The Republicans in the House and Senate have passed their tax bills. Because they have some notable differences, they will have to be reconciled so a final version can be sent to President Trump for his signature. Liberals, predictably, have generally condemned both bills even as conservatives, predictably, have generally commended them. Libertarians have weighed in as well, but unfortunately, not always from a libertarian perspective.
What makes tax reform libertarian?
Before addressing this question, we need to briefly review the libertarian view of taxation.
The libertarian view of taxation is simply that taxes should not exist because taxation is organized government theft. As Murray Rothbard explained in The Ethics of Liberty:
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.
And if taxation is organized theft, then, as Rothbard also says: “There can be no such thing as “fairness in taxation” since “the concept of a ‘fair tax’ is therefore every bit as absurd as that of ‘fair theft.’” And as Frank Chodorov adds: “There cannot be a good tax nor a just one; every tax rests its case on compulsion.”
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It follows, then, that tax increases of any kind or amount, tax reform that is revenue neutral, tax base broadening, tax replacement of one tax with another, and tax shifting from one group of taxpayers to another are not libertarian while tax decreases, tax rate reductions, tax deduction income phrase-out increases or eliminations, tax bracket expansions, and new or increased tax deductions, exemptions, credits, exclusions, loopholes, and shelters are libertarian. The former increases or maintains the government’s total take and the latter reduces or eliminates it.
In their analyses of the House and Senate GOP tax plans, some libertarians have lost their way. There are several things I see them getting excited about that are not in and of themselves libertarian or even libertarian at all.
Simplifying the tax code, shortening the tax code, filing one’s taxes on a postcard, closing loopholes, reducing or eliminating deductions and credits, making the tax code less progressive, reducing the number of tax brackets, changing the indexing method, expanding the tax base, restoring horizontal equity, making the tax code fairer, making tax code changes permanent, and eliminating distortions in the tax code are not necessarily libertarian.
For example, if the government simplified and shortened the tax code, closed every loophole, eliminated every deduction and credit, allowed taxpayers to file their taxes on a postcard, and imposed one flat rate of 75 percent on an expanded tax base so that everyone pays their fair share—that would be horrible from a libertarian standpoint.
The president of the Tax Foundation says in an e-mailed “Insider Update” that throughout the “fast and furious process” of tax reform, his organization has “been there to guide legislators and keep the end goal in perspective: a tax code that’s simpler, fairer, and allows our economy to grow.” But is that the end goal for libertarians?
What is it that makes tax reform libertarian? To answer this question, all we need is the Rockwell rule: Does it reduce or eliminate an existing tax?
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Because taxation is government theft, libertarians should primarily be concerned with just one thing when it comes to tax reform: to what extent does it allow Americans to keep more of their money in their pockets, purses, and bank accounts and out of the greedy hands of Uncle Sam.
Therefore, any decrease in taxes or tax rates is a good thing and any increase is a bad thing; likewise, any increase in tax deductions or credits is a good thing and any decrease is a bad thing.
It is that simple.
The tax-reform proposals currently under consideration by the House and Senate are not libertarian. They are, after all, tax-reform proposals and not tax-reduction or tax-elimination proposals. True, some Americans’ taxes will go down (temporarily in the Senate version), but Republicans are counting on economic growth to bring in more taxes to the federal government to “pay for” their tax cuts—the smallest, not the largest (as Trump says), individual tax cut in history, according to David Stockman. Republicans can’t see to ever get away from the idea of revenue neutrality. This is because they have no intention of ever cutting federal spending. Four trillion dollars a year is not enough for them.