WEBVTT NOTE Murray Rothbard's View on Taxation 1 00:00:00.000 --> 00:00:09.000 I'm Joseph Stromberg, the resident historian at the Mises Institute, and the talk is on Murray Rothbard's view of taxes. 2 00:00:09.000 --> 00:00:17.000 I could summarize it very quickly, but that would take all the fun out of it. 3 00:00:17.000 --> 00:00:25.000 Basically, Rothbard didn't like taxes, because he didn't like states very much, and this was their main source of income. 4 00:00:25.000 --> 00:00:33.000 And at best he thought states were sort of bumbling, inefficient monstrosities, but of course most of the time they were doing a lot of harm also. 5 00:00:33.000 --> 00:00:40.000 And so he didn't like the fact that they also were supporting themselves by what amounted to highway robbery, 6 00:00:40.000 --> 00:00:47.000 although highway robbery is supported by a good deal of ideology and historical precedent and so forth. 7 00:00:47.000 --> 00:00:53.000 So with Rothbard's work we get not just complaints about taxes or some sort of emotional reaction, 8 00:00:53.000 --> 00:01:00.600 We also get a lot of technical economic analysis of how they work and what the specific disadvantages 9 00:01:00.600 --> 00:01:07.040 of specific taxes are and various other things that are quite useful. 10 00:01:07.040 --> 00:01:13.200 Of course, he held in general that any tax cut is good provided it was a cut-cut. 11 00:01:13.200 --> 00:01:16.840 Now I have to explain a linguistic phenomenon. 12 00:01:16.840 --> 00:01:20.640 Rothbard had to start inventing reduplicated words. 13 00:01:20.640 --> 00:01:30.640 For instance, he thought that films had gone to hell, so if he said a movie movie, he meant a real film in the tradition of those made in the 30s and 40s and not some modern schlock. 14 00:01:30.640 --> 00:01:39.640 Similarly, a cut cut was a real tax cut. It was not a cut in the estimated projected increase in next year's budget. 15 00:01:39.640 --> 00:01:48.640 And this device of cutting the projections, I think, emerged in the 1970s, and Rothbard thought this was a debasement of the language to call this a cut, 16 00:01:48.640 --> 00:01:53.300 In fact, the budget for the Department of Agriculture will be larger next year, not smaller. 17 00:01:53.300 --> 00:01:58.440 There's no substantive cut, so the language is simply being misused. 18 00:01:58.440 --> 00:02:03.720 So his critique of various proposed taxes and existing taxes runs through all of his work. 19 00:02:03.720 --> 00:02:09.280 His political journalism, as Justin Raimondo calls it, is a useful term, but also his technical 20 00:02:09.280 --> 00:02:12.480 economic writings and his historical work. 21 00:02:12.480 --> 00:02:17.920 One of the earliest things I run into is a 1949 memo on war finance. 22 00:02:17.920 --> 00:02:24.920 We've just been at a conference in Chicago on war finance, because no center in World War II is over. 23 00:02:24.920 --> 00:02:34.920 We have the Cold War presented to us, and there's all sorts of discussion that will, making this big effort, you know, be inflationary. 24 00:02:34.920 --> 00:02:44.920 What will happen? How are we going to finance all these big public projects attendant on the Cold War and an active foreign policy? 25 00:02:44.920 --> 00:02:59.920 So Rothbard followed the reports of this conference and did this short paper on war finance, but here he just follows Mises' position that given there's a war and you can't do much about that, what's the least damaging way to finance it? 26 00:02:59.920 --> 00:03:17.920 And he concludes, as Mises does here and there, that the best thing is to actually tax people, then they know what it costs, and it's less to starting than creating a vast new amount of public debt, which will then exist in later years as a consequence of this war. 27 00:03:17.920 --> 00:03:24.920 It's also a point that John Davenport, the American and Austrian economist, made in 1919 in a paper. 28 00:03:24.920 --> 00:03:28.180 I don't think he could publish it in 1908. 29 00:03:28.180 --> 00:03:34.080 If Wilson would have arrested him, I suppose he couldn't dissent from the law policy. 30 00:03:34.080 --> 00:03:40.580 The next thing of interest is a paper called The Uneasy Case for Degressive Taxation, 31 00:03:40.580 --> 00:03:42.560 a critique of Bloom and Calvin. 32 00:03:42.560 --> 00:03:48.320 Now, Bloom and Calvin had written a piece in the University of Chicago Law Review in 1952. 33 00:03:48.320 --> 00:03:52.820 Rothbard reads this, finds it quite interesting, and does a lengthy critique, 34 00:03:52.820 --> 00:04:00.820 which has since been published in the Quarterly Journal of Austrian Economics, Spring 2001. 35 00:04:00.820 --> 00:04:05.820 And he says, well, there's some good points in this essay by these men 36 00:04:05.820 --> 00:04:09.820 because they do take apart some of the arguments in favor of progressive taxation. 37 00:04:09.820 --> 00:04:17.820 Unfortunately, they make their own argument for a kind of proportional taxation which has almost as many flaws. 38 00:04:17.820 --> 00:04:27.820 They kind of like the way in which they critique some of the arguments, but he's not very kind to a lot of what they say, a lot of their positive argument. 39 00:04:27.820 --> 00:04:38.820 And this is an interesting piece, which I won't summarize here, but it's interesting partly because some of the phrasing and some of the arguments that he uses in this essay 40 00:04:38.820 --> 00:04:42.820 carry over into Man Economy and State, which he's also working on at the same time. 41 00:04:42.820 --> 00:05:00.820 I would say in summary he basically hands these guys their heads while recognizing what he thinks are their positive contributions and their good insights. 42 00:05:00.820 --> 00:05:06.820 He's particularly harsh on their using democracy as a kind of fallback position. 43 00:05:06.820 --> 00:05:19.820 and so forth, and he's got some interesting commentary on that side of it. 44 00:05:19.820 --> 00:05:24.300 But the whole article is rather interesting to me as an excellent critique of the kind 45 00:05:24.300 --> 00:05:31.340 of sloppy thinking that passed for economic, social science and ethics in the age of the 46 00:05:31.340 --> 00:05:32.340 New Deal. 47 00:05:32.340 --> 00:05:35.860 There's really a lot of bad argumentation going around, a lot of assumptions, and this 48 00:05:35.860 --> 00:06:05.860 This is one of Rothbard's pet peeves, is an economist in the guise of doing scientific analysis will smuggle in big truckloads of ethical premises they haven't defended or argued for and then say well there's a shortage of potatoes in Des Moines therefore the state must do X and they don't give you any reason to believe this and there's one amusing bit where there's some discussion that Bloom and Calvin don't like either entirely 49 00:06:05.860 --> 00:06:19.860 But some argument to the effect that we must have some sort of slightly progressive or proportional taxation for the children. 