Friday, October 21, 2011

Rothbard On The Best Tax

All taxes are, of course, a bad idea, but when Peter Schiff pushed me on his show to come up with a tax. I first told him that I really hadn't spent a lot of time thinking about how to tax people. Peter told me he had, which I guess is what happens when you decide to run for office.

Quickly running through all the possible ways to tax people, I told him a head tax seemed to be the best tax. Peter jumped on that and attempted to take my, pardon the pun, head off, telling me it's not allowed by the Constitution. It is.

A friend points out that Murray Rothbard also felt a head tax was the best tax. Here's Lew Rockwell explaining why:

No principle of taxation, [Rothbard] argued, can equal a market system
of fairness. A progressive tax discriminates on the basis of income; the rich
aren't forced to pay more for bread than the poor. Even a flat tax forces that
result, since higher incomes contribute a greater dollar amount than lower ones.
The least harmful tax is a head tax or equal tax: a flat fee low enough for even
the poorest to pay.

When I proposed the head tax, I was expecting Peter to come back and say you couldn't raise a lot of money that way, and I planned to say that was my point, which as Lew points out is in line with Rothbard's thinking on the idea. But, Peter instead took the preposterous position that a head tax isn't allowed by the Constitution.


  1. The statist is coming out of the closet.

  2. I am shocked that Schiff would be in favor of any tax. I spent time volunteering for his campaign under the assumption that he was opposed to all forms of taxation -- I am utterly shocked.

    Regardless there is NO tax I feel is warranted. Mr. Wenzel did an excellent job of offering something when Schiff questioned. I am still amazed that a man who suffers at the hand of tax law and regulation like Schiff does would be in favor of any coerced tax!


  4. Jaison,

    Schiff argument is against the underlying premise that there HAS to be some sort of tax. Of course Schiff hates taxes; his dad is in jail because of the IRS. Wenzel refuses to be an adult and answer the question. He'd rather construct a straw man and tear him down with Rothbard quotes instead.

  5. Taxes are not good at all, they are indeed the dirtiest form of coercion and how government gets its life blood. Schiff is ridiculous on this point, considering he is very right on many others, but to assume taxes are ok in any form is preposterous. I agree with Mr Wenzel that Schiff is letting the politician come out in him, and perhaps because of this thinks legislation is the bet way to change the system. I am an anacap, and I will compromise my ethics to vote for a radical like Ron Paul, but to give the political system credit insofar as allowing politicians and bureaucrats the excuse to spend and grow is ridiculous. Taxes allow them to ratchet's common sense. Furthermore, to think that the populous cannot change bring down the government on their own through organization and education on Austrian Economics and Liberty in general, is a slap in the face of the 1/3 minority of revolutionaries that brought down the British reign in the colonies. It was the common man that gathered on their own to secede and remove the British Government. The founding fathers @#%*-ed it up. As far as Robert Murphy, I think he is falling into Schiff's trap too, but in his post he seems to just be bringing up an idea for us to think about. Overall, taxes are ALL BAD, none are good. End of story...Rothbard would firmly agree.

  6. @1:53

    Not sure why the prerequisite for "being an adult" is advocating which form of coercion is best.

  7. @anon 1:53, he already showed that he views there to be no difference whether a tax is a consumption or savings tax. Did you even read the Rothbard qoutes that spelled this out?

    So we have a situation where you refuse to hear his answer because it doesn't conform with what you want him to say. You are the one who is attacking a straw man. Wenzel has simply posted what Schiff said and critiqued it.

  8. If government's purpose is to protect from violence against persons and property, the two types of protection imply two types of charges.

    A capitation tax may be a less-unjust way of financing the cost of protecting an individual from violence against their person.

    The cost of protecting property, however, almost always varies with the value of the property to be protected. A tax on real and personal property would be somewhat akin to this.

    In either case, though, there are huge differences between privately purchased protection and government "services": compensation for losses vs. no compensation or guarantee of performance; self-insuring vs. compulsory protection; limiting coverage, etc.

    I also prefer the zero tax solution.

