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60


L. Neil Smith's
THE LIBERTARIAN ENTERPRISE
Number 60, November 30, 1999
Post-Turkey Stress Disorder

Re-Examining Taxation

by Andrew Muriithi
andrew97@wharton.upenn.edu

Special to TLE

           There are plenty of things that we grow up with and become acculturated to in our lifetimes. We tend to take many institutions and customs for granted, rarely questioning why they exist or why we observe them. One such thing is taxation. I bring up the subject because the question regarding what form our economic organization should take is of profound impact, especially given the fact that Kenya languishes in a pitiable state today economically and politically. Needless to say, we can blame most of it on a lack of economic freedom. Our economy is too planned, too regulated, too taxed.
           A free society places high value on the freedom to live as we choose in our daily lives without infringing on the rights of others. Traditionally, politics and economics tend to be treated as separable, but are in fact inextricably intertwined. Economic freedom is the Siamese twin of political freedom, and is an important aspect of overall liberty in a free society. Political freedom protects and assures economic freedom. Conversely, economic freedom assures political freedom by creating alternate centers of influence that countermand political power and discourage its centralization. The decisions about how to organize our personal lives constitute our economic freedom--for economics is essentially how we allocate our resources and time in order to ensure our survival. Economic freedom means the right to dispose of our skills, talents and wealth as we choose so as to further our daily sustenance. Hence any constraint that is imposed on that ability, outside of preventing the violation of the rights of others, can be properly construed as an unfair infringement on our individual liberty and a threat to our survival.
           Which brings me back to taxation. I posit in this article that taxation is an infringement on individual freedom because it places a constraint on our ability to dispose of our income or wealth as we choose, even when we are not infringing on the rights of others. Many scholars, thinkers, leaders and ordinary people have come to the same conclusion, including Laissez Faire City Times writer Ace and book author David Kelley. Taxation is unjust. To many, that is a sweeping statement. Some may regard it as radical, even dangerous and subversive. But it only sounds radical for the reason above: as a result of growing up with the institution of taxation, we take it for granted as a normal, unchangeable fixture of life, and develop a vested interest in keeping it that way. But it need not be. Just because murder, theft and other acts that limit our freedom occur in our society doesn't mean that we sanction them as normal events. There are revolutions which have been fought over the injustice of taxation. The American Revolution stands out as a prominent example this century. Indeed there are some countries today that don't have taxes entirely--the so-called tax havens. The very term haven in ordinary parlance means a refuge. This should be instructive because it implies escape from an injustice. Often though, the term tax haven as used by overnments connotes the opposite--escape from justice.
           Ace writes that in order to introduce further clarity into the notion of taxation as an injustice, one needs to forget for a moment the contemporary interpretations offered by its apologists and defenders. One needs to set aside arguments about general well-being or necessity, or the widespread occurrence of taxation in many countries for that matter, and reduce taxation down to a syllogism. Consider what taxation is all about at its most basic level. A group of people (who we call the government) prints fiat money (currency or bonds) and, through state institutions, spends it on public programs--welfare, warfare, "whatever-fare". This group then compels the public (the group of people who are not the government) to "volunteer" a percentage of their lifetime at wage-labor or business to pay back what was never owed in the first place, and with interest. If anyone opts not to volunteer, they are stripped of as much as 100 percent of their assets, or imprisoned where 100 percent of their time belongs to the state. Now this is arguably a form of slavery.
           This last statement is astounding. If you are a defender of the status quo, it would be reasonable to expect you to dismiss the above argument as nonsense. Surely, slavery is the most atrocious form of evil one individual can perpetrate on another, short of murder. But those days are long gone and we are all free. But are we? There is no better slave than one who thinks he is free, so goes a wise saying. The absence of whips and scourges doesn't mean coercion is absent; nor does it mean that we are free to control our means and destiny as we please, for we still have to make provision for the government in most, if not all our personal economic decisions. Taxation is slavery--fractional or partial perhaps--but slavery nonetheless. However covert or clever, there is nothing benign or voluntary about taxation, and if you doubt the fact, I challenge you to withhold your taxes. Sooner or later, you will spot the gun in your face.
           We can go further and perform the following thought experiment: if taxes were made voluntary (REALLY voluntary) today, so that you wouldn't go to jail if you failed to pay them, how many Kenyans do you suppose would continue paying them? There isn't a single soul one comes across that pays his taxes with glee, or who wants to pay more than the bare minimum he is required to--not even the very rich who have pots of money to throw away. Is such a high degree of consistency in people's opinions about taxes across all income levels a mere accident? But then again, once made voluntary, taxes would cease being taxes and instead become contributions to the government. How many Kenyans would contribute to the myriad government ministries and departments and their profligate spending? If the Kenyan government had only contributions to rely on, would it retain its present size and scope, with all the inefficiencies and ills associated with it? If you think this is a far-flung idea, you need not look farther than Switzerland, which has a volunteer government.
