It's The Spending, Stupid!

For everybody yelling about the 1% not paying their “fair share” of taxes, I’ve got news for you: It’s not the taxes that are the problem; It’s the spending.

Recently we heard that the Buffett Rule failed to pass the Senate 51-45. Supporters of the so-called Buffett Rule, which would set a minimum 30% federal income tax on those making over $2 million a year, will be quick to point out that the vote was along party lines, with only one each of Republicans and Democrats breaking ranks with their party.

What’s most amazing to me, however, is if you talk to the people who support this proposal, and ask them if they think taxes are complicated already, they invariably say “Yes.”

So how’s this for logic? They think the existing tax code is complicated, but they support adding more rules which make it even more complicated. Were you aware that our current tax code is over 70,000 pages long? Yes, I said that right! 70,000 pages! The reason why Buffett pays less in taxes than his secretary is because he can afford to pay somebody to go through all 70,000 pages and find the loopholes (and believe me, there are plenty of them there). Do you honestly think that by adding this one little rule, it’s going to have any affect? Of course not! There will be another loophole to get around it. Meanwhile dumb America turns on the TV to American Idol, thinking life is peachy again and Warren Buffett is finally paying his “fair share.”

Therein lies another problem I have. It comes from the word “fair.” The rhetoric is everybody needs to pay their “fair share.” Well, question: What exactly is fair?

Aren’t all Americans supposed to be treated equally by their government? What happened to “all men are created equal”? Women want equal pay to their male counterparts. Gay and lesbian couples want to marry and adopt children. They are fighting for these “equality” issues. But suddenly, when you start talking about how much somebody pays in taxes, this bullshit of equality flies right out the window and we want to crucify the rich, emptying out their pockets on the streets and fighting over who gets which golden coin.

Taxation is Theft

Taxation is plain and simply put, theft. Don’t believe me, do you? Murray Rothbard, in The Ethics of Liberty, wrote:

For there is one crucially important power inherent in the nature of the State apparatus. All other persons and groups in society (except for acknowledged and sporadic criminals such as thieves and bank robbers) obtain their income voluntarily: either by selling goods and services to the consuming public, or by voluntary gift (e.g., membership in a club or association, bequest, or inheritance). Only the State obtains its revenue by coercion, by threatening dire penalties should the income not be forthcoming. That coercion is known as “taxation,” although in less regularized epochs it was often known as “tribute.” Taxation is theft, purely and simply even though it is theft on a grand and colossal scale which no acknowledged criminals could hope to match. It is a compulsory seizure of the property of the State’s inhabitants, or subjects.

It would be an instructive exercise for the skeptical reader to try to frame a definition of taxation which does not also include theft. Like the robber, the State demands money at the equivalent of gunpoint; if the taxpayer refuses to pay his assets are seized by force, and if he should resist such depredation, he will be arrested or shot if he should continue to resist. It is true that State apologists maintain that taxation is “really” voluntary; one simple but instructive refutation of this claim is to ponder what would happen if the government were to abolish taxation, and to confine itself to simple requests for voluntary contributions. Does anyone really believe that anything comparable to the current vast revenues of the State would continue to pour into its coffers? It is likely that even those theorists who claim that punishment never deters action would balk at such a claim. The great economist Joseph Schumpeter was correct when he acidly wrote that “the theory which construes taxes on the analogy of club dues or of the purchase of the services of, say, a doctor only proves how far removed this part of the social sciences is from scientific habits of mind.”

Hans-Hermann Hoppe wrote in Economics and Ethics of Private Property:

That taxation — foremost and above all — is and must be understood as a means for the destruction of property and wealth-formation follows from a simple logical analysis of the meaning of taxation.

Taxation is a coercive, non-contractual transfer of definite physical assets (nowadays mostly, but not exclusively money), and the value embodied in them, from a person or group of persons who first held these assets and who could have derived an income from further holding them, to another, who now possesses them and now derives an income from so doing…

Thus, by coercively transferring valuable, not yet consumed assets from their producers (in the wider sense of the term including appropriators and contractors) to people who have not produced them, taxation reduces producers’ present income and their presently possible level of consumption. Moreover, it reduces the present incentive for future production of valuable assets and thereby also lowers future income and the future level of available consumption.

