True Tax Reform

“If man in the state of nature be so free, as has been said; if he be absolute lord of his own person and possessions, equal to the greatest, and subject to no body, why will he part with his freedom? why will he give up this empire, and subject himself to the dominion and controul of any other power? To which it is obvious to answer, that though in the state of nature he hath such a right, yet the enjoyment of it is very uncertain, and constantly exposed to the invasion of others: for all being kings as much as he, every man his equal, and the greater part no strict observers of equity and justice, the enjoyment of the property he has in this state is very unsafe, very unsecure. This makes him willing to quit a condition, which, however free, is full of fears and continual dangers: and it is not without reason, that he seeks out, and is willing to join in society with others, who are already united, or have a mind to unite, for the mutual preservation of their lives, liberties and estates.” – John Locke, Second Treatise on Government

The recent tax bill passed by Congress and signed by President Trump has resulted in a massive cacophony of false narratives and blatant lies by both parties. The Republicans have been touting this as tax “reform” that will boost the economy, while the Democrats have been railing about the disproportionate benefit to the upper class, the supposed loss of health insurance, and the $1.5 trillion cost to the deficit. The debate has also illustrated the continued effectiveness of the Progressive movement in controlling the political narrative and convincing the American people that the state knows what’s best for them. Unfortunately, the Republicans are also historically all too happy to let the citizenry believe that government is best suited at dictating to the American people what is in their best interests, so long as they are at the helm. One cannot really get too mad about this problem when one looks at how complicit we as a citizenry have become to casting away our liberties to those who would promise us the moon if only we were to cede just an ounce more of power.

To understand the true depths of these hyperboles, we must look back to the founding of the nation. The Founding Fathers understood the dangers of tyrannical government, specifically that power to encroach upon the inalienable right to one’s property. Having already experienced multiple infringements on this right by George III, the Founders were very careful to craft a government which was hindered against such transgressions. The Founders recognized that government serves very few and highly limited roles in a free society; the two most fundamental roles being the preservation of individual liberties from others who would seek to violate them, and the enforcement of agreements between individuals.

Among the greatest powers a state can wield against its citizenry is that to levy taxes and deprive individuals of their property. The Founders were not oblivious to the essentiality of taxation in order for a government to properly fulfil the above stated fundamental purposes, having experienced the drawbacks of the Articles of Confederation, and thus the Constitution states that “Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States.” However, the Founders were also keenly aware that they had previously proclaimed about the criticality that there be “consent of the governed” and which is most strongly exercised at the lowest levels of local government. A strong national government with the power to tax could easily subjugate an entire state to the tyranny of the majority.

George Mason described the threat of unmitigated powers of taxation to the young nation in Antifederalist Paper No. 35 expressing, “The mode of levying taxes is of the utmost consequence; and yet here it is to be determined by those who have neither knowledge of our situation, nor a common interest with us, nor a fellow-feeling for us…Why, then, should we give up this dangerous power of individual taxation? Why leave the manner of laying taxes to those who, in the nature of things, cannot be acquainted with the situation of those on whom they are to impose them, when it can be done by those who are well acquainted with it?” Thus, the check on congressional abuse of power and the protection of state’s rights was preserved by requiring “all Duties, Imposts and Excises shall be uniform throughout the United States” and that “No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.”

Following the ratification of the Constitution and the assumption of all state debts by the Federal government the nation began steadily reducing its percentage of debt-to-GDP utilizing almost exclusively tariffs and excise taxes, and by highly limiting spending until the Civil War by adhering to George Washington’s advisement on governing “that no taxes can be devised which are not more or less inconvenient and unpleasant; that the intrinsic embarrassment, inseparable from the selection of the proper objects (which is always a choice of difficulties), ought to be a decisive motive for a candid construction of the conduct of the government in making it.” More plainly put, the public debt is a cherished asset that must be protected from abuse and, when used, expeditiously repaid via taxes, and that in order to minimize the unpleasantry of frequent taxation, conscientious oversight of judicious government spending must exist by the citizenry.

Gross Public Debt 1792-1910US spending 1792-1910

The Civil War saw a significant increase in spending, tax revenues, and debt as a percentage of GDP. Following the War, the US once again began to reduce the debt steadily until the Progressive movement began to dictate to the American public their best interests by introducing legislation including the 16th Amendment and the Federal Reserve in 1913, and Prohibition in 1919. Upon US entry into World War I, debt once again escalated. The introduction of the Welfare State under Franklin Roosevelt in 1933 marked the true beginning of the runaway increase in government spending, continuing through World War II. Again, in 1965 with the creation of Medicaid and in 1966 with Medicare, the Welfare State monstrosity continued to prosper under Lyndon Johnson’s Great Society. These programs account for well over half of today’s Federal budget and are the crown tools of the unconstitutional and immoral redistribution of wealth by the Federal government.

