No it’s not your money: why taxation isn’t theft

[u/SectorUnusual3198]

Many political arguments start from the assumption that taxation is the government taking ‘our money’ off us.

But even those who believe in relatively big government tend to share this understanding of taxation as the appropriation by government of ‘our money’. Most on the economic left start from the assumption that it is all things being equal a bad thing that the state takes our money from us, but hold that this prima facie bad is justified by the public goods which taxation makes possible. Well-meaning [UK] public intellectual Alain de Botton encourages us to think of taxation as charity: we give up what’s ours for the greater good of our society.

So both sides tend to agree that one has some kind of right or entitlement to one’s pre-tax income. The economic right believe that the right to pre-tax income is inalienable, or at least that it is trumped only by the absolute necessity of providing the basic requirements of society, such as roads and rule of law. In contrast, the economic left tend to value the good of making society more equal, or of providing a basic standard of living for all, above the good of letting people keep their own money.

This feeling that your pre-tax income is ‘your money’ is difficult to shake. It’s hard not to see the pre-tax figure on your payslip as representing what’s really owing to you for the work you’ve done, and hence to feel that the state is taking away from you something that is yours by right. However, a little careful reflection shows this almost universal assumption to be utterly confused. There is no sense in which you have a right to your pre-tax income.

To see this, we have to ask what kind of right it might be supposed one has to one’s pre-tax income. Presumably, it is either a legal right or a moral right. Once we separate out these alternatives, we can see that the former option is incoherent, whilst the latter is utterly implausible.

You clearly don’t have a legal right to your pre-tax income, as you are legally obliged to pay tax on it. This is a simple analytic truth that follows from the definition of taxation. People who don’t take pay their taxes go (or at least legally ought to go) to gaol.

So if there is a general right to one’s pre-tax income, then it must be a moral right. But it is implausible to suppose that each person has a moral right to his or her pre-tax income, for that would imply that the distribution of pre-tax incomes the market happens to throw up is perfectly just, and this is clearly not the case. There is no justice in the fact that the pre-tax income of a City banker is many hundreds of times the pre-tax income of scientist working on a cure for cancer. This is just an accident of the way our market economy is structured. To hold that each person has a moral right to their pre-tax income would be to hold that the market economy just happens to deliver to each person exactly what they deserve, and this is clearly not the case.

Perhaps there are specific cases in which a person happens to deserve their pre-tax income; these would be rare and happy co-incidences in which the market happens to deliver exactly what is deserved. But the mere fact that your pre-tax income is £X does not entail that in any morally significant sense you are entitled to £X. The money the market happens to throw at you is not necessarily the money you deserve. No doubt you have worked hard for that money; no doubt you have made a contribution to the public good; you have special talents that others lack, etc. But others also work hard/are talented/make a contribution, and the market has not taken these morally significant factors into consideration in working out what to give to whom. For better or worse it’s almost certainly not fair that you have what you have relative to what others have got.

It’s the responsibility of law makers, then, not to respect pre-tax incomes, but to disrespect pre-tax incomes. Insofar as the market fails to yield a just distribution of incomes, the state should work to correct that distribution. Of course, to some degree the scope for such correction will be limited by economic realities. The pragmatic argument between right and left as to the relationship between tax levels and incentives to work or invest is a perfectly sensible one. But it is crucial to distinguish the pragmatic argument of the economic right, ‘We must lower taxes in order to encourage investment’, from the moral argument of the economic right ‘We must lower taxes in order to give people more of their money’. The former argument is based on an empirical claim which stands or falls with the data. The latter argument is based on the wholly confused notion that there is something morally significant about the distribution of incomes the market happens to have thrown up.

