“The Myth of Neutral Taxation”
by Murray N. Rothbard (1981)
Free-market economists have successfully extended their critical analyses of government to all areas of State operation and intervention—all except one. Taxation, the heart and soul of government, has escaped unscathed. Free-market economists have either avoided the topic of taxation altogether or have provided concepts that, while claiming to help limit government, have in reality offered apologies for the extension of State power. The view that income taxes are “better” than excise taxes; the call for proportional or degressive income taxation; the Friedman negative income tax; the Buchanan-Tullock Unanimity Principle; and the collective-goods, external-benefits, and transaction costs arguments for government and taxation, have all served to place the imprimatur of economics on the status quo or on extensions of government rather than to limit or roll back State power. All this has followed the course traced by Bertrand de Jouvenel three decades ago: From the idea of divine right down to modern times concepts originally meant to limit State power have been turned by the State and its advocates into rationales for its further extension. Much the same thing has happened to the noble concept of neutral taxation. The idea that taxation, and therefore government’s fiscal operation, should be neutral to the market—should not disturb the operations of the market nor divert it from its free course—is a noble but impossible one.
Posted by Mises.org News
