Frontlines

Taxation and Theft

A central tenet of the libertarian philosophy is the rejection of coercive collections for social functions. If it is wrong to enslave your neighbors to mow your front lawn or paint your house, it is equally wrong to advocate taxation to mow the city parks or paint the old courthouse. The communal element in these ends still cannot justify the means.

Sophisticated conservative writers have argued that taxes are like membership dues in the great social club known as civilization. Apologists have the gall to say that without taxation we could not enjoy the benefits of government regulation. Social democrats and government employees are more forthright—without heavy taxes, they could not finance programs to attack the poor at the expense of the malefactors of great wealth (anyone with a before-tax income of more than $12,000).

The mission of libertarian activism is to spread the idea that government regulation and taxes are not only distasteful but unneeded when individual rights are respected. Last year in New Jersey, the largest taxpayers' rally ever held was organized by leaders of the New Jersey Libertarian Party. It attracted over 10,000 angry protestors to the state capitol. In the north suburbs of Chicago in August, Illinois Libertarian Party Chairman Milton Mueller and Illinois Taxpayer Union director James Tobin succeeded in stirring up a battery of public protests against the local property tax.

Last year, the Illinois legislature changed the basis for property tax assessments from the cost of improvements to "fair market value." The immediate effect of such a switch, of course, was to inflate the dollar value of homes and other real estate. The property taxes increased by half, and more than doubled in some cases. Many non-political souls suddenly felt ready for action. This was where the value of the Libertarian Party organizational structure paid off. Mueller and Tobin contacted Leonard Hartmann, an Evanston, IL, resident quoted in a Chicago Tribune article about taxpayer outrage. Hartmann agreed to head up a "Taxpayers Protest Committee."

After securing a town hall for a meeting, committee leaders expected that about 50 people would attend. More than 200 packed the room instead. Most had heard about the protest meeting by word of mouth, since very little publicity or advance notice had been possible. The protest mushroomed from there. Subsequent meetings of the Taxpayers Protest Committee drew extensive newspaper and television coverage, and the governor of the state met with a delegation of the protestors. The Cook County Assessor has proposed a token tax rate cut. Every local government official in the suburbs has made some sort of statement about government spending. Most importantly, over a million solid suburbanites have seen their neighbors gathering on street-corners and town hall steps, denouncing taxation, and carrying placards supplied by Mueller and Tobin that read "Don't Tread on Me," and "Taxation is Theft."

Slicing the Pie

Treasury Secretary Michael Blumenthal told a public forum in St. Louis last Spring, "There's no political percentage in tax legislation. All you get is black eyes." This is the political effect of a policy of social-justice-cum-beggar-thy-neighbor. For the past 60 years the theory of "ability to pay" has meant "stick it to somebody else"—and the taxes on business and capital investment have led to a slowing of economic growth and to higher levels of unemployment.

The American Council for Capital Formation, 1425 K Street NW, Suite 1000, Washington, DC 20005, was formed two years ago to focus governmental attention on the supply side of the fiscal policy paradigm. Typically, the Establishment ideology says that increased government spending or inflated money will stimulate aggregate demand, but nobody says anything about supply. With business strangled by taxes, regulations, and paperwork, increasing demand will only increase the prices of goods and services, not the output.

For example, the two principal macroeconomic models which Congress and the Administration consult for predictions of economic policy effects both say that any tax cut will lead to slower economic growth and a net loss in government revenue. On the other hand, every major historical tax cut has led to an increase in economic growth (and an increase in revenue). This is the result of the "supply effect"—that is, if you increase the profit incentive, you will increase the output.

Senate Finance Committee Chairman Russell Long recently stated before the subcommittee on taxation that the revenue estimates which they use "have a way of being very, very far off base because of their failure to anticipate everything that happens." As Frederic Bastiat would say, this is the difference between the Seen and the Unseen. The Center for Public Policy Research at the ACCF has asked Prof. Arthur Laffer, of the University of Southern California, to develop an econometric model which will incorporate the supply effects of tax reduction. Art Laffer is known for, among other virtues, his advocacy of the gold standard and total laissez-faire in industrial organization. He consulted with Roger MacBride during the 1976 campaign on a number of issues.