For decades, make that centuries, philosophers, economists, politicians and others have been searching for the Holy Grail of taxation, a “fair” tax. And they all have failed. Inasmuch as all taxes involve coercion, the very negation of liberty, taxation is no different from what a robber who says to his victims, ‘Your money or your life.” In fact, taxation violates one of the fundamental tenets of the Judeo-Christian tradition, “Thou shall not steal.” Thus, creating a fair, coercive tax is impossible.
Even atheists or agnostics have to acknowledge that taking money from an individual by force is unethical even if the taker is a democratically elected organization called government. Otherwise, there can be objection to government confiscating 100% of everyone’s income. If government should not be allowed to take 100% of anyone’s income—that would be slavery–then why is the federal government’s taking of 10%, 30% or more of the people’s income any less objectionable?
However, how can government function if it does have the power to tax? This is another example of how non-sequitrs dominate the discussion over taxation and other economic issues. In other words, if government is constitutionally authorized to engage in activity A, B, or C, why does it have to tax the people to fund these activities? We are not taxed to obtain our food, clothing, shelter, utilities, gasoline, entertainment, etc.
Moreover, how do we know if the government is doing exactly what the people want it to do? We do not have a direct way to determine if the people would be willing to pay $3.7 trillion a year to support the federal government’s welfare-warfare state. Nevertheless, we know the people do not want to pay for the bloated federal government because the people are not clamoring for the Congress to raise their individual taxes to eliminate the $1.4 trillion deficit.
The truth is we have more government than people are willing to pay for. The federal government imposes taxes to support unnecessary wars, subsidize crony capitalists, redistribute income to lower income folks, and has created unsustainable social programs like Social Security and Medicare. If payments to the government were voluntary, the American people would “vote” overwhelmingly for less spending. There is only way to test this proposition and that is to end all federal taxation, not try to find the impossible, a ‘fair” tax.
In the meantime, over the centuries, governments have imposed taxes on income, property, spending, imports, estates, and capital, only to have large segments of the public complain that the tax is too high, or that the government is spending their money unwisely. Thus, at what tax rate would the public not complain that government is spending their income wisely? There is no objective way to determine the fair rate of taxation, because there is no way such a rate would have unanimous or even majority consent. Thus, to try to concoct one is a futile exercise.
In addition, taxation reduces our standard of living. Hundreds of billions of dollars are devoted to preparing tax returns, paying IRS agents and other government employees devoted to tax collections and enforcement. Thus, the economy loses hundreds of billions of dollars of lost output from the private sector—output that would have met the people’s needs if taxation had not been imposed on individuals and businesses. In short, taxation imposes a huge opportunity cost on the economy.
There is, however, one “fair tax,” and that is the gasoline tax, which should be called a transportation use fee, because it is imposed on purchasers of gasoline and other products, and the funds collected by government are supposed to be dedicated to building and maintaining streets, roads, highways, and bridges, an important service to the economy. Thus, if government wants to have a ‘fair” way to collect revenue, it should impose (voluntary) fees for its services.
Throughout history taxes have been imposed that have been called “fair” because they have conformed to one or more “equity” principles—the ability to pay (a progressive income tax), a tax on “wealthy or well to do landowners, homeowners, and commercial property owners (property tax), a levy on consumption, especially luxury goods (sales and excise taxes). Both sales taxes and payroll taxes have been called regressive because they impose a disproportionate burden on low-income individuals and households. That is an even more reason to eliminate these taxes as well.