Theft and Taxes

I received this short and to the point comment on a post I made on Google+ recently regarding the difference between subsidies and tax breaks: 

Ah, it's the same old 'taxes are theft' horseshit. Your kind never gets tired of that malarkey.

This caused me to stop and think.  Is the idea that "taxes are theft" malarkey or is there some basis for it in reality?

First, what exactly is theft?  Unfortunately we cannot simply go to the dictionary and find out in one quick look because the main definition of theft doesn't tell us very much.  (All definitions come from dictionary.reference.com).  The dictionary defines theft as "the act of stealing," which is not terribly helpful.  Referring back to the dictionary, we find that stealing is, "to take the property of another or others without permission or right, especially secretly or by force."  That helps, but what does it mean to do something by force?  Back to the dictionary where we find that force is “unlawful violence threatened or committed against persons or property”, “the power to influence or control”, and when used as a verb “to coerce.”

With that we have a pretty clear definition of theft:

To take the property of another or others without permission or right, either secretly or through the threat or commission of violence against their person or property.

Does our definition reflect the reality we observe when we see theft?  

“Your money or your life!”  says the mugger as he brandishes a gun or a knife. “I have a gun, put all money in an envelope, no dye packs, no alarms, no one will get hurt,” says the bank robber’s note. These examples of what I think of as “confrontational” theft certainly fit our definition.  The thief is attempting to take the victim’s property without permission by the threat of injury.

Thefts such as burglary, pick pocketing, fraud and other crimes that I think of as “non-confrontational” also fit the definition as the property is being taken without the knowledge of the victim.  In the case of fraud, it is being taken by deceiving the victim as to the nature of the reality of the situation.

Now that we have a clear idea of what theft is, let’s take a look at taxes.  Taxes are defined as "a compulsory financial contribution imposed by a government to raise revenue."  We should clarify what is meant by compulsory, which is defined as "required by regulations or laws; obligatory."  We have two choices here to clarify things - required or obligatory.  They both get is to the same place, obliged.  The definition for oblige is "to bind or constrain (someone to do something) by legal, moral, or physical means."  Constrain in turn brings us to compel which is defined as "to secure or bring about by force."    With force we are back to ground already covered in the discussion about theft.

After this, our definition of tax has become: 

The transfer of money to the government under a declared, or implied, intention to inflict legal, moral or physical punishment for failure to comply.  

As with theft, we need to look at some real examples of taxes to see whether our definition matches reality.  While there are many types of taxes they are similar in many respects.  They all involve the transfer of money to the government and they all carry the threat of punishment for failure to do so.  For property taxes, the threat is the loss of your property even if you own it without mortgage or other claim against it.  With sales taxes, individuals have no choice whether or not to pay them, but if the merchant fails to collect them and remit them to the government they can face, in Vermont, up to $10,000 in fines and 3 years in jail, depending on the amount involved.  Similarly, failure to pay income taxes can lead to monetary penalties, forfeiture of property and jail time.  

So in both theft and tax, we have a transfer of property from one person or group to another under the threat, explicitly stated or implied, of punishment.  In neither case do we need to consider what the transferred property will be used for, the victim only cares that he no longer has his property.  Also, we do not need to consider whether the government has the right to take your property or whether their use of force is lawful.  If the government has a right to part of your property, they have a right to all of it and simply haven’t decided to take it.  Yet.  As to lawful, well, who writes the laws?

In order to flourish, individuals must have a right to their property, to use and dispose of it as they see fit.   This right is not something granted by the government, but arises from the basic necessity of life.  If you lived on a desert island, you have to work to stay alive.  You would need to gather the goods necessary for your survival, be it food, materials to create shelter, tools, clothing and etc.  Imagine if periodically a canoe arrived at your island and strangers came and took part of your food, raw materials, tools, clothing, and destroyed your shelter.  If this continued, you could not flourish on your island and, if they took enough, your very survival would be in jeopardy.

It is no different in modern society.  If you do not have the right to use and dispose of your property in the way that you see fit, you are in exactly the same position as on the deserted island.  When someone else is able to take some or all of your property to dispose of how they see fit, your chances for thriving and even surviving will certainly be in question.