50 00:06:19.860 --> 00:06:24.860 And Rothbard says, well, if you follow this premise to its logical conclusion, you have to nationalize children. 51 00:06:24.860 --> 00:06:27.860 Of course, this is a proposal we'll probably eventually hear. 52 00:06:27.860 --> 00:06:36.860 And also he has some fun with people who make arguments on the notion, on the premise that life is a race, or life is a game. 53 00:06:36.860 --> 00:06:41.860 And he disposes of this fairly quickly and has some fun doing it. 54 00:06:41.860 --> 00:06:50.860 Now his economic treaties, which I will hold up in case someone hasn't seen it, which has been republished in this edition, 55 00:06:50.860 --> 00:06:55.860 combining the entire work as he intended it to be published, 56 00:06:55.860 --> 00:07:13.860 was begun or first suggested in late 1949 and begins as a textbook in which you're simply going to expound Austrian theory as developed by Mises and Human Action in a step-by-step version aimed at the intelligent public, college classrooms and so forth. 57 00:07:13.860 --> 00:07:22.860 And as often happened with Rothbard, it got more complicated and insightful, larger and turned into a treatise in its own right. 58 00:07:22.860 --> 00:07:37.860 Now the original, his original plan was to do the work in three parts, the first two parts would expound the logic of the pure market economy, work out all the implications, all the categories of economic thought, proceed from axioms and proceed deductively. 59 00:07:37.860 --> 00:07:45.860 Part three was going to bring the state in, which it assumed out, it assumed that somehow property is protected and exchanges take place. 60 00:07:45.860 --> 00:07:52.860 Now he's going to bring the state in and see what happens when the state intervenes in the economy. 61 00:07:52.860 --> 00:07:53.860 This was part three. 62 00:07:53.860 --> 00:07:58.860 Well, this was considered controversial in the late 50s, somehow. 63 00:07:58.860 --> 00:08:04.860 And the reader, Frank Meyer, said, no, this should be published as a separate book. 64 00:08:04.860 --> 00:08:06.860 This is too radical. It's too drastic. 65 00:08:06.860 --> 00:08:10.860 This shouldn't come out as part of the economics treaties. 66 00:08:10.860 --> 00:08:20.860 And so under friendlier auspices, Man Economy and State then is published in 1962 by Van Nostrand publishing it for the Volcker Fund. 67 00:08:20.860 --> 00:08:30.860 Under friendlier auspices, the book comes out as a separate book, part three comes out as Power and Market in 1970, published by the Institute for Humane Studies. 68 00:08:30.860 --> 00:08:41.360 And to make this work, Rothbard had to sort of cut parts of part three that he thought would still pass muster in Man Economy and State. 69 00:08:41.360 --> 00:08:49.860 So he did a shorter chapter, chapter 12, and saved some of his material, and the rest of it appears in Power and Market. 70 00:08:49.860 --> 00:08:55.360 And there's some repetition, inevitably, but not as much as you might think, because he leaves out in here the discussion of, 71 00:08:55.360 --> 00:09:00.700 most of the discussion of money and banking, which you'll find in his treatise, Man Economy and State. 72 00:09:00.700 --> 00:09:02.020 So let's kind of go through this. 73 00:09:02.020 --> 00:09:04.460 I'll try to avoid repetition, 74 00:09:04.460 --> 00:09:07.100 but he does discuss some of the same things. 75 00:09:07.100 --> 00:09:09.260 But starting with this material, 76 00:09:09.260 --> 00:09:11.940 mostly in chapter 12 of Man Economy and State, 77 00:09:14.000 --> 00:09:16.060 he's brought the state in, 78 00:09:16.060 --> 00:09:17.420 and he thinks that you can divide 79 00:09:17.420 --> 00:09:19.020 interventions into three kinds, 80 00:09:19.020 --> 00:09:22.020 autistic, binary, and triangular interventions. 81 00:09:22.020 --> 00:09:23.920 The autistic interventions don't amount to much, 82 00:09:23.920 --> 00:09:25.660 so we won't worry about them. 83 00:09:25.660 --> 00:09:27.500 But a binary intervention, 84 00:09:27.500 --> 00:09:29.820 the state tells you to do something 85 00:09:29.820 --> 00:09:42.700 In a triangular intervention, the state tells two or more people not to trade in some commodity, 86 00:09:42.700 --> 00:09:46.620 not to do something involving one another. 87 00:09:46.620 --> 00:09:51.860 And he's rather interested in that most of the right-wing or free market economists of 88 00:09:51.860 --> 00:09:56.980 the period were mostly concerned about triangular interventions, price controls and things like 89 00:09:56.980 --> 00:09:57.980 this. 90 00:09:57.980 --> 00:10:00.540 didn't seem to be very concerned about binary interventions, 91 00:10:00.540 --> 00:10:03.820 so they didn't have much useful to say in his view, 92 00:10:03.820 --> 00:10:08.220 or not as much as they could say, about taxation. 93 00:10:08.220 --> 00:10:11.580 Now, another idea he brings in very early 94 00:10:11.580 --> 00:10:15.300 is John C. Calhoun's analysis of net taxpayers 95 00:10:15.300 --> 00:10:17.460 and net tax consumers, 96 00:10:17.460 --> 00:10:19.340 that the very fiscal operation of the state, 97 00:10:19.340 --> 00:10:22.340 and Calhoun says this, I think, in the Disquisition, 98 00:10:22.340 --> 00:10:25.500 anyway, Rothbard will take you to the source, 99 00:10:25.500 --> 00:10:32.000 The very fiscal operation of the state at any time and place will tend to divide society into two classes, 100 00:10:32.000 --> 00:10:36.200 those who are paying for it and those who are being benefited by it. 101 00:10:36.200 --> 00:10:44.400 And Rothbard rather liked this exposition and quotes about two pages of it. 102 00:10:44.400 --> 00:10:49.600 And this is sort of the fundamental assumption Rothbard works, and it's not the only source you could get this from. 103 00:10:49.600 --> 00:10:53.900 He decided Calhoun's exposition was quite good. 104 00:10:53.900 --> 00:10:56.800 So he says of this point, 105 00:10:56.800 --> 00:11:00.100 since all state actions rest on the fundamental binary intervention of taxation, 106 00:11:00.100 --> 00:11:04.200 it follows that no state action can increase social utility. 107 00:11:04.200 --> 00:11:08.200 That is, can increase the utility of all affected individuals. 108 00:11:08.200 --> 00:11:10.400 Sure, the people that are getting the subsidies 109 00:11:10.400 --> 00:11:12.500 or the government bureaucrats are getting the money, 110 00:11:12.500 --> 00:11:16.900 their utility is doubtless improved, although we can't really measure it. 111 00:11:16.900 --> 00:11:20.200 And there's no workable way to compare the utilities. 112 00:11:20.200 --> 00:11:22.700 It's sort of reasonable to assume 113 00:11:22.700 --> 00:11:31.700 And since they're taking it and somebody else is giving it up, their utility has increased in some unmeasurable amount. 