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The Myth of Neutral Taxation

Tags Taxes and Spending

07/20/2005Murray N. Rothbard

Economists have long believed that government's tax and expenditure policy either is, or can readily be made to be, neutral to the market. Free-market economists have advocated such neutrality of government, and even economists favoring redistributive actions by government have believed that the service activities and the redistributive activities of government can easily be distinguished, at least in concept. The purpose of this paper is to examine the nature and implications of fiscally neutral government; the paper argues that all government activities necessarily divert incomes, resources, and assets from the market, and therefore that the quest for a neutral tax or expenditure policy is an impossible one and the concept a myth.


Murray N. Rothbard

Murray N. Rothbard made major contributions to economics, history, political philosophy, and legal theory. He combined Austrian economics with a fervent commitment to individual liberty.


The Cato Journal, Fall, 1981, pp. 519-564; The Logic of Action Two (Cheltenham, UK: Edward Elgar, 1997), pp. 56-108.