C. General Effects of Taxation
In the dynamic real economy, money income consists of wages, ground rents, interest, and profits, counterbalanced by losses. (Ground rents are also capitalized on the market, so that income from rents is resolvable into interest and profit, minus losses.) The income tax is designed to tax all such net income. We have seen that sales and excise taxes are really taxes on some original-factor incomes.
The governor of Indiana last week signed the Religious Freedom Restoration Act, modeled on similar federal legislation. The Indiana statute states that a person’s religious beliefs may not be “substantially burden[ed]” by anti-discrimination statutes. In other words, if anti-discrimination laws could be construed as forcing a person to violate his own religious conscience, then the law allows for an exemption in that case to anti-discrimination mandates.
4. Binary Intervention: Taxation
A. The General Sales Tax and the Laws of Incidence
One of the oldest problems connected with taxation is: Who pays the tax? It would seem that the answer is clear-cut, since the government knows on whom it levies a tax. The problem, however, is not who pays the tax immediately, but who pays it in the long run, i.e., whether or not the tax can be “shifted” from the immediate taxpayer to somebody else.
3. The Incidence and Effects of Taxation Part I: Taxes on Incomes
2. The Burdens and Benefits of Taxation and Expenditures
As Calhoun brilliantly pointed out (see chapter 2 above), there are two groups of individuals in society: the taxpayers and the tax consumers—those who are burdened by taxes and those who benefit. Who is burdened by taxation? The direct or immediate answer is: those who pay taxes. We shall postpone the questions of the shifting of tax burdens to a later section.
1. Introduction: Government Revenues and Expenditures
AN INTERVENTIONARY AGENCY, SUCH AS the government, must spend funds; in the monetary economy, this means spending money. This money can be derived only from revenues (or income). The bulk of the revenue (and the reason the agency is called interventionary) must come from two sources: in the case of the government, taxation and inflation. Taxation is a coerced levy that the government extracts from the populace; inflation is the basically fraudulent issue of pseudo warehouse-receipts for money, or new money.
Appendix A: On Private Coinage
The common, erroneous phrasing of Gresham’s Law (“bad money drives out good money”) has often been used to attack the concept of private coinage as unworkable and thereby to defend the State’s age-old monopolization of the minting business. As we have seen, however, Gresham’s Law applies to the effect of government policy, not to the free market.
Appendix B: Coercion and Lebensraum
Tariffs and immigration barriers as a cause of war may be thought far afield from our study, but actually this relationship may be analyzed praxeologically. A tariff imposed by Government A prevents an exporter residing under Government B from making a sale. Furthermore, an immigration barrier imposed by Government A prevents a resident of B from migrating. Both of these impositions are effected by coercion. Tariffs as a prelude to war have often been discussed; less understood is the Lebensraum argument.
R. Policy Toward Monopoly
Economic historians often inquire about the extent and importance of monopoly in the economy. Almost all of this inquiry has been misdirected, because the concept of monopoly has never been cogently defined. In this chapter we have traced types of monopoly and quasi monopoly and their economic effects. It is clear that the term “monopoly” properly applies only to governmental grants of privilege, direct and indirect. Truly gauging the extent of monopoly in an economy means studying the degree and extent of monopoly and quasi-monopoly privilege that the government has granted.