114 00:11:31.700 --> 00:11:37.700 And I mentioned in passing that he's already addressed these issues in an essay published in 1958 115 00:11:37.700 --> 00:11:42.700 on the reconstruction of utility and welfare economics. 116 00:11:42.700 --> 00:11:48.700 And, well, maybe it's 56, I'm sorry, but nonetheless he's addressed very technical issues 117 00:11:48.700 --> 00:11:56.700 There were some technical issues involving the Pareto optimality and all of these notions that were sent from the economic literature. 118 00:11:56.700 --> 00:12:14.700 So he was using the standard framework and within this he launches a devastating critique of much of what's being said about welfare economics and utility theory in the 40s and 50s. 119 00:12:14.700 --> 00:12:21.420 Now he goes on to what he thinks of as a futile search for a neutral tax. 120 00:12:21.420 --> 00:12:22.620 Now what would a neutral tax be? 121 00:12:22.620 --> 00:12:32.780 Well, a neutral tax is a tax that is thought to do as little damage to the structure of the market, 122 00:12:32.780 --> 00:12:35.260 what would actually be happening without the tax. 123 00:12:35.260 --> 00:12:40.780 So as little distortion as possible, as little allocation of resources in a different direction. 124 00:12:40.780 --> 00:12:43.180 And a lot of economists thought this was possible to find. 125 00:12:43.180 --> 00:12:52.180 In fact, Mises thinks it's possible to find such a tax, and Rothbard has quoted him in a later piece to this effect. 126 00:12:52.180 --> 00:12:56.180 And Rothbard's not buying it. He says, quote, 127 00:12:56.180 --> 00:13:02.180 The tax and expenditure process, therefore, will inevitably distort the allocation of productive factors, 128 00:13:02.180 --> 00:13:06.180 the types of goods produced, and the pattern of incomes from what they would have been on the free market. 129 00:13:06.180 --> 00:13:11.180 The larger the level of taxing and spending, i.e. the bigger the government budget, 130 00:13:11.180 --> 00:13:14.180 the greater the distortion will tend to be. 131 00:13:14.180 --> 00:13:15.940 So he's saying you always get some distortion, 132 00:13:15.940 --> 00:13:19.900 there's no neutral tax, but the level is important 133 00:13:19.900 --> 00:13:22.180 in practical reality, it's important politically 134 00:13:22.180 --> 00:13:24.420 and this is a key notion with Rothbard. 135 00:13:24.420 --> 00:13:27.020 He doesn't even care about progressivity, 136 00:13:27.020 --> 00:13:30.260 whether the rates are progressive. 137 00:13:30.260 --> 00:13:33.700 He doesn't think that's as important as the general level. 138 00:13:33.700 --> 00:13:37.020 In fact, he gives an example of two countries 139 00:13:37.020 --> 00:13:54.020 in which one has a progressive rate, but the rates are so low that both the poor men and the rich men would prefer to live in the first country and not the second one, where the rates are just significantly higher, but not progressive. 140 00:13:54.020 --> 00:13:59.420 Okay. Now he also makes an interesting point that the Marshallians, followers of Marshall, 141 00:13:59.420 --> 00:14:05.740 had tended to look at a particular type of tax in isolation, while the Volrasians hold that taxes, 142 00:14:05.740 --> 00:14:10.340 quote, may be analyzed only in conjunction with what is done with the proceeds. So they're interested 143 00:14:10.340 --> 00:14:16.140 in where the money goes, how it's used in the economy. And he says the Austrian approach would 144 00:14:16.140 --> 00:14:22.100 ideally combine these two types of analysis. He says it's actually futile, quote, to separate them 145 00:14:22.100 --> 00:14:27.100 and since they're both stages in the same process of burden and redistribution. 146 00:14:27.100 --> 00:14:33.100 And here he goes back to a point he's made earlier in the book where he says actually the whole notion of distribution is wrong. 147 00:14:33.100 --> 00:14:38.100 You just have hundreds and thousands of exchanges going on all the time. 148 00:14:38.100 --> 00:14:40.100 There's no distribution. 149 00:14:40.100 --> 00:14:51.100 He says the fact that we even think in terms of distribution already arises from the intervention of the state and the economy in the form of taxation. 150 00:14:51.100 --> 00:14:54.100 The market process is taking care of itself. 151 00:14:54.100 --> 00:14:58.100 You don't have to talk about distribution as some result of this. 152 00:14:58.100 --> 00:15:01.100 It's a constant ongoing set of exchanges. 153 00:15:01.100 --> 00:15:08.100 And he adds that the budgetary process impairs the property right of everyone and his own product 154 00:15:08.100 --> 00:15:13.100 and creates this effort process and therefore the problems of distribution. 155 00:15:13.100 --> 00:15:16.100 And here he's probably also influenced by Albert J. Nock, 156 00:15:16.100 --> 00:15:19.100 Frans Oppenheimer and other people who have written along these lines, 157 00:15:19.100 --> 00:15:24.580 as well as the more radical classical liberals who had always thought of government activity 158 00:15:24.580 --> 00:15:29.580 as being fundamentally plunder and exploitation and who thought, therefore, you'd want to 159 00:15:29.580 --> 00:15:35.180 minimize this as much as possible by constitutions and other means. 160 00:15:35.180 --> 00:15:42.860 Okay, now he goes into an analysis of different types of taxation, which is interesting. 161 00:15:42.860 --> 00:15:50.380 With income taxes, he says, there's probably some natural limit to how much can be taxed, 162 00:15:50.380 --> 00:15:54.740 beyond which the top heavy burden can no longer be carried by the diminishing stock of producers. 163 00:15:54.740 --> 00:15:57.180 Well, this is simply a matter of numbers, in a way. 164 00:15:57.180 --> 00:15:59.220 There's so many people producing, they're being taxed. 165 00:15:59.220 --> 00:16:03.100 They're being taxed more and more, they pay more and more people who are doing the taxing 166 00:16:03.100 --> 00:16:04.100 or benefiting from it. 167 00:16:04.100 --> 00:16:07.700 At some point, you would expect the system to break down. 168 00:16:07.700 --> 00:16:12.820 And there are also limits, he says, imposed by the disincentive effects of taxation. 169 00:16:12.820 --> 00:16:19.180 In general, as in the less developed countries, and here he cites Peter Bauer, increased 170 00:16:19.180 --> 00:16:24.980 taxation will make monetary incomes less worthwhile and tend to drive people back into barter. 171 00:16:24.980 --> 00:16:29.500 There's a lot of interesting literature on this, so I won't go into it. 172 00:16:29.500 --> 00:16:36.500 He says, in some cases of high income taxation, a person will slacken his efforts, but in 173 00:16:36.500 --> 00:16:42.020 others he may work harder to try to offset the burden, so this is not entirely predictable. 174 00:16:42.020 --> 00:16:49.020 The other way, there's a loss of utility because in the case of working harder, he's lost leisure, which is a consumer good. 175 00:16:49.020 --> 00:16:56.020 Again, another insight that isn't always appreciated sufficiently. 