The Founding Fathers recognized this fundamental right of the individual and secured it in our founding documents.   The Declaration of Independence states, "endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."   Liberty and the pursuit of happiness require that man be free to work, to keep the fruits of his labor, and to dispose of them as he sees fit.  Further, the Fourth Amendment to the Constitution says, "The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures shall not be violated."  While this is most often quoted in terms of criminal matters, it can also be read as affirming the right of an individual to keep his property.  The Fifth Amendment contains similar language - "shall not be deprived of life, liberty or property" and "nor shall private property be taken for public use."


As the Founders noted, these rights are unalienable, i.e. they cannot be separated from the individual by any means.  We recognize, for example, that we have the right to freedom of speech regardless of whether a majority of the people disagree with what we are saying, as long as the exercise of that right does not demonstrably injure another person (the classic example of crying fire in a crowded movie theater).  In the same way, we have the right to use and dispose of our property in any manner that we choose regardless of what others may think, as long as such use does not demonstrably injure another person or actually damage their property.  

It is obvious that theft is a violation of the victim's rights and immoral.  It should also be obvious that taxes are violations of individual rights and immoral, and for the same reasons.  The fact that the government, the majority, or some group currently in power has decided that taxes are legal and "necessary" does  not make them any less so.

Regards

Egalitarianism Goes to the Cinema

Last week during his State of the Union address, President Obama spoke at length about his view of how America works and what the people have a right to expect from the government.  Lines about people who work hard and fulfill their obligations being able to live a decent life, increases in minimum wage and so forth brought standing ovations.  If you listened to any conservative commentary you likely heard much of what Obama said referred to as egalitarian, but just what does it mean to be egalitarian?

Imagine you are the manager or owner of a small movie theater with several screens.  You have been in business for quite some time and have developed a good knowledge of your customers and what sort of movies they like.   You are notified that the state legislature has passed a new law requiring you to show all films offered to you.  The intention, so they claim, to help ensure that small film makers have the opportunity to have their films shown and make money.   You protest but are told that this is being "supporting the arts", since it should not just be big films or films from well known directors that are shown in theaters.  You cringe to think what types of films you may be forced to accept since your own experience and judgment are no longer final and you will lose customers as they will no longer be able to trust your choice of films. 

Further, you learn as you actually read the law, you will also be required to equally share revenue between any films you show each week, regardless of how many people actually attend each one.  While this does not directly or immediately impact how much money you will make, you know that in the long term it will be devastating.  Film distributors of expensive "blockbuster" films will likely stop dealing with you as they are unlikely to see as much of a return from your theater as they would from theaters in other states.  You know that this will mean that eventually the quality of films available in your state will decline as there will be less incentive to make or distribute films in your state that require a large investment as they will not be able to recoup it as the income from ticket sales will be diluted by the share taken to give to poorly made and/or attended films.

Later you hear rumblings that this type of legislation will become national, to "protect" the theaters in those states that are just trying to "support the arts".  You know that if such a law passes it means the end of the film industry in the United States, but you have long since closed your theater as your customers have increasingly turned to DVD, streaming video and other means of obtaining films that are not available in theaters in your state.  If the law goes national, well, at least you will still have foreign films.  Until the government passes the Film and Video Protection Act slapping a large tariff on foreign entertainment available in the United States, the proceeds of which will, of course, be used to support the arts.  Well, at least those arts the government deems as needing support.

While the events described above might seem unlikely, they do illustrate the most common types of egalitarianism: equality of opportunity and equality of results.

In the first part of the story, I describe equality of opportunity, where everyone gets a chance, regardless of merit.  While this may sound good, a little thought will show that it cannot actually exist in reality without violating someone's rights.  In my theater example, it should be obvious that the manager/owner's rights are being violated pretty significantly.  He is no longer allowed to use his own judgment to select the films he will show, but rather he has to show whatever films someone wants to offer him, regardless of any sort of objective assessment of quality or appropriateness.  Other examples include, but are certainly not limited to: providing home loans to people who do not meet the standard requirements for borrowing simply because the "deserve" the opportunity to own a home; giving tax payer funds to a company to develop products regardless of whether there is, or will be, any demand for them; forcing hiring quotas based on criteria that are non-essential to job performance such as race, gender, and age regardless of the number of candidates from those categories actually applying for the job. In all these cases, the ability of some are being suppressed or devalued to give opportunity to others.