Taxation is not just a punishment of consumption without any effect on productive efforts; it is also an assault on production as the only means of providing for and possibly increasing future income and consumption expenditure. By lowering the present value associated with future-directed, value-productive efforts, taxation raises the effective rate of time preference, i.e., the rate of originary interest and, accordingly, leads to a shortening of the period of production and provision and so exerts an inexorable influence of pushing mankind into the direction of an existence of living from hand to mouth. Just increase taxation enough, and you will have mankind reduced to the level of barbaric animal beasts.

Frank Chodorov writes in Out of Step: The Autobiography of an Individualist:

If we assume that the individual has an indisputable right to life, we must concede that he has a similar right to the enjoyment of the products of his labor. This we call a property right. The absolute right to property follows from the original right to life because one without the other is meaningless; the means to life must be identified with life itself. If the State has a prior right to the products of one’s labor, his right to existence is qualified. Aside from the fact that no such prior right can be established, except by declaring the State the author of all rights, our inclination (as shown in the effort to avoid paying taxes) is to reject this concept of priority. Our instinct is against it. We object to the taking of our property by organized society just as we do when a single unit of society commits the act. In the latter case we unhesitatingly call the act robbery, a malum in se. It is not the law which in the first instance defines robbery, it is an ethical principle, and this the law may violate but not supersede. If by the necessity of living we acquiesce to the force of law, if by long custom we lose sight of the immorality, has the principle been obliterated? Robbery is robbery, and no amount of words can make it anything else.

If a man approaches you on the street, holds a gun to your head, and says “give me all your money,” you report that to the police as armed robbery, correct? The government, in effect, is doing the same thing, through less obvious means. Don’t believe me? Try not paying your taxes this year. Your assets could be seized and you could be jailed. The government will use force against you, at gunpoint, to take some of your hard earned money from you. If it were anybody but the government, we would call it theft. Yet, somehow, we allow the government unfettered access to our pockets.

Federal Debt

There’s been a great amount of attention paid to the national debt, which currently stands at over $15 Trillion. We’re all concerned with the possibility of a default. What would happen if the US suddenly couldn’t pay its obligations any longer?

So, what is a “patriotic American” to do? Why, pay more in taxes, of course! Keep us from hitting that point.

Many people have heard the term Keynesian Economics, but probably don’t quite fully grasp the concept. From Wikipedia:

Keynesian economics is a school of macroeconomic thought based on the ideas of 20th-century English economist John Maynard Keynes.

Advocates of Keynesian economics argue that private sector decisions sometimes lead to inefficient macroeconomic outcomes which require active policy responses by the public sector, particularly monetary policy actions by the central bank and fiscal policy actions by the government to stabilize output over the business cycle. The theories forming the basis of Keynesian economics were first presented in The General Theory of Employment, Interest and Money, published in 1936. The interpretations of Keynes are contentious and several schools of thought claim his legacy.

Keynes also advocated deficit spending at times of low private investment or consumption, which is exactly what we’ve seen the last few years here in the US. The government believes it can stimulate the economy by injecting money into it. The only problem is, it’s using borrowed money to do so.

We’ve witnessed first hand, however, that it has had relatively little positive effect, all the while running up over $5 trillion in added debt, just since President Obama has taken office.

But is our debt really a problem? Not according to former Federal Reserve Chairman Alan Greenspan (pictured above), who had this to say:

“The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default” 

I’m not sure that I’ve ever heard something so idiotic in all my life. We can simply print more money? Of course Mr. Greenspan isn’t stupid, he realizes that the more money you have out there, each dollar is worth less. It appears Greenspan knows what the real end game is, however:

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. … This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”

You wonder why gas prices have gone up so much? Do you wonder why food prices are going up? The value of your dollar is going down. No wonder so many people are preparing for the worst. If this is the course that our government intends to take, to simply print more money, then we will end up in a state of hyperinflation:

In economics, hyperinflation occurs when a country experiences very high and usually accelerating inflation. While the real values of the specific economic items generally stay the same in terms of relatively stable foreign currencies, in hyperinflationary conditions the general price level within a specific economy increases rapidly as the functional or internal currency, as opposed to a foreign currency, loses its real value very quickly, normally at an accelerating rate. Economists usually follow Cagan’s description that hyperinflation occurs when the monthly inflation rate exceeds 50%.

