So we established in the first two of this series of three posts that:
- Government does not have an intrinsic right to order us how to dispose of ourselves and our property, provided we are not infringing on the rights of others to dispose of themselves and their property
- Government nevertheless has the right to demand payment for protecting our rights to ourselves and our property, and to punish us for refusal to pay, just as it punishes individuals when they refuse to pay for services rendered by other private individuals, or other breaches of contract
What services can the government render and demand payment for, and how is the government allowed to collect payment? As indicated, these services are rightly limited to protecting our rights to ourselves and our property. We do not have a right to, say, money or property belonging to others, so government programs that redistribute wealth through taxation are intrinsically unjust. Just as the government cannot rightly punish me for refusing to give to one who asks, so the government should not have the right to punish me for refusal to pay a tax that is to benefit other private citizens. The only services that government has a right to charge for are those services that all citizens benefit from equally.
But are there limits on how the government can collect payment? Insofar as everyone equally benefits from the government’s protection, it follows that everyone should pay the same fee. The problem with progressive taxation is that those who pay less benefit just as much as those who pay more. While a private individual or organization is, of course, free to charge different rates from different customers for any reason at all, including poverty or financial need, such charges are never coerced from the customer. Government, on the other hand, coerces payment from citizens, so the wealthier cannot opt out of paying more than the less wealthy.
At the same time, there is a sense in which those with more property benefit more from government protection of property rights than those with less. One possibility is for government to assess the total value of an individual’s property and charge tax at a flat percentage of that value. The bureaucratic hurdles of this are daunting, however; among other concerns, individuals might find ways of concealing wealth before collection day in order to fool assessors. A more practical means is to tax sales or income or other exchanges. Those who earn more income, or those who buy more property and so accumulate more wealth in that way, will then be paying more into the system that protects the security of their free exchanges.
As is well known, attempts to charge income tax on the wealthy run into problems, since they can find means to conceal the source of their income, e.g. by disguising income as gifts that should not be taxed. Similarly, a sale can be disguised as an exchange of gifts. At the same time, giving and charitable exchange is not protected by the state. Failure to give one gift for another cannot form grounds for a lawsuit, while failure to pay for goods or services in a commercial sale are. So sellers and buyers have an incentive to record and register their sales in order to be able to act on them in court if necessary; such registers also provide a tax base for the government.
Some libertarians, like Ron Paul, believe sales or excise taxes are a legitimate source of revenue, while income taxes are not. I have not yet worked out whether this is a correct view. Probably material for a later post.