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Why Should the Government be Limited?

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In Sheldon Richman’s excellent Freeman column Elizabeth Warren’s Non Sequitur, he rightly criticizes the abysmal logic expressed by Elizabeth Warren, the demonrat who’s running for the U.S. Senate in Massachusetts. In her remarks in this video (see below) she says:

There is nobody in this country who got rich on his own. Nobody. You built a factory out there? Good for you. But I want to be clear: you moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did. Now look, you built a factory and it turned into something terrific, or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.

Elizabeth Warren on Debt Crisis, Fair Taxation


Now this is statist and abysmal, of course. By claiming the right to tax, the state claims to own us. After all, as Supreme Court Justice John Marshall admitted in 1819, “the power to tax involves the power to destroy.” (Someone on Facebook posted some funny parodies of Warren’s comments, which are appended below.)

Now notice in Warren’s argument is the assumption that because the state provides benefits to people, then is justified letting you keep only an uspecified “hunk” of your profits. Because she is a statist, and views the state as legitimate, it is no different in kind than private entities, like a shopping mall. If I set up a shopping mall, to permit a store to set up a storefront there I can require him to agree to give me a percentage of his sales or profits–I let him keep a hunk, I take a hunk. I am providing him with infrastructure and access to customers, after all. We can negotiate the relative size of the respective hunks we are entitled to. But in principle I could demand most or all of his profit–he can take it or leave it.

If you view the state as legitimate, then there is really no reason the state has to let you keep even a majority of your property. In the eyes of statists, the state is analogous to the shopping mall, which provides infrastructure and other benefits for its tenants; likewise, the state provides all these infrastructural “benefits” Warren mentions–safety, defense, protection, roads, an educated workforce. Given these assumptions, what possible principled argument can the opponent of confiscatory taxation make? What argument is there, indeed, for limited government at all? If the state really provides useful services, why shouldn’t it, rationally, simply take whatever payment it wants from us, as the shopping mall owner does? Once you make Warren’s assumptions, then the successful businessman has no natural right whatsoever to any of the profit he’s earned–the state’s infrastructure was necessary for this. The state’s choice as to much of “his” profit he ought to be allowed to keep–a “big hunk”–is totally arbitrary and up to the state. Sure, the state does not want to kill the goose that lays the golden egg. If the mall owner charges too much to the tenants, they won’t be able to make a afford to open up the storefront. So it’s a practical matter. The mall owner’s goal is to maximize his own profit; to do so, he has to permit the tenant to keep some profit, but only enough to keep him as a successful tenant. The mall owner’s goal is not to have a “limited government”, or to “minimize” the “taxes” it collects. It’s rather to maximize them. How it does so it just a pragmatic question. Likewise, why should the state try to be a “minimal” state? Why should it try to cut its spending as much as possible and reduce taxes as much as possible? No: it is offering a huge set of benefits and infrastructure to a large population over a large region that it has jurisdiction over–it is the benefactor of all these people. They get to make profit in the market because the state makes this possible; so why shouldn’t the state try to make a tidy profit from the wonderful services it provides to these ingrates? Why, if the state allows them to keep even 10% of their profits, they should be grateful–it’s still a good deal for them, for without the state these poor serfs would be living in poverty.

Now notice also that this argument applies not only to statists like Warren, but even to minarchists. Minarchists also think we need a state, that a state is both necessary and good, and provides essential services like law and order and justice. Given this view of the state, as argued above, it’s hard to see exactly why those in charge of the state ought to try to “limit” its spending, activities, regulations, and taxing. Rather it ought to use its position as the benefactor of society to enrich itself. If I come up with a wonderful and necessary service that others need, why shouldn’t I charge as much as the market will bear? But even minarchists claim that this is what the state does: it provides an invaluable service. Okay–so why shouldn’t the agency that provides this amazing service charge what the market will bear? That is, it ought to increase its income–both psychic income that state agents get from dominating and controlling people via regulations and laws and wars and prisons, and monetary income from taxes? The only limit is a practical one: you don’t want to raise taxes so high that overall tax revenues go down. So maybe 70% marginal rate is fine, but 99% would kill the goose that lays the golden egg. But there is no reason for the state to scrimp and restrict its actions just so it can charge a minimal tax like 5%.

This, ultimately, is a serious problem with any minarchist thinking. Minarchist libertarians say they are in favor of limited government, of minimal government. But they are in favor of an agency that purportedly is providing an essential service to all its citizens; like any other market actor, the state of course ought to use its position as a provider of a desired service to sell it for as high a price as it can get away with.

Of course, this is exactly why there are no limited states, why they always expand. (See Higgs, Crisis and Leviathan; Hoppe’s work on democracy.) This is why limited government is a pipedream. Those advocating limited states are really just advocating the (unlimited) state, since limited states are not possible–just as those misguided libertarians who advocate “replacing” the income tax with a sales or consumption tax are, in effect, really advocating adding a sales tax on top of the income tax, because it’s utterly unrealistic to expect the state to abolish the income tax (see my Say No To Tax Reform).

I made a similar argument before, in my post An Objectivist IP Argument for Taxation, where I noted:

Objectivists say they are against taxation; they say that you can fund a state by some kind of contract fee or lottery system. Obviously, you can’t, not without the state compelling membership or outlawing competitors, which permits them to charge monopoly prices which amounts to a tax.

But Objectivists are strongly pro-intellectual property (see Why Objectivists Hate Anarchy; IP: The Objectivists Strike Back!). They believe you deserve to be rewarded for creative, innovative, inventive action. But note that they also are extremely fond of the American Constitution and Founders; they believe the Constitution is a great achievement of the intellect–this corresponds with their belief that a proper state, such as the original American state, is a great value to man. Well, put two and two together: the Founders gave us a great creation: the Constitution, and our system of government. We all benefit from it. It’s only fair that the Founders charge us a royalty for our use of their creation–and naturally, the state itself is the agency as the natural successor to its parent-creators, the Framers and Founders, to inherit and manage this royalty-collecting right. Don’t call it a tax–call it a royalty.

And as above: the royalty need not be a “minimal” one of, say, 5%. It could be whatever the market will bear.

So: states, if they exist, will not be and can never be limited, and those who say a minimal state is legitimate really have no good arguments that it ought to be limited. For them, the state is analogous to a mall. For anarchists, it’s not: the mall is private and peaceful, while the state is a criminal gang. Libertarians should not support even a minimal state, because it’s unrealistic and even contradictory to say it should be “limited”.

Stephan Kinsella is an attorney in Houston, director of the Center for the Study of Innovative Freedom, and editor of Libertarian Papers.

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