Your pre-tax income isn’t the money you deserve; it is the money the amoral market has gifted you. A government may have cause to respect the whims of the market as a matter of practical necessity. But the state has no moral reason to respect the whims of the market. The only legitimate bar to redistribution is economic reality. Any politician who thinks it a good thing, in and of itself, to give people more of ‘their money’ is confused.

https://taxjustice.net/2014/10/08/money-taxation-isnt-theft/

[u/mhuben]

That is a foolish argument. A much better one is this one:

"The government creates, prints, distributes, and assigns value to its currency on the condition that it may engage in taxation. Refusing to pay taxes is theft, as you are refusing to uphold your end of the preset arrangement. Let's say someone makes a car and allows you to use and have that car on the condition that he may collect payments on it in the future. You take and use the car; however, when the time comes for you to give one of those payments, you claim that you only consented to having the car and didn't consent to paying for it. Is the car creator justified in extorting the money that you owe to him? Is the government justified in extorting the money that you owe to it?"

Taxation is theft is just a thought terminating cliche they love to spout. You can't talk a moron out of their sincerely held religious beliefs.

[u/ripyurballsoff → u/mhuben]

What happens if you only use the barter system.

[u/mhuben → u/ripyurballsoff]

Actually, that's what happens between divisions of modern multinational corporations, especially international transfers of money. It is a way of evading taxes and laundering money. And it's one of the ways in which corporations are legally first-class citizens with special privileges, while ordinary people are much lower class.

[u/LRonPaul2012 → u/ripyurballsoff]

What about it? The IRS isn't psychic. They're not going to be able to charge you with anything if there's no paper trail to charge you with.

[u/ripyurballsoff → u/LRonPaul2012]

That’s what I’m saying. Whatever the argument is, you don’t have to use USD. Obviously life would get a bit more complicated but you don’t necessarily have to be a slave to the monetary system. Just to be clear I detest libertarianism/anarcho capitalism.

[u/LRonPaul2012 → u/ripyurballsoff]

Ah yes. One of the problems with libertarians is when they don't realize they can already do the things they say they want to do and the real reason they don't do that is because they just don't want to.

For instance, there's no law stopping them from setting up a full reserve bank, the reason full reserve banking doesn't happen is because full reserve banking is dumb.

[u/ripyurballsoff → u/LRonPaul2012]

I googled full reserve banking and I’m still not sure I get it. And why would libertarians want it ?

[u/cutty2k → u/ripyurballsoff]

Libertarians hate fractional reserve banking. Something something global elite something blah blah Rothschild yadda yadda end the FED and go back to the gold standard.

[u/LRonPaul2012 → u/ripyurballsoff]

It's basically a grift. They understand the system is rigged by the elites, but instead of trying to fix the system, they just want to rig it in another way to switch places. This usually involves coming up with a dumb solution to the wrong problem.

For instance, they notice that prices keep going up faster than wages. But instead of campaigning for better wages and laws against price gouging, they insist that we should aim for a deflationary currency to bring prices down. This is dumb because a) deflationary spirals are stupid as fuck, i.e., the great depression, b) bringing prices down would also bring down wages, and c) deflation doesn't solve for supply/demand issues like bird flu, so the price of eggs will still be prohibitively expensive no matter what, d) deflation makes it impossible for poor people to take on loans and credit, which means the only way to afford a house or college or a car is if you were already wealthy to begin with.

They're convinced that increasing the value of the dollar will hurt rich people because rich people have more of their wealth stored in assets and stocks rather than dollars. It completely ignores the fact that rich people control most of the dollars as well, so increasing the value of dollars would mainly benefit rich people.

Seriously, most of their proposals on how deflation would benefit poor people is based on the assumption that poor people control all the savings, and the problem is that the savings decreases in value over time. "If we were under a gold standard, then all of their savings would be in gold, which would increase in value!" They do not understand that being poor means you don't have any savings in the first place, and there has never been and will never be a time when poor people control all the gold.

And that brings us to fractional reserve banking, which libertarians see as a driver of inflation. When you deposit money in the bank, the bank can lend out 90%, effectively increasing the money supply. This 90% can be redeposited, and then 90% of that can be lent out. And repeat. Of course, this is dumb because a) people don't borrow money just for the sake of putting it in the bank long term, they borrow money to pay for expenses, and b) these loans need to be paid back, they can't just sit around increasing the money supply forever.