176 00:16:56.020 --> 00:17:03.020 Further, an income tax, quote, crippled saving and investment by lowering the payer's real income and the real value of his monetary assets. 177 00:17:03.020 --> 00:17:10.020 As a result, the whole process will shift the social proportion more towards consumption and less saving. 178 00:17:10.020 --> 00:17:13.020 But again, knowing Rothbard, this isn't the whole story. 179 00:17:13.020 --> 00:17:17.020 It's not sufficient to say that this will... 180 00:17:17.020 --> 00:17:22.020 high income tax rates will favor consumption and reduce saving. 181 00:17:22.020 --> 00:17:30.020 Because again, Rothbard is never happy with the limitations of conventional free market thinking. 182 00:17:30.020 --> 00:17:34.020 So he goes on to add that too many free market defenders seem, quote, 183 00:17:34.020 --> 00:17:38.020 are more concerned about governmental measures penalizing saving and investment 184 00:17:38.020 --> 00:17:40.020 than they are about humbling consumption. 185 00:17:40.020 --> 00:17:43.020 Why would you want to humble consumption? 186 00:17:43.020 --> 00:17:46.020 He says, you know, leave the market alone, it will decide the proportions, 187 00:17:46.020 --> 00:17:51.020 people's time preferences and so on, will sort these things out. 188 00:17:51.020 --> 00:17:54.020 That's what the market does. 189 00:17:54.020 --> 00:17:59.020 So it isn't necessarily a decisive argument to say that a particular tax favors consumption 190 00:17:59.020 --> 00:18:03.020 because there's nothing wrong in principle with consumption. 191 00:18:03.020 --> 00:18:13.020 Now, returning to the search for the elusive neutral tax, he argues that these people looking for it misconceive what a neutral tax would have to be. 192 00:18:13.020 --> 00:18:25.020 Quote, for a tax to be truly neutral to the free market, it would not be one that left income patterns the same as before. 193 00:18:25.020 --> 00:18:28.020 Because the market process doesn't leave patterns the same either. 194 00:18:28.020 --> 00:18:43.020 It would be a tax which would affect the income pattern and all other aspects of the economy in the same way as if the tax were really a free market price. 195 00:18:43.020 --> 00:18:46.020 Obviously, this is not going to be possible. 196 00:18:46.020 --> 00:18:54.020 But it does follow that the so-called poll tax would be far closer to the goal of neutrality. 197 00:18:54.020 --> 00:18:57.720 But nonetheless, since it is a tax and people aren't actually giving the money out voluntarily, 198 00:18:57.720 --> 00:19:06.020 there'd be at least three groups unduly affected, the poor, the uninterested, and the hostile. 199 00:19:06.020 --> 00:19:08.020 Because again, you can't leave out the subjective factors. 200 00:19:08.020 --> 00:19:15.020 If people are going to pretend to compare utility, then they have to understand that the guy who really hates this whole idea 201 00:19:15.020 --> 00:19:18.020 suffers more disutility than the people that don't mind 202 00:19:18.020 --> 00:19:21.520 or the people that actually believe this is a good way to proceed. 203 00:19:21.520 --> 00:19:30.020 So he's constantly bringing in different arguments from utility theory and so on to bear on taxation. 204 00:19:30.020 --> 00:19:42.720 He says also the cost principle, the attempt to have taxes cover the actual costs of administering a service or a government program ought to be looked at. 205 00:19:42.720 --> 00:19:48.020 He says it's a neglected principle, but it raises the problem of how the service is to be defined. 206 00:19:48.020 --> 00:19:52.020 And some people don't want some of the services that are being offered. 207 00:19:52.020 --> 00:19:58.020 In fact, they don't consider them goods, they consider them bads, so again, this is a further complication. 208 00:19:58.020 --> 00:20:05.020 And in the last analysis, you can't measure benefits from government services in quite the same way 209 00:20:05.020 --> 00:20:13.020 that you can say that if someone buys something, it's a safe conclusion that he wanted it. 210 00:20:13.020 --> 00:20:16.020 and demonstrated preference, as Rothbard calls this. 211 00:20:16.020 --> 00:20:18.020 Okay. 212 00:20:18.020 --> 00:20:21.020 Now, talking again about progressivity, 213 00:20:21.020 --> 00:20:26.020 as before, he says that free market economists tend to overweigh its effects 214 00:20:26.020 --> 00:20:31.020 and to underweigh the destructive effects of proportional taxation. 215 00:20:31.020 --> 00:20:37.020 But again, it's the height of the tax that he believes is the key problem. 216 00:20:37.020 --> 00:20:41.020 Also, again, taking on a sort of political rhetoric of the period, 217 00:20:41.020 --> 00:20:46.860 He says that the poor as such do not rob the rich by way of progressive taxation. 218 00:20:46.860 --> 00:20:52.860 The state robs both to some degree or another and then decides how to distribute the money. 219 00:20:52.860 --> 00:20:58.020 And so it may well be, again, since numbers matter, there being fewer rich people than 220 00:20:58.020 --> 00:21:08.140 people of medium incomes or poor people, that the progressive income tax neutralizes opposition, 221 00:21:08.140 --> 00:21:12.860 Allows the state to tax everyone more than it otherwise could, and with this money the 222 00:21:12.860 --> 00:21:16.620 state will then subsidize some of the poor and some of the rich as it sees fit. 223 00:21:16.620 --> 00:21:21.500 You don't have this set of coalitions, you won't have the clear case of any class of 224 00:21:21.500 --> 00:21:28.000 people that already existed being robbed to subsidize another class, in fact the classes 225 00:21:28.000 --> 00:21:31.780 as we know them are coming out of this process, in some ways the class structure is a result 226 00:21:31.780 --> 00:21:32.780 of this process. 227 00:21:32.780 --> 00:21:47.780 Okay, but enough on the income tax, the next, well the one point I can still make or should make about that is that income tax in Rothbard's view cannot be shifted, you're stuck with it, you have the income tax, you pay it and you're stuck. 228 00:21:47.780 --> 00:22:00.780 Now he goes on to sales taxes and he says it is a widespread fallacy that businessmen can simply shift their higher costs forward onto the consumers in the form of higher prices. 229 00:22:00.780 --> 00:22:11.780 And this is still true. I mean, any political discussion of a sales tax, you'll hear this argument put forward, I suppose, by people who are sometimes well-meaning. 230 00:22:11.780 --> 00:22:20.780 But he says this is something not true. If you could raise the price to absorb the tax, you'd have already raised the price. The market would have already raised the price. 