US spending 1910-1960Gross Public Debt 1910-1960

Since the introduction of the income tax, government spending has sky-rocketed. Today, the need to fund entitlement and social welfare programs have crippled the budget, built on promises against the labor of future generations. Social Security in 2016 accounted for $910.3 billion, Medicare accounted for $961.6 billion, Medicaid accounted for $368.3 billion, and Income Security (SNAP, unemployment, etc.) accounted for $303.9 billion. All of these programs have continually grown since 1967 as Congress has been more than willing to be “charitable” with the citizenry’s money. However, charity cannot come from the barrel of a gun.

On the discretionary side, defense spending, while constitutionally mandated, accounted for $583.7 billion including the purchase of “warships” that break down while transiting from their factory to their homeport, Joint Strike Fighter aircraft that will never be combat capable, and continuing operations in Afghanistan which will soon be old enough to host troops born after 9/11 and with no clearly achievable strategic objective. But that only accounts for half of the discretionary pile. Among the various billions allotted, we also have the Department of Education spending $70.9 billion and “overseeing” the 24th ranked nation in science and reading, and 39th in mathematics.

US spending 1960-2020Gross Public Debt 1960-2020

The maxim that “the person with the greatest vested interest in the prudent use of one’s money is oneself” continues to ring true, and should be no less applicable to our tax dollars. Yet we continually turn to the state to decide how best to spend our money, a practice Congress has proven repeatedly to be widely ineffective at, if not outright reckless and negligent. All these burgeoning programs have gradually desensitized the American citizens from the incremental levels of thievery perpetrated by the government. We are left with a citizenry that has been indoctrinated into believing that taxes are a civic duty in service of the nation, rather than the reality of our serfdom to the state, by playing up national defense and roads while ignoring the rampant waste and abuse by our elected representatives catering to special interests and ushered along by a failed public education infrastructure conveniently propped up by those very taxes. We have come to embrace the lie that the reduction of taxes is somehow a theft perpetrated against the state and therefore the population as a whole. Thus, we can now circle back to the lies being bandied about by our elected representatives.

We shall begin with a few of the Democratic myths. The easiest is that it is only logical to expect that those who most heavily prop up the state’s system of taxation (i.e. the wealthy) are the ones who will see the greatest return on any positive changes to the tax system. Furthermore, we can expect that only those who bear an actual burden will experience any relief from tax reform, real or half-hearted, most notably those in the highest quintile who account for 68.8% of all Federal taxes, and the upper three quintiles that account for 95.5% of all taxes paid. Yet these facts don’t align with the desired talking point of Democrats who proffer the notion that the wealthy somehow do not pay their “fair share” of taxes. Therefore, those that do not pay into the system naturally have the most to “lose” in a system that effectively pilfers and redistributes property from those who rightfully possessed it.

The second falsehood is the “loss” of health insurance by 13 million individuals. We first must look past the basic fact that health insurance is a service and that no individual has an inherent right to any service without a voluntary exchange and the fact that government subsidies routinely cause the price of such commodities or services to increase beyond what the market would truly demand (see Education). Next, we can begin to address the false assumptions this claim is built upon. The first false assumption is that an insurance market that is artificially propped up through taxation and coercion is “providing” true greater access to health insurance services. The second false assumption is the notion that individuals whose health insurance is provided by or subsidized by the government through taxation can rightfully claim to have gained insurance in such a market and thus make claims that it is theirs to “lose” to begin with. The third false assumption is that the market suddenly will experience a decrease in the supply of services due to a mandate repeal and that this shrinkage of availability will cause individuals to lose their insurance. With these false assumptions removed, we can begin to address the claim. Per the former IRS Commissioner, 6.5 million Americans opted to not buy health insurance in 2016 demonstrating that Americans are more than willing to face fines rather than partake in services of which they have decided they do not have a need of. Naturally, these numbers should continue to climb as citizens, now free to decide how best to allocate their own resources and property, may exercise their own judgment and choose not to purchase health insurance, which can hardly be considered losing.

However, the segment of the population who would voluntarily not acquire insurance is likely not the one being cited, though they are conveniently lumped into the Democratic talking points. Therefore, let us turn to those in the population who would likely experience an increase in premiums such that they might not be able to afford insurance. The argument is that eliminating compulsory participation in the risk pool by more individuals will necessitate a rise in premiums. This relationship is certainly true, but only if we intentionally ignore the other variables in the full equation. Health insurance, as with many services, has many variables that in sum account for its cost to consumers. In a truly free market, consumers would negotiate with providers to find a service that meets their needs at a price they are willing to pay, or at a value which is determined by the market (i.e. its true value). What we as a nation have done, in the name of the citizen’s “best interests,” is lock several of these variables so that consumers no longer have the power to manipulate them in order to minimize their final costs. These include minimum coverage requirements, co-payment restrictions, and deductible restrictions. And the cherry on top is government’s prohibition against screening those with preexisting conditions, itself a notion that runs completely counter to the concept of health insurance. Now we find ourselves shocked that after all this state intervention in the market, the prices have rapidly risen. Lo! how “capitalism” has failed us!