  9. A head tax is also something Joe Sobran advoctaed, he mentioned that in one of his columns in the 90s. I am convinced that it really is the most fair, everyone pays the same fair share!

  10. Schiff, Wenzel, Rothbard all want zero taxes. The differences only come up in disagreement as to what the stepping stones towards a zero tax should be.

  11. Has there ever been a tax, however modest at its inception, which hasn't morphed into a monster? The observation that liberty requires eternal vigilance applies especially to taxes. We should regard taxes with the same fear and loathing that we regard cancer and fire. They both start out very small but will kill if left unchecked.

    The correct pragmatic libertarian position is to ceaselessly and vigorously oppose all taxes and then grudgingly settle for reductions wherever we can and then start the pressure all over again.

  12. Wenzel is lying, Schiff DID NOT say a capitation tax is unconstitutional...

    The part in question can be heard here, and anyone can listen to the whole interview which starts at 18:50 at that link.

    Schiff in fact defied Wenzel's point of "you couldn't raise a lot of money that way" by pointing out that the reason the founders didn't like a capitation tax was because they knew that a capitation tax cannot be avoided...meaning no matter what, you have to pay what the government says you owe. With something like a sales tax, you can choose not to buy the products, which would reduce government revenue...forcing the government to keep the tax rate at something people will actually put up with.

    With a capitation, the tax rate could be as much as the government wanted and you would have no way to avoid it.

    SCHIFF'S ANSWER HAD NOTHING TO DO WITH CONSTITUTIONALITY. Were you just not listening in your own interview, bob??

    @Jaison De Montalegre
    Schiff also did not come out "in favor" of some tax, he said (just as many times as Wenzel) that taxes should be zero. But obviously if you're going to be taxed, there are better ways and worse ways for the economy. Obviously Murray Rothbard picked a "best tax system"...even Wenzel says so (see his next blog post).

  13. I would like to listen to this interview as well. And I also am surprised at some of the things Schiff has been saying. He is generally pretty good, but definitely off his mark here.

  14. @anon 5:41, Rothbard and Wezel want zero taxes but not Schiff. Schiff is not an ancap. There are many things that Schiff would like the government to do.

  15. According to Friedman, one of the least economically damaging taxes would be a tax on real estate. Real estate is a scarce resource as the amount available is naturally limited. This often leads to markets of monopolistic character in which the price equilibrium is is higher than in a perfect market. Thus, taxing real estate leads to lower land prices, but not lower consumption, as there is enough reserve in the margin to absorb the taxes. The net effect is that there will be less unnecessarily rich realtors, but the wealth of the nation as a whole is not reduced.

  16. When we ancaps say that we'd like to have ZERO taxes, shouldn't we just go all the way and say that we'd like to end the institution of the state altogether? It seems like we're left hanging in an uncomfortable paradox to say we want zero taxes but then don't take the final step and call for the abolition of the state. Go for it, I say. At the minimum, let's start giving serious credence to the idea of splitting up and eliminating the federal government as step 1.

    Now, short of that, one thing that occurs to me as the BEST solution would be to have the Feds just tax the STATES, and not individual persons. That may come with it's own set of problems, but at least it gets the feds off of my back. I'd have my state to deal with, but that's getting closer to a fair fight...

    Has anybody given that any thought, and have any ideas on how to do it? Base it on congressional seats? I realize it's a politically problematic idea, but if we're talking about "fairness" and taxes, it might be fairer and certainly helps reduce the scope of the police state...

  17. As far as the constitutionality of a head tax, if you are referring to the federal government then it is unconstitutional. States can implement a direct head tax depending upon the provisions of their constitutions, but the federal government has no authority to levy a direct head tax.

    Article I section 9 specifically forbids a direct head tax. “No capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to betaken”. The herein before directed portion is in Article I, section 3 and states, “Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons.” That authorized a head tax apportioned according to census but the head tax is levied among the several states not each person individually. It does not give the federal government the power to levy a direct head tax from citizens individually. It only allows such tax to be apportioned among the states which is exactly how such taxes were levied. The states paid such taxes and the states raised them in manners they saw appropriate, by different methods. If Wenzel meant a head tax apportioned against the states according to the census numbers, that would be authorized by the constitution but Wenzel did not make that clear and it certainly sounded like he was referring to a direct head tax levied against individuals directly which is forbidden by the constitution.