Hyperinflation results from a rapid and continuing increase in the supply of money, which occurs when a government prints money or creates credits in bank accounts, instead of collecting taxes to fund government activities. The price increases that result from increased government spending create a vicious circle, requiring ever increasing amounts of money creation to fund government activities. Hence both monetary inflation and price inflation rapidly accelerate. Such rapidly increasing prices cause widespread unwillingness of the local population to hold the local currency as it rapidly loses its real value. Instead they quickly spend any money they receive, which rapidly increases the velocity of money flow which causes further acceleration in prices. Hyperinflation is often associated with wars or their aftermath, political or social upheavals, or other crises that make it difficult for the government to tax the population.

What is the Solution?

The solution is simple: To cut spending. There’s no magic, no gimmicks, no tricks. It’s the same thing you and your family have undoubtedly had to do sometime in the last 6 years – to cut back on spending. Chris Future comes to the same conclusion on Freedom Bunker:

You know our problem is not revenue. Our problem is SPENDING. Even if you taxed every citizen of this country 100%, how many years would to take to pay for everything? The answer is INFINITY. We never stop or even slow spending, so we will never pay it off.

No, the only solution, which very few will actually call out, like Ron Paul, is to stop spending. His proposal of a $1T cut, and the immediate elimination of 5 departments, is a just a GOOD START. We must cut and cut DEEP, simply in order to survive.

Above you see two charts. On the left, you see pretty clearly that government spending has been on a rapid uphill climb for quite some time (and is projected even higher). On the right, you see a comparison with federal spending as a percentage of GDP. I included the chart on the right in the hopes of staying fair and balanced on the issue. While I believe federal spending is high, I’m not sure that it’s out of control as many people say. Yet.

Anyways, I wrote the other day on cutting spending. It’s what needs to be done. Government feels it can simply print more money and pay any debt, so there is no need for them to reduce the debt. Eventually, however, they will have to increase revenue, and that’s where we come back to taxation.

Let’s pretend for a moment that taxation is not theft. What would be “fair”? Well, as Blake Oates notes on Freedom Bunker:

A flat tax is a simple solution to this problem. Everyone pays a small percentage of their income (1-2%), no more, no less. If you make $100, you pay a dollar, if you make a million, you pay $10,000, and so on.

So there you have it, a simple flat tax. There’s also a similar proposal, called the Fair Tax, which would essentially eliminate entirely the personal income tax, and institute a nation-wide sales tax. There are both positives and negatives to this approach.

Listen, I’m a realist. As much as I’d like to believe that we could simply cut personal income taxes entirely overnight, I know that will never happen. I’ve supported the Fair Tax, and I support a simple flat tax as alternatives to our current system. Ultimately, I support the abolition of personal income taxes entirely. That, of course, would require a dramatic cutback in spending.

If our government stuck with only those powers specifically granted them by enumeration in the Constitution, I believe we wouldn’t have the current levels of spending. If we return to that, it should be easy to cut spending. Both Republican candidate for President Ron Paul and Libertarian candidate Gary Johnson have called for over $1 trillion in spending cuts their first year as President if elected. It’s time we get behind some candidates like these. We must also not forget about the legislative branch, that is, the congress (both House and Senate).

I welcome your thoughts and suggestions on all of this. Feel free to comment below.

Aaron Graves

Aaron Graves

Aaron Graves is a veteran and a staunch libertarian, consistently breaking ranks with his Conservative friends on social issues, and with his Liberal friends on economic issues. He is also the guy that wrote the crap that you just read. Sic Semper Tyrannis

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