231 00:22:20.780 --> 00:22:25.780 So you might try it. It's not likely to work. 232 00:22:25.780 --> 00:22:35.780 So instead what happens is that the retailer is paying the tax, so he's going to have to cut costs. 233 00:22:35.780 --> 00:22:41.780 So the effects of the tax are shifted backwards to original factors, land and labor, try to use less of those. 234 00:22:41.780 --> 00:22:47.780 And so there are effects that ripple outward from the tax, but they're not shifting forward to the consumers. 235 00:22:47.780 --> 00:23:02.780 In a roundabout way, in the longer run, if the tax drives the marginal firms out of business, you have a smaller supply and fewer competitors, and prices then go up because of these circumstances. 236 00:23:02.780 --> 00:23:15.780 At that point, the consumers are affected by higher prices, but not because the businessman in the first instance could pass it on just by tacking the number on to the prices that existed before the tax. 237 00:23:15.780 --> 00:23:21.780 In a similar case is the notion, again widespread in conservative circles in this period, 238 00:23:21.780 --> 00:23:24.780 that unions per se were causing inflation. 239 00:23:24.780 --> 00:23:29.780 It would be truer to say that inflation was allowing some of this to take place, 240 00:23:29.780 --> 00:23:32.780 but even then it's not really that successful. 241 00:23:38.780 --> 00:23:41.780 What the unions can do is raise wages and cause unemployment. 242 00:23:41.780 --> 00:23:44.780 This is another matter. 243 00:23:45.780 --> 00:24:02.780 Now Rothbard goes into, I'm just trying to go through this sort of point by point, but leaving some stuff out into a critique of the Georgists and the notion of single tax, and I may come back to this in terms of what he says about it in power and market. 244 00:24:02.780 --> 00:24:11.780 Now he argues that some taxes are in fact a lot worse than others, and one is the excess profits tax, capital gains and such taxes. 245 00:24:11.780 --> 00:24:21.780 He's like any other economist. He's concerned about taxes that cause capital accumulation, destroy, reduce the capital structure, and distort the capital structure, and so on. 246 00:24:31.780 --> 00:24:37.780 He also is interested in what he regards as the central flaw in the whole process. 247 00:24:37.780 --> 00:24:41.780 The central flaw is the separation of payment and service. 248 00:24:41.780 --> 00:24:43.780 Let's assume these are services. 249 00:24:43.780 --> 00:24:45.780 Nevertheless, someone takes the money. 250 00:24:45.780 --> 00:24:47.780 Somebody else hands out the service. 251 00:24:47.780 --> 00:24:52.780 The service is theoretically free if you allow for the fact that the money got taken and used. 252 00:24:52.780 --> 00:24:56.780 And free services lead to misallocation, waste, overuse, 253 00:24:56.780 --> 00:25:00.780 all because of the basic split between payment and receipt of service. 254 00:25:00.780 --> 00:25:03.780 Hence, the slogan popular at that time with a lot of conservatives, 255 00:25:03.780 --> 00:25:06.780 and maybe still popular if they even think about these things, 256 00:25:06.780 --> 00:25:10.780 That government should be put on a business-like basis is an utter fallacy. 257 00:25:10.780 --> 00:25:13.780 You cannot put government on a business-like basis. 258 00:25:13.780 --> 00:25:15.780 This can't be done. 259 00:25:15.780 --> 00:25:20.780 It always has the possibility of trying to expand its income by coercing more money to come in. 260 00:25:20.780 --> 00:25:23.780 There's no profit and loss test of anything it does. 261 00:25:23.780 --> 00:25:25.780 There's no check crane on it. 262 00:25:25.780 --> 00:25:27.780 So it is not a firm on the market. 263 00:25:27.780 --> 00:25:34.780 And with that line of attack, you can do away with a good deal of the public choice approach, 264 00:25:34.780 --> 00:25:42.780 which tries to treat government as a kind of genial business firm in the market itself and behaving like other firms. 265 00:25:42.780 --> 00:25:51.780 But no, Rothbard says a fatally arbitrary element has been built into the very vitals of the enterprise when it's a state enterprise. 266 00:25:51.780 --> 00:25:56.780 And thus government enterprises introduce islands of calculational chaos. 267 00:25:56.780 --> 00:26:01.780 And this comes after the chapters in which he's discussed the socialist calculation problem and so forth. 268 00:26:01.780 --> 00:26:09.060 So he's alluding to government enterprises as sort of islands of socialism which have a hard time 269 00:26:12.020 --> 00:26:16.340 meeting a standard of calculation of costs and loss of profit and loss or 270 00:26:16.340 --> 00:26:22.820 costs and so forth which businesses can do because they're in the market. Also false is 271 00:26:22.820 --> 00:26:28.180 the argument that the state can take the long view with its assets and property and manage them 272 00:26:28.180 --> 00:26:53.180 He says this is true of politicians generally, with the possible exception of a hereditary monarch, who might actually be taking care of what part of the realm is actually considered his property, and of course, Hans Hoppe has developed this sort of insight rather further. 273 00:26:53.180 --> 00:27:07.180 As for Social Security, first we're taxed for an out of current earnings, and then because it is not actually a self-standing program, we're taxed again to make it work as it goes. 274 00:27:07.180 --> 00:27:11.180 So it is rather interesting in that respect. 275 00:27:11.180 --> 00:27:25.180 And of course Rothbard's aware that the so-called employer contribution is in effect coming out of wages. 276 00:27:25.180 --> 00:27:35.180 It's interesting, this argument wasn't available when the welfare state was first being promoted by Bismarck in Germany in the second half of the 19th century. 277 00:27:35.180 --> 00:27:39.180 If the anti-Bismarkians had had this argument they might have done a little better. 278 00:27:39.180 --> 00:27:46.580 A little better, at least Ralph Reiko suggests that in his book, but this argument wasn't understood, who's paying for what. 279 00:27:46.580 --> 00:27:52.380 So, Rothbard concludes that Social Security is essentially, quote, 280 00:27:52.380 --> 00:27:59.880 a program that makes more palatable a general taxation of lower income wedge-earning groups than would otherwise be possible. 281 00:27:59.880 --> 00:28:03.980 And if you ever look at your pay stub, you'll see what a large amount that is. 282 00:28:03.980 --> 00:28:09.580 And I don't think anyone now believes that it goes into a little vault and is put aside for social security. 283 00:28:09.580 --> 00:28:14.980 It's just part of the general bunch of money that the government has to work with. 284 00:28:14.980 --> 00:28:20.680 Corporate taxes, corporate corporation income taxes place an extra burden on the corporate form. 285 00:28:20.680 --> 00:28:25.780 And this is also a form of double taxation on the same income on the grounds of legal fiction 286 00:28:25.780 --> 00:28:31.980 that the corporation is somehow a separate existing real entity and can be taxed, 287 00:28:31.980 --> 00:28:34.220 as well as the individuals. 