-operatives
for defense would be any more efficient. Hence, we may expect the old
co-operative government to “wither away” through
loss of customers on the market, while joint-stock (i.e., corporate)
defense agencies would become the prevailing market form.
This does not concede that
“costs” determine “prices.” The
general array of final prices determines the general array of cost
prices, but then the viability of
firms is determined by whether the price people will pay for their
products is enough to cover their costs, which are determined
throughout the market. In equilibrium, costs and prices will all be
equal. Since a tax is levied on general funds and therefore cannot be
equivalent to market pricing, the only way to approximate market
pricing is to set the tax according to costs, since costs at least
reflect market pricing of the nonspecific factors.
Blum and Kalven mention the cost
principle but casually dismiss it as being practically identical with
the benefit principle:
Sometimes the theory is stated in
terms of the cost of the government
services performed for each citizen rather than in terms of the benefits received from such services.
This refinement may avoid the need of measuring subjective benefits,
but it does little else for the theory. (Uneasy
Case for Progressive Taxation, p. 36 n)
Yet their major criticism of the
benefit principle is precisely that it requires the impossible
measurement of subjective benefit. The cost principle, along with the
benefit principle, dispenses with all government expenditures except laissez-faire ones, since each recipient
would be required to pay the full cost of the service. With respect to
the laissez-faire service of
protection, however, the cost principle is clearly far superior to the
benefit principle.
Dr. Warren’s article
appeared in the Boston University Year Book for 1876. The board of the
Council of the University endorsed the essay in
these words:
In place of the further extent of
taxation advocated by many, the essay proposes a far more imposing
reform, the general abolition of all compulsory taxes. It is hoped that
the comparative novelty of the proposition may not deter practical men
from a thoughtful study of the paper. (See
the Boston University Year Book III
(1876), pp. 17–38)
Both quotations may be found in
Sidney H. Morse, “Chips from My Studio,” The Radical Review, May, 1877, pp.
190–92. See also Adam
Smith, Wealth of Nations, pp.
801–03; Francis A. Walker, Political
Economy (New York: Henry Holt, 1911), pp. 475–76.
Smith, in one of his most sensible canons, declared:
In a small republic, where the
people have entire confidence in their magistrates and are convinced of
the necessity of the tax for the support of the state, and believe that
it will be faithfully applied to that purpose, such conscientious and
voluntary payment may sometimes be expected. (Smith,
Wealth of Nations, p. 802)
The current poll tax began simply
as a head tax, but in practice it is enforced only as a requirement for
voting. It has therefore become a
voting tax.
See below on fees charged for
government service.
Voting, like taxation, is another
activity generally phrased in terms of “duty”
rather than benefit. The call to “duty” is as
praxeologically unsound as the call to sacrifice and generally amounts
to the same thing. For both exhortations tacitly admit that the actor
will derive little or no benefit from his action. Further, the
invocation of duty or sacrifice implies that
someone
else is going to receive the sacrifice or the payment of the
“obligation”—and often that someone is
the exhorter himself.
We are assuming that the
government will confine its use of force to defense, i.e., will pursue
a strictly
laissez-faire policy.
Theoretically, it is possible that a government may get all its revenue
from voluntary contribution, and yet pursue a highly coercive,
interventionist policy in other areas of the market. The possibility is
so remote in practice, however, that we may disregard it here. It is
highly unlikely that a government coercive in other ways would not take
immediate steps to see that its revenues
are assured by coercion. Its own revenue is always the
State’s prime concern. (Note the very heavy penalties for
income-tax evasion and counterfeiting of government paper money.)
Spencer,
Social
Statics; Herbert and Levy, Taxation
and Anarchism; and Molinari, Society
of Tomorrow. At other times, however, Molinari adopted the
pure free-market position. Thus, see what may be the first developed
outline of the purely libertarian system in Gustave de Molinari,
“De la production de la
sécurité,” Journal
des Economistes, February, 1849, pp. 277–90, and
Molinari, “Onzième soirée” in
Les soirées de la rue Saint Lazare
(Paris, 1849).
These corporations would not, of
course, need any charter from a government but would
“charter” themselves in accordance with the ways in
which their owners decided to pool their capital. They could announce
their limited liability in advance, and then all their creditors would
be put amply on guard.
There is a strong
a priori reason
for believing that corporations will be superior to cooperatives in any
given situation. For if each owner receives only one vote regardless of
how much money he has invested in a project (and earnings are divided
in the same way), there is no incentive to invest more than the next
man; in fact, every incentive is the other way. This hampering of
investment militates strongly against the cooperative form.
Previous Section * Next Section
Table of Contents