The final, and most egregious, myth being perpetuated by the Democrats is the increased cost of the tax cuts towards the deficit. This embodies the entirety of effects that Democratic and Progressive messaging and policy have had on the American political discussion: the idea that somehow lower tax rates are robbing the state. Citizens don’t “pay” for tax cuts, either in the short term or in the deficit. Taxes are revenues. This is money that the state did not originally have and is raised (or more accurately, coerced). The programs that government funds (e.g. education, social security) cost money, are an outflow of funds and are thus “paid” for. Only the Progressives have successfully convinced the populace that somehow their money does not truly belong to them but rather to the state and that allowing individuals to retain their property is somehow depriving others (specifically the government) of money, which the state never had any right to in the first place.

Looking across the aisle, Republicans have rightfully avoided, for the most part, invoking the concept of “trickle-down economics” in the discussion. In part, this is because of the left’s success at vilifying the concept and also, more importantly, since the effects on the economy of returning wealth to the citizenry are not experienced via “trickle-down” anyways. Moving beyond the foundational inherent right of individuals and collections of individuals (i.e. corporations) to be secure in their property, returning wealth to the system allows for the market to best dictate the proper allocation of such resources. Even Keynesian economists believe in the injection of wealth into economies whether through tax cuts or deficit spending. The difference is the right of individuals influenced by the demands of the market to determine where those resources should be directed, rather than the self-stylized, omnipotent planners in Washington. This means that resources may not flow to those places most desired by politicians, but to those areas which the market most demands. The second half of this effort to condemn trickle-down economics is that those who benefit from the return of their property somehow horde these funds from returning to circulation. While it is certainly an option for people to place their dollars under a mattress or in a jar in the backyard, the other 99% will not simply allow the money to sit idly. Whether they spend the funds themselves, or invest in the markets, or simply store the money in a savings account, these resources are allowed to flow into those areas that the market best dictates. Again, what areas these resources may be directed normally do not match the desires of the politicians, but a free society should allow for individuals to dictate their optimum allocation of resources and not the state.

But the greatest myth is that merely tweaking the tax code somehow bears any semblance of actual tax reform. Actual tax reform would mean a true commitment to a limited government that hinders feckless spending by politicians and unelected bureaucrats. It would entail abolishing the 16th Amendment, drastically reducing Federal spending, and eliminating the dozens of bureaucratic agencies and executive departments that add exponential costs to government for little to no actual return and whose regulatory decisions, that circumvent the powers delegated to Congress, manipulate the true signals of the markets and raise costs for all concerned.

At its roots, the discussion over taxation is about power and where that power should reside. Control of the flow of money is one of the primary tools for exercising power. The Founders knew this and sought explicitly to minimize the transference of this power to the state through taxation. Taxation, when not applied equally, is a tool used by crony capitalists to manipulate the markets by favoring one force over another, and by power-seekers who would barter other people’s money via handouts in exchange for votes. These weapons can take the form of deductions that encourage individuals to spend money in a particular segment, or the healthcare mandate, recognized by the Supreme Court as an indirect tax, and its efforts to coerce the population into participation in the health insurance markets, or Medicare that promises insurance to some paid for by the stolen labors of others. All of these legislative actions seek to manipulate the markets, which we have seen the state catastrophically fail at time and time again as they mask the true signals of the market. And even when Congress still wants to spend and can’t make up the funds through increased taxation, debt is an always available failsafe as we turn to the Federal Reserve.

One of the greatest cons in history is the state’s ability to convince the population that not only do they know what’s best for us, but that we need a government that extends beyond its natural role to care for us. The Founders fully intended for politicians to be limited in true power, but the power to tax and decide where the gains of this theft are to be distributed is where the true power rests. Remove the money from Washington, and you will quickly see the influence of lobbyists and the leaches dwindle. What need is there to petition those who have no power (i.e. money) to implement beneficial actions towards my interests in exchange for my vote? Our government has exceeded its established natural purpose and proceeded even further still beyond its constitutional authorities that exist in order to preserve our individual liberties. None of these enumerated powers granted to government include the redistribution of wealth through taxation and spending nor for providing for those services which individuals can and should obtain of their own volition.

No individual has a right to the rightfully acquired property of another. This right is absolute and is not contingent upon the quantity of such property, the means of acquisition of such property, if lawful, or the intentions of the usurper. And certainly, no individual has the right to use the state to coerce such transfer of property. It is a shame that after centuries of enlightenment thinking, struggle, and revolution that we as a society should so gladly turnover those freedoms to which the Founders pledged their very lives for.

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