           Now, there are perhaps some who agree marginally that taxation is an evil, but a necessary one. There are poor people who need shelter, clothing, education, health care etc. and without taxation, they would languish or perish. Those who hold this "necessary evil" position must necessarily also believe that the end justifies the means--if the end is noble, the means, however evil, are justified. There are obvious philosophical and moral problems with this utilitarian view, and not enough space to accommodate them here. But to illustrate them in simple fashion, consider David Kelley's pristine logic. He writes that in our personal lives, we know that people sometimes suffer through no fault of their own. We recognize a place in life for generosity and mutual aid. If a stranger is hurt in the street, we call the ambulance and see to his needs. If a neighbor's house burns down, we do what we can to help. But we choose to do so voluntarily (emphasis added), weighing such needs against the other demands on our resources, and we expect some measure of gratitude in recognition of our help. If a stranger appeared at our door demanding a place to live, or help with his medical bills, or a contribution to his retirement fund or to his kids' education--if he demanded it as a matter of right, regardless of whether we were willing and able to help, and without any obligation to thank us for helping--we would take offense. We would recognize it as a monumental act of presumption. If the stranger demanded it with gun in hand, we would find it grossly unjust and punishable.
           Taxation does precisely the same thing. Through the coercive mechanism of government, one group of individuals puts claims on the public coffer--and thus on the wealth of productive members of society who pay taxes--without considering the latter's willingness or ability to pay and without any obligation to be grateful. We rarely challenge these claims as illegitimate or unjust. Usually, we go by the assumption that the rights of the claimants supersede those of the producers of the wealth. But this is the exact same assumption that the armed stranger above makes when he dispossesses you of your money by force. The government, by taxation, steals from productive members of society. Remember, the government doesn't produce anything and, therefore, has no right to people's income. It merely robs Peter to pay Paul--what we euphemistically call wealth redistribution. And while it shifts wealth around, it pinches some off to pay the people whose job it is to shift it (the people we call bureaucrats). So then, if the government commits the same crime in effect as a common thief, why aren't the government people in jail? Because the government legalizes this theft for itself. A common Robin Hood doing the same thing, however noble his intentions may be, would be incarcerated. Economist Walter Williams asks in a recent column, if an act done by one person is immoral, does it become moral when done collectively, namely by the government? Without doubt, the distinction between legalized or "official" theft and common theft is not a meaningful difference --both are immoral. An injustice by any other name is still an injustice.
           All this may be a bitter reality pill for you the reader. If you are still with me at this point, then you are beginning to see the nefarious nature of taxation. Some of that nefarious nature is obvious in Kenyan society. Corruption, especially within the government, is probably the most visible symptom. Corruption is made possible by the government's taxing power, and the influence-peddling that results from its ability to impose or exempt taxation among different groups. The corruption in the Customs Department, for instance, would cease to exist if there was no Customs Department. There would be no Customs Department if no customs or tariffs existed--or for that matter, no NSSF if payroll taxes didn't exist. A highly intrusive government is also a real and dangerous, albeit less visible, consequence of taxation. Huge tax collection agencies such as the Kenya Revenue Authority, with police powers to confiscate your property on the slightest suspicion of tax evasion, can ride rough shod over your right to be secure in your person, papers and property. But perhaps the most insidious effect of taxation is its stealthy corrosion of wealth, and the widespread poverty that results. Progressive taxation punishes individuals who prosper and climb up the income ladder. High taxes reduce the incentive to work--people like to work to earn money for themselves and not the government. All taxes reduce disposable income, and the less disposable income you have, the less you can spend or save. Low spending means low demand for goods and services. Low demand coupled with low savings mean low investment. Low investment means less research and development, less innovation, and fewer new products, services and technologies. Less of these things means a lower standard of living.
           Should Kenya be a tax haven? My categorical answer is yes, and Kenya's quest for liberty is the most compelling reason why there should be no taxes in Kenya. While there is most likely no broad consensus on this, nonetheless, it should be quite obvious that the less taxes there are, the better, and that the ideal, from the point of view of justice and prosperity, is zero taxes--regardless of whatever fiscal prescriptions the international bureaucrats at the IMF, World Bank or other aid agencies prescribe. It is fascinating to contemplate the Kenyan economy becoming tax-free like the economies of the Isle of Man, the Channel Islands, the Grand Cayman Islands, or at least a low-tax economy like Hong Kong and New Zealand. Add to that the resourcefulness of Kenyan citizens, our natural resources, and a government limited only to an orthodox role as protector of individual rights and the possibilities are almost limitless.


"INDEPENDENT" MEANS NEVER HAVING TO SAY YOU'RE SORRY

Independents lead registration among New Hampshire voters

CONCORD, N.H. (November 23, 1999 7:32 p.m. EST http://www.nandotimes.com) -- New Hampshire's secretary of state said Tuesday that voter registrations show that independents outnumber Republicans and Democrats in the nation's first primary state.

Independent, or undeclared, voters make up 37 percent of the state's registered voters. Republican registration is 36 percent and Democrats number 27 percent.

In real numbers, there are 274,927 independents, 265,679 Republicans and 197,816 Democrats.

Unlike some states, where independent voters can't vote in primaries, New Hampshire independents can vote in either party's primary. The state's voters will have another choice as well: Reform Party candidate Pat Buchanan, who won the New Hampshire primary in 1996 over eventual GOP nominee Bob Dole.

[With "choices" like this, who needs independence? - ed.]


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