I go on in the next paragraph to describe the second definition of egalitarianism: equality of outcome.  As with equality of opportunity it should be apparent that this is impossible to achieve without infringing on someone's rights.  In the theater example, the makers of a successful films are penalized (actually they are stolen from) in order to provide equal outcome to the less popular film.  You can find further examples of this in the world today such as the Marxist theory of "from each according to his ability and to each according to his needs";  social promotions in schools with no regard to the actual achievement of the student in their classwork; pay or employment based solely on seniority rather than performance; or, as in Obama's speech, providing a "decent living" to someone who "works hard" and "fulfills their obligations" (with no real definition of what those terms mean) regardless of the actual value created.  In all of these cases, results earned by one group are either taken away or devalued in order to provide them to another.

If infringing on the rights of some to provide benefits to others as egalitarianism requires is immoral, which it is, then what type of equality, if any, can we strive for?  The only moral type of equality is equality before the law.  If your rights are infringed on by someone, the courts should only recognize the facts of the case.  Non-essentials such as race, gender, age, wealth, social standing, political connections and so forth should play no part in the proceedings.  

Sadly, as Obama's address illustrated,  we appear to be moving toward increasing collectivism and egalitarianism and away from true, achievable, equality.  Virtually every government program claims to be all about "equality" and "fairness", again without defining what exactly this means, while trampling the rights of other groups to provide those benefits to another group that is claimed to be at a disadvantage.  At the same time these programs often reward with special privileges individuals or groups who are favored by those currently in power.   

Until we actually embrace the notion of equality before the law and reject any other supposed type, we will be increasingly at risk of finding ourselves in one of the groups whose rights need to be infringed in order to be "fair" to the politically important group of the moment.

My 2 percent...I mean cents

I had a little interaction on Twitter the other day that got me thinking.  A dangerous thing as my brother might tell me.

I had posted to Twitter:

Ah, first paycheck of the year, first view of my higher taxes. And people say the government can't work fast.

The difference in my paycheck was just the ending of the so called "payroll tax holiday."

This garnered a decent number, for me, of favorites, retweets and even a few new followers.  It also drew one direct reply:

This was a two year tax holiday; would you like to have it made permanent? Why not lower the rate to 0%, and borrow 100%?

Implicit in this reply is that Social Security is a fact of reality that is not subject to change and that the only choice open to us is how we fund it.

This is a pretty common assumption, or at least not uncommon.  A quick search revealed any number of similar reactions a year ago when the payroll tax holiday was extended.  For example:

Investor's Business Daily (one of my favorite newspapers) said, "Result: cash for pizza now — and smaller Social Security checks later."
Truth Sandwich's headline read: "Raiding the Social Security Piggy Bank for Pizza Money"
CNS News reported, quoting Rep. Frank Wolf (R-VA), "Wolf called the payroll tax extension a "raid on Social Security, which is already going broke," and he noted that the money paid into the system now -- through payroll taxes -- pays benefits for existing retirees."

This was pretty much my reaction at the time.  I felt that if we have a Social Security system that is by all accounts already looking at trouble down the road it is foolish to knowingly take in less money.  For those that don't believe that Social Security is on shaky ground, here is a quote from Social Security Administration that they used to send out when they mailed statements to people:

"Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time. The law governing benefit amounts may change because, by 2037, the payroll taxes collected will be enough to pay only about 76 percent of scheduled benefits.”

There are a number of philosophical issues with a Social Security system.  The first is that it essentially requires that you work/live for the benefit of someone else.   To whatever extent you are living for someone else's benefit you are NOT living for your own.  Given that we are forced to live for others, as opposed to choosing to do it for your own reasons, we are not free.  As Ayn Rand put it, "Living for others is slavery -- and nothing else whatever -- and no names, ends or excuses can alter the fact."

Contrary to popular belief, the government is not saving and investing your contributions in order to give you income during your retirement.  Rather, money paid in today is used to pay benefits to those collecting them today.  In the past, more revenue was collected in payroll taxes than was needed to pay the current benefits and the surplus was used to fund other parts of the government in return for IOUs (Treasury bonds) which  were put in the "Trust Fund."  Now that payroll taxes are no longer covering current benefits, bonds from the "Trust Fund" need to be redeemed.  Which means the cash needed to pay shortfall is coming from general tax revenues further burdening current tax payers.  This latter problem will worsen as demographics catch up with us and there are fewer and fewer workers paying taxes to support retirees.  In the 1930s it was about 17 workers for 1 retiree and now it is approaching 2 to 1.