288 00:28:34.220 --> 00:28:36.300 And he points out one consequence is that profits 289 00:28:36.300 --> 00:28:40.700 are often left undistributed to put off taxation. 290 00:28:41.900 --> 00:28:46.100 And he says the expected thing is about capital gains, 291 00:28:46.100 --> 00:28:48.340 noting that they sometimes encourage investors 292 00:28:48.340 --> 00:28:51.180 not to sell and so on and so forth. 293 00:28:52.980 --> 00:28:54.760 There's a discussion also of excise taxes, 294 00:28:54.760 --> 00:28:57.680 but this is not that different from the discussion 295 00:28:57.680 --> 00:29:00.720 of sales taxes except that these are more pinpointed 296 00:29:00.720 --> 00:29:04.720 The excise tax on whiskey is going to affect that business more than the general sales tax. 297 00:29:04.720 --> 00:29:10.720 So again, there are some distortions and so on from what would otherwise happen. 298 00:29:10.720 --> 00:29:13.720 Now, property taxes. 299 00:29:13.720 --> 00:29:19.720 Rothbard makes the interesting point that since a real sale has not occurred, you don't know, 300 00:29:19.720 --> 00:29:22.720 and at least in Austrian terms, you don't know what something's worth. 301 00:29:22.720 --> 00:29:24.720 There's no real sale. 302 00:29:24.720 --> 00:29:29.720 So there's guessing what a piece of property might sell for when they make the appraisal. 303 00:29:29.720 --> 00:29:35.400 So this is inherently iffy and a bit arbitrary. 304 00:29:35.400 --> 00:29:38.000 Now, gift and inheritance taxes are taxes on capital. 305 00:29:38.000 --> 00:29:44.640 He considers these to be particularly destructive for obvious reasons. 306 00:29:44.640 --> 00:29:46.000 And now we're into power and market. 307 00:29:46.000 --> 00:29:48.520 I'm further along in the discussion. 308 00:29:48.520 --> 00:29:52.360 Since it's one volume now, it just sort of goes continuously. 309 00:29:52.360 --> 00:29:57.240 Now we're into the section that's published originally as power and market. 310 00:29:57.240 --> 00:30:01.080 And here he takes up his further critique of the Georges in a single tax. 311 00:30:01.080 --> 00:30:05.400 And I think one interesting point he makes is that, well, suppose that they try this 312 00:30:05.400 --> 00:30:09.400 and they're going to tax the rents that the landlords get at 100 percent 313 00:30:09.400 --> 00:30:13.480 and force idle land into use and other things they think they're going to accomplish. 314 00:30:13.480 --> 00:30:15.680 Well, why would the landlords charge the rent? 315 00:30:15.680 --> 00:30:17.920 Would you go around charging rent and then give it all away? 316 00:30:17.920 --> 00:30:19.320 Why do they even do this? 317 00:30:19.320 --> 00:30:22.800 So basically, they're simply destroying the landowner's function 318 00:30:22.800 --> 00:30:28.800 as someone who allocates resources and does other useful services. 319 00:30:28.800 --> 00:30:34.800 And it has some discussion of what might actually ensue if you had the single tax, 320 00:30:34.800 --> 00:30:43.800 that all distinctions in the land market would vanish and there'd be a rush into the more useful lands and all sorts of chaos. 321 00:30:43.800 --> 00:30:50.800 So you'd establish a calculational chaos in the real estate market. So I think that's pretty telling. 322 00:30:50.800 --> 00:30:54.100 But he says nonetheless that George's TAF raised an interesting problem. 323 00:30:54.100 --> 00:31:05.740 There is a land question because of the role that the states and before that feudal lords played in controlling and allocating land arbitrarily for their own reasons. 324 00:31:05.740 --> 00:31:15.860 And there he suggests briefly the homesteading model is the alternative and what amounts to absolute allodial title, though he doesn't use that term. 325 00:31:15.860 --> 00:31:36.860 And this whole discussion of homesteading and the first user and so on and there between that and a system in which the state arbitrarily says it owns the land and then parcels it out to its friends who then can make a profit either by feudal rent indefinitely or by selling it to real settlers. 326 00:31:36.860 --> 00:31:39.460 This point is also developed in his historical work. 327 00:31:39.460 --> 00:31:42.460 You'll find in volumes 1 and 2 of Conceived in Liberty, 328 00:31:42.460 --> 00:31:43.960 His History of the American Colonies, 329 00:31:43.960 --> 00:31:47.460 some discussion of this exact question. 330 00:31:47.460 --> 00:31:49.760 And a few historians, as far as I know, 331 00:31:49.760 --> 00:31:53.860 have brought this degree of economic insight to historical topics. 332 00:31:53.860 --> 00:31:58.560 I just mentioned that in passing. 333 00:31:58.560 --> 00:32:01.760 He continues with the discussion of the just tax. 334 00:32:01.760 --> 00:32:03.860 There's this idea there are canons of taxation. 335 00:32:03.860 --> 00:32:07.600 How can you come up with taxes that are just? 336 00:32:07.600 --> 00:32:11.900 And, of course, he says, well, why, now that we've given up any notion of finding a just price, 337 00:32:11.900 --> 00:32:15.860 why do we want to look for a just tax? 338 00:32:15.860 --> 00:32:20.220 He finds this rather strange, and again makes this point that 339 00:32:20.220 --> 00:32:26.820 undefended ethical notions are brought in in all this literature 340 00:32:26.820 --> 00:32:28.500 in trying to justify taxation. 341 00:32:28.500 --> 00:32:33.100 But he says the writers first have to establish the justice of taxation itself. 342 00:32:33.100 --> 00:32:37.660 No one bothers with. Well, this is a telling argument. I think it's a problem. 343 00:32:37.660 --> 00:32:43.600 Maybe they can, but they aren't bothering to do it. They'd proceed on to the different kinds of taxes. 344 00:32:43.600 --> 00:32:52.540 And some of this goes back to Adam Smith. Adam Smith says things like a good tax has minimal costs of collection. 345 00:32:52.540 --> 00:32:57.060 Well, it's true from some point of the state. What about from the standpoint of other people? 346 00:32:57.060 --> 00:33:01.960 Payment should be convenient. Again, somewhere critique could be made. 347 00:33:01.960 --> 00:33:12.960 There should be certainty, and Rothbard, just as a counter argument, says well what would happen if the taxes fluctuated, maybe this would be a benefit to some people, and so on and so forth. 348 00:33:12.960 --> 00:33:20.960 Another rule often suggested for taxes is uniformity of treatment. Everybody should be treated the same. 349 00:33:20.960 --> 00:33:28.960 And he objects, quote, the justice of equality of treatment depends first of all on the justice of the treatment itself. 350 00:33:28.960 --> 00:33:34.680 Equality of unjust treatment can never be upheld as an ideal of justice. 