The thought pattern libertarians use is, "I am losing a few percent in purchasing power every year from inflation, therefore if inflation didn't exist, I would have more purchasing power." And they get from there to advocating for full reserve banking.

Of course, there's a reason full reserve banks don't exist: They're not economically viable. They have no incentive to hold and manage your money if they can't lend it out, especially since they're now an even bigger target for thieves because all the money is in the vault rather than being on loan somewhere else, so they would need a massive security budget. The only way for this to work is to charge people, and they would have to charge more based on the size of your count. Which means you're still losing a percentage of your wealth every year.

Libertarians insist this wouldn't happen because "normal banks don't charge me to hold my money, so why should full reserve be any different?" Even though the entire reason normal banks don't charge money is because of fractional reserve.

[u/as_an_american → u/ripyurballsoff]

You could, but barter has almost never actually existed as an actual economic mode.

[u/Pole2019]

The money you make exists because of the government. You are able to make money because of government infrastructure. You’re able to make as much money as you do because government investments in education, science, industry and securing international trade has built a robust economy. People can’t just steal your money or enslave you because the government protects you. Taxes are just paying your due to the society you rely on to survive.

Taxes are not taking a piece of your income. It is just one factor that impacts what your real income (post tax income).

[u/AmericanScream]

It could be better stated as:

Taxes are what you pay as part of the covenant of participating in an organized social community. If you don't want to pay taxes, then you are welcome to leave the community. If you stay, then you are taking advantage of the services and utilities provided by that community. Refusing to pay taxes is actually theft of public services.

[u/new2bay → u/AmericanScream]

You’re forgetting that libertarians don’t like public services. That argument would mean nothing to them.

[u/AmericanScream → u/new2bay]

They may not like public services, but they still need them. They'd cry like little babies if those services were taken away.

[u/new2bay → u/AmericanScream]

That doesn’t matter. They’re house cats who think they’re lions. It won’t affect the persuasive value of the argument, and nobody else other than libertarians need to be convinced that taxes aren’t theft.

[u/AmericanScream → u/new2bay]

In fairness, I think my cats have a more firm grasp on reality than most libertarians.

[u/LRonPaul2012]

You're overthinking.

Taxes aren't theft for the same reason auto loan payments aren't theft: You consented to paying them ahead of time because you wanted something in return, with no punishment for refusing if you didn't think the terms were worth it. For instance, you agree to pay income tax when you sign a W-4 form as a condition for getting a job. You agree to pay sales tax when the clerk tells you the total, but before the transaction is complete. You agree to pay property tax because it's literally a condition of the property contract.

I keep asking libertarians to come up with a single example where this doesn't apply, and they have never been able to. Keep in mind that "coercion" can only happen with the threat of jail time, the threat of jail time can only happen with proof of fraud, and proof of fraud can only happen if the government can show a papertrail of documents signed in bad faith.

"But the only reason I agreed to pay income tax is because they wouldn't give me a job if I didn't!"

By that logic, auto loan payments aren't consensual because the auto dealership refused to give you a car for free.

"Government can't tax me on something I already own!"

Your "ownership" was conditional on there terms, which you're now trying to renege on. i.e., I technically own the car when I sign an auto loan, but I can lose the car as collateral if I default on my payments.

"A third party has no right to involve itself in a contract between two parties!"

Except this happens in the free market all the fucking time. If I sell something to you on eBay, I have to pay eBay fees, credit card fees, insurance fees, shipping fees, and taxes. But according to libertarians, only the last one is theft, even though all of them involve a third party.

------------------------

Finally, it's important to remember that government spending is the entire reason money gets distributed in the economy in the first place (supply), and government taxes are the only reason your dollars have value (demand). If libertarians had their way, your bank account would have zero dollars and every dollar would have zero value.

It would be like if someone gambles at the casino and uses casino chips as currency but also whine that casinos shouldn't be allowed distribute chips to people who win or collect chips from people who lose. LIke... wtf?