There have been a number of models for privatizing Social Security which would appear to remove the issue of requiring people to work for the sake of others.  Two of the more often mentioned systems are those of Chile and Galveston, Brazoria and Matagorda counties in Texas.

Chile converted their system from an untenable government run system to a privately invested system where the individuals can decide how their money is invested.  So far this seems to a lot of improvements over the government run system.  One interesting side effect is that savings rates are higher than before the private system which certainly helps long term growth.

The three counties in Texas took advantage of a since-closed loophole in the law and opted out of Social Security in 1981 and convert to a privately invested system.  These counties pool the contributions and then money management firms bid to manage this money with certain restrictions on guaranteeing rates of returns. Even the report from the Social Security Administration indicates that in many ways the private program is as good and often better than Social Security.  In the areas where it appears Social Security is better it is unclear whether the figures given for Social Security include the reduction in benefits that would appear to certain to occur around 2037 (the examples given in the report are for workers retiring in 2045).  Assuming the government doesn't increase payroll taxes by about 1/3, at current estimates, then benefits as noted above would be reduced by 24% making the private plan in these counties better in pretty much all areas.

The problem with both of the above alternatives is that they use government force to compel the workers involved to participate.  (Well, in the case of the counties in Texas, workers are compelled to either participate in the private plan or social security.)   While the government properly should have the monopoly on the use of force in a civilized society, this force should only be used in retaliation against those who initiation the use of force unlawfully.  The government should never be the initiator of force against the innocent.

When the government uses force to compel behavior, or prevent behavior that does not infringe on the rights of others, it effectively takes away our right to use our own mind and reason to decide what the best course of action for ourselves is.  When the government compels someone to save X% of their income towards retirement it precludes the person from using that money for something else.

Maybe the person would like to start their own business but because of such a law they would be unable to save the money needed to begin, or would be so delayed that the opportunity would disappear and the person's future be worse off as a consequence.  Maybe the person would decide to take a trip, buy a new computer or whatever and not bother with saving for the future.  Either way, man's most important right, the one he cannot truly live without, is the right to live his life as he sees fit based on his own reason.

Below is Yaron Brook of the Ayn Rand Institute discussing the entitlement problem in the United States.

So my feeling is the the ultimate answer is essentially the same as what Yaron speaks of in the video.  As I put it in response to the tweet quoted above:

or how about phasing out Social Security all together and let individuals plan for themselves?

After I started writing this post, I noticed I had a reply to my response.  I was a little surprised, but pleasantly so, given my preconception based on the initial reply:

That would be the best idea, since it isn't a "retirement plan" and is nothing more than an entitlement program.

Regards

Life, Liberty and the Pursuit of Happiness?

"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."

How far we have moved away from these founding principles, the underlying philosophy, of our country.

While researching what may (or may not) become a blog post, I found myself on the website for the National Bureau of Economic Research.  This sounds like a government agency, but according to "History of the NBER" on their website, the NBER is:

a private, nonprofit, nonpartisan research organization dedicated to promoting a greater understanding of how the economy works.

Private and non-partisan sounds like it might be an organization that would be a good source of information about the economy.   After reading a bit of one article, I have my doubts about the philosophy behind the organization.

Here is a quote from a 2010 report regarding the tax exemption for employer offered health insurance (emphasis is mine):

This tax exclusion is extremely costly - it reduces federal and state tax revenues by $260 Billion per year and is the government's third largest expenditure on health care, after Medicare ($400 Billion) and Medicaid ($300 Billion).

Apparently according to a private, non-partisan organization, any tax that the government fails or chooses not to take is an expense.   This is not an unusual sentiment these days.  Just enter "tax break cost government" or a similar search phrase and you'll get any number of links which reflect the same belief:  tax cuts are giveaways, expenditures and cost the government money.  For example here, here and here.

If you accept this idea, it logically follows that anything your earn rightfully belongs to the government, which simply allows you to keep some portion of it for yourself.   After all, if it is an expenditure for the government to NOT take the money in taxes, it must rightfully be theirs in the first place.

This in turn leads to the idea that you do not work for yourself, but for others and your only reward is what they decide to give you or let you keep.  Another way of putting this is that you are essentially the servant of the government.

If we are the servant to others, we are not free to act in pursuit of our own goals and happiness.  If we are not free to act as we see fit, we do not have liberty.  If we do not have liberty, in essence we do not have life.

"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."

Regards