    The 16th Amendment did not change any of this with regard to a head tax. The 16th amendment does authorize a new power for the federal government to levy direct taxes, however it is limited solely to a tax on incomes. The 16th amendment read in full, “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”

    Robert Wenzel’s “argument” that a direct head tax being unconstitutional is “preposterous” is not an argument at all. It is just a childish knee jerk assertion without any rational discussion, logical analysis, historical basis or factual support. Such irrational dismissals via simplistic derogatory descriptives like “preposterous” are typical methods of fallacy used to avoid logical discussions and sidestep rational analysis. It generally indicates an erroneous position by the person resorting to such fallacy measures refuses to acknowledge.

  18. I agree with the guy who said that the "best" way given the existing system is to have the states directly support the feds, not the people. If it were up to me, I'd reverse the power structure there to where the feds were a subcommittee of the states, so states would indirectly tax (through existing sales taxes, not income)the people. This leaves every person off the hook for a direct tax from either state or federal gov't. If you could also get rid of property tax locally, then short of having a fully free society this would be heaven.

    The further you get away from the people, the less taxing power should exist. This is a common sense reform that could and should be championed by people across the board. Income and wealth taxes are just too insidious to have at any level. And centralized power structures will always seek maximum control over people.

    The feds should have ZERO power to tax anyone. If you have to have a tax system, you have to have the bulk of it locally controlled and going to local "services." More local autonomy means that the smaller gov'ts pass on a small percentage of tax revenue to the higher jurisdictions which then consequently have less direct power over people's lives. They'd basically have to beg for an increase in their "allowance" when they wanted to spend more money, and it would be less likely to come to them from below as long as the power is held there.

    But as long as you have this pyramid system where all power is at the top, it's going to be horrible no matter what slick new tax package you come up with. Any reform you pass can be nullified by the next set of weasels that get in there. I mean, the income tax started at 1 % and was only for the super-rich. How long did that ruse last? Tax reform has to go hand in hand with political reform, devolution, secession, decentralization. Otherwise, it's much ado about nothing.

  19. I thought Mr. Wenzel did an excellent job on his interview with Peter Schiff. Invocating Rothbard's arguments were entirely appropriate - who else could have said it better than Murray Rothbard. There are many that fail to study and understand the history of the constitution and original intent. We need more of that. Limited government and free markets were a part of the original intent, as was escaping the economic tyranny of the Crown.

    I listen to Peter Schiff daily and I am surprised at his recent commentary which emphasizes that "there must be some tax to pay for the government that we have." This is BS. The sane/responsible among us don't support the level of government we have; we are all actively fighting government excess and Fed reckless exogeny, and fighting for property rights and freer markets. Peter is losing his status as a libertarian.

    I would also like to state that I am increasingly annoyed that Peter would condone taking government handouts. He repeatedly states that if the government is handing out subsides and bailouts, why not take them - but then caveats that these vote-buying giveaways should not be available anyway. This is a silly rationale - a responsible, upstanding businessperson would refuse the handouts and look for ways to beat the system - and believe me, there are ways, especially when media is used as a leverage, not to mention just by offering the better/best product or service that meets/exceeds supply/demand.

    The "can't beat 'em, join 'em" mantra from Schiff is getting increasingly old. We need people to stand up for what is responsible, ethical, moral and honest, and to take the risk that it is the unpopular move, but the one that will contain a principle and that is backed by ingenuity and real economic value. Our country cannot lead anything if we devolve into a nation of takers and dependents, which is where we're headed if we don't have more people refusing to accept handouts, bailouts, subsides, and more "entitlement" than they'll ever pay into the system. Many, many of us out here would do anything to avoid taking the handout/bailout, will lead by example and responsibility, and will look for ways to thrive despite. We've worked too hard for what we have already, and look upon "Debtor and Bailout Nation" with disdain!