351 00:33:34.680 --> 00:33:42.920 So, I don't know why on this kind of argument equal slavery would be good because it was equal. 352 00:33:42.920 --> 00:33:49.360 And here he's getting to the core of a lot of the egalitarian proposals that are still around, that don't go away. 353 00:33:49.360 --> 00:33:56.620 Justice is something that isn't established, but it's all right, apparently, as long as it's done equally to everyone or as much as possible. 354 00:33:56.620 --> 00:34:00.260 So again, a rather powerful argument, I think. 355 00:34:00.260 --> 00:34:07.460 Now, another typical Rothbardian theme is this discussion of how a lot of economists 356 00:34:07.460 --> 00:34:12.860 and political scientists will treat someone's failure to be taxed as a privilege. 357 00:34:12.860 --> 00:34:19.220 Let's say, by some accident or by some trick of the tax code, someone is not being taxed. 358 00:34:19.220 --> 00:34:22.860 This is considered a subsidy or a special privilege. 359 00:34:22.860 --> 00:34:27.860 And yet all that's happened is that you're being allowed to keep some amount of money you already had, 360 00:34:27.860 --> 00:34:31.860 that you presumably have earned honestly, you're being allowed to keep it. 361 00:34:31.860 --> 00:34:36.860 This can't be a subsidy. It's a subsidy if they take other people's money and give it to you. 362 00:34:36.860 --> 00:34:39.860 Again, I think he's on solid ground. 363 00:34:39.860 --> 00:34:44.860 But again, just looking at the tenor of political discussion in this country, 364 00:34:44.860 --> 00:34:50.860 you can see this point is not widely appreciated. 365 00:34:50.860 --> 00:35:00.860 Okay. Now, returning to income taxes, in a later discussion in the Power of Market, he says, well, 366 00:35:00.860 --> 00:35:06.860 how do they even establish what taxable income logically includes? 367 00:35:06.860 --> 00:35:08.860 What if you have a garden? 368 00:35:08.860 --> 00:35:12.860 Are they going to estimate what you would have paid if you'd gone to the grocery store 369 00:35:12.860 --> 00:35:15.860 and bought the vegetables and tax you on that? 370 00:35:15.860 --> 00:35:17.860 Or if someone had given them to you? 371 00:35:17.860 --> 00:35:28.860 If you're living in your own house, is this to be figured as hypothetical imaginary rent that you could have been paying and then either deducted in your favor or held against you? 372 00:35:28.860 --> 00:35:33.860 And these problems actually come up, I mean, that's why I don't read much in this area. 373 00:35:33.860 --> 00:35:36.860 There's just too mind-boggling. 374 00:35:36.860 --> 00:35:45.860 Did Clinton propose imputing rental income for people who live in their homes? 375 00:35:45.860 --> 00:35:48.520 I believe you're right. 376 00:35:48.520 --> 00:35:53.300 And then Rothbard also is another example of something he thinks is absurd. 377 00:35:53.300 --> 00:36:00.420 He says, well, are they going to start figuring a housewife's work is imputed labor? 378 00:36:00.420 --> 00:36:03.660 Well, naturally, you can't satirize anything that comes along. 379 00:36:03.660 --> 00:36:05.460 They'll do it eventually. 380 00:36:05.460 --> 00:36:09.920 So back in the, I think, the late 70s, there were some German feminists demanding 381 00:36:09.920 --> 00:36:16.720 that someone figure out what this kind of work would cost if it were in the market. 382 00:36:16.720 --> 00:36:21.020 And they were attacked mercifully by a French Marxist, André Gores, 383 00:36:21.020 --> 00:36:24.320 who's, I guess, must be a paleo-Marxist, 384 00:36:24.320 --> 00:36:27.720 for acting as if something that wasn't in the market should be put in there. 385 00:36:27.720 --> 00:36:34.420 So this got very convoluted, so once for once one of the Marxists said something interesting. 386 00:36:34.420 --> 00:36:40.300 But here we find an interesting thing, it's the reification of the market, 387 00:36:40.300 --> 00:36:42.820 which actually comes from the left as much as from anyplace else, 388 00:36:42.820 --> 00:36:46.540 the reification of the market, 389 00:36:46.540 --> 00:36:53.380 but in aid of trying to bring something else under the umbrella of the welfare state, 390 00:36:53.380 --> 00:37:01.780 another paradoxical thing that happens is not the Austrians doing this. 391 00:37:01.780 --> 00:37:11.180 Now, one of Rothbard's fundamental starting points is the notion that if something can't be achieved, 392 00:37:11.180 --> 00:37:13.880 then there's no point in talking about it. 393 00:37:13.880 --> 00:37:18.980 So, praxeologically, you couldn't accomplish a certain goal, then it's a waste of time. 394 00:37:18.980 --> 00:37:23.480 And this is why he has at the end of Power and Market a praxeological critique of ethics, 395 00:37:23.480 --> 00:37:25.680 which I think is worth reading. 396 00:37:25.680 --> 00:37:29.380 He's suggesting that if you can show on the basis of economic reasoning 397 00:37:29.380 --> 00:37:59.380 The Theory of Money and Credit 398 00:37:59.380 --> 00:38:05.380 bogs down much the same way, because utilities, quote, are not quantities, but subjective orders of preference. 399 00:38:05.380 --> 00:38:11.380 The Sacrifice Theory at least admits that a burden is being imposed. 400 00:38:11.380 --> 00:38:14.380 So it's not the sort of happy social democratic view of taxation. 401 00:38:14.380 --> 00:38:16.380 At least it admits there's a burden. 402 00:38:16.380 --> 00:38:19.380 And then they're trying to say, well, without showing why there should be a burden, 403 00:38:19.380 --> 00:38:23.380 they try to say how you could, you know, farm it out. 404 00:38:23.380 --> 00:38:26.380 Who should be paying it, suffering this burden? 405 00:38:26.380 --> 00:38:39.380 So the Equal Sacrifice Theory comes under his ban of having equality or equal treatment as a substitute for finding out whether the thing is just to begin with. 406 00:38:39.380 --> 00:38:49.380 And then there was the Minimum Sacrifice Theory and so on, so I won't go into that, but again another attempt at justifying taxation as we know it. 407 00:38:49.380 --> 00:39:05.380 Now I jump forward to a paper Rothbard gave in 1980, and published after that the next year in the Cato Journal, and reprinted in the Logic of Action, pages 56 through 108, and this is the myth of the neutral tax. 408 00:39:05.380 --> 00:39:11.380 So you might think he just repeats here his strictures about how you can't find a neutral tax. 409 00:39:11.380 --> 00:39:13.980 Actually, this is more fun because it's much more political 410 00:39:13.980 --> 00:39:17.380 and it gives you a broader framework for looking at the question, 411 00:39:17.380 --> 00:39:22.980 not just the economic theory deficiencies of the neutral tax. 412 00:39:22.980 --> 00:39:25.980 So it's an essay on political economy, in the old sense of the word, 413 00:39:25.980 --> 00:39:30.380 in which politics is assumed to intrude on the economy 414 00:39:30.380 --> 00:39:33.680 and you have to address the consequences, 415 00:39:33.680 --> 00:39:36.480 which says a business in the market is neutral. 416 00:39:36.480 --> 00:39:39.880 So the mom-and-pop doughnut shop is in the market. 417 00:39:39.880 --> 00:39:46.680 They're certainly neutral to the market in the sense that they're not distorting the market process. 418 00:39:46.680 --> 00:39:49.480 If a shop starts lobbying for a subsidy, that's different. 419 00:39:49.480 --> 00:39:53.480 In fact, I think this is the whole key to business ethics. 420 00:39:53.480 --> 00:39:59.480 Business ethics exist as long as you don't go to the government looking for a subsidy 421 00:39:59.480 --> 00:40:02.480 or some way the government can penalize your competitors. 422 00:40:02.480 --> 00:40:05.380 If you do that, you're pretty much on the straight and narrow path. 423 00:40:05.380 --> 00:40:08.280 And all the other stuff that press is going on about these days, 424 00:40:08.280 --> 00:40:11.360 about the Great Decline in Business Ethics. 425 00:40:11.360 --> 00:40:13.840 This is either just personal bad behavior 426 00:40:13.840 --> 00:40:15.120 that should be treated as crime 427 00:40:15.120 --> 00:40:16.840 or it's the result of government policies 428 00:40:16.840 --> 00:40:18.080 that encourage bad behaviors. 429 00:40:18.080 --> 00:40:21.260 A huge number of moral hazards around these days. 430 00:40:22.580 --> 00:40:24.720 So how do businesses get their income? 431 00:40:24.720 --> 00:40:27.640 Well, they have investors and they have customers 432 00:40:27.640 --> 00:40:30.800 and all the investments add up 433 00:40:30.800 --> 00:40:35.480 to a complicated integrated structure of production 434 00:40:35.480 --> 00:40:37.900 and the factor owners, the laborers and the landowners 435 00:40:37.900 --> 00:40:41.500 and so on, get their income in advance of production. 436 00:40:41.500 --> 00:40:44.820 And we also know when consumers spend, they benefit. 437 00:40:44.820 --> 00:40:46.380 There's profit and loss tests to know 438 00:40:46.380 --> 00:40:48.020 if they're serving the consumers. 439 00:40:48.880 --> 00:40:51.060 And Rothbard also includes in the market 440 00:40:51.060 --> 00:40:55.420 voluntary non-profit organizations, which is fortunate. 441 00:40:55.420 --> 00:40:57.100 They would do that. 442 00:40:57.100 --> 00:40:59.340 But now along comes the robber. 443 00:40:59.340 --> 00:41:01.460 Along comes Jesse James. 444 00:41:01.460 --> 00:41:03.460 Oh, I know that's not fair to old Jesse. 445 00:41:03.460 --> 00:41:06.100 But somebody comes along and wants your money. 446 00:41:06.100 --> 00:41:08.160 Is he providing a service? 447 00:41:08.160 --> 00:41:09.000 Probably not. 448 00:41:09.000 --> 00:41:09.880 Is he providing goods? 449 00:41:09.880 --> 00:41:10.840 Probably not. 450 00:41:11.640 --> 00:41:14.760 And Rothbard just goes into a lengthy discussion. 451 00:41:14.760 --> 00:41:16.500 It's rather amusing because it's totally unnecessary, 452 00:41:16.500 --> 00:41:19.680 but he says there are so many people that claim 453 00:41:19.680 --> 00:41:22.160 that certain things that happen aren't coercive 454 00:41:22.160 --> 00:41:24.240 and certain actions are voluntary, 455 00:41:24.240 --> 00:41:28.360 that he extends the comparison of the highway robber 456 00:41:28.360 --> 00:41:32.720 and the taxation process at some length 457 00:41:32.720 --> 00:41:34.300 and has some fun with that. 458 00:41:34.300 --> 00:41:45.300 Now, but the state of course has to support itself in this fashion, and in doing so it establishes hegemonic bonds over society, he quotes Mises here. 459 00:41:45.300 --> 00:41:51.300 And given all this as a starting point, then the so-called services being provided by the state are beside the point. 460 00:41:51.300 --> 00:41:56.300 We don't know if there are services that are wanted. We'd find out if we had a market for them. 461 00:41:56.300 --> 00:42:00.300 And they don't constitute a justification for the whole process. 462 00:42:00.300 --> 00:42:10.020 Process. And again, Rothbard is very good at finding a quote, finding a stunningly odd 463 00:42:10.020 --> 00:42:14.980 or stupid quote from some eminent figure to illustrate the point. Here he quotes Sir John 464 00:42:14.980 --> 00:42:19.900 Hicks. And Hicks says, well, we can't really start it out very well, so we'll just have 465 00:42:19.900 --> 00:42:28.420 to assume that somehow the fiscal process of the state must somehow correspond to what 466 00:42:28.420 --> 00:42:33.860 that people actually want, even if the leader is Robespierre or Nero. 467 00:42:33.860 --> 00:42:40.720 Now, I don't know if Hicks actually realizes how that sounds. 468 00:42:40.720 --> 00:42:45.120 Now, here, of course, Rothbard goes on to deconstruct the usual public goods argument 469 00:42:45.120 --> 00:42:46.820 and the whole defense business. 470 00:42:46.820 --> 00:42:47.620 And it's worth reading. 471 00:42:47.620 --> 00:42:54.220 I don't know that I think I'm running short on time to go into all of that. 472 00:42:54.220 --> 00:43:24.220 But nonetheless, taking protection or defense as the usual reason given for having the state and the main public good is providing shows rather easily that there's a whole array of services that come under this and suggests that it's odd that economists can treat every other good or services 473 00:43:24.220 --> 00:43:29.220 and the policing of all sorts of different possibilities and possible services and products 474 00:43:29.220 --> 00:43:36.220 and apply marginal analysis to this and they don't do this in this case. 475 00:43:36.220 --> 00:43:40.220 And this brings them to the usual free rider problem and so on. 476 00:43:40.220 --> 00:43:43.220 So if the hypothetical movie theater has some empty seats, 477 00:43:43.220 --> 00:43:47.220 it doesn't cost them any more to let somebody come in and sit there. 478 00:43:47.220 --> 00:43:50.220 Does this follow that the movie theater should be nationalized 479 00:43:50.220 --> 00:43:53.220 because there's a free rider problem if they chose to do that? 480 00:43:53.220 --> 00:43:59.220 Well, they don't choose to do it because, in fact, you can often exclude people from the service if they're not paying. 481 00:43:59.220 --> 00:44:06.220 So this problem begins to vanish pretty quickly. 482 00:44:06.220 --> 00:44:15.220 So we'll get on to Rothbard's general notions of taxation. 483 00:44:15.220 --> 00:44:19.220 And here he quotes Jean-Baptiste Say, and Say says, 484 00:44:19.220 --> 00:44:25.220 The best scheme of finance is to spend as little as possible, and the best tax is always the lightest. 485 00:44:25.220 --> 00:44:30.220 Nice classical liberal sort of thing to say. 486 00:44:30.220 --> 00:44:37.220 And once again, Rothbard mentions that about the closest approximation is the poll tax, 487 00:44:37.220 --> 00:44:41.220 that everybody in the country pays $10, and that's it until it comes up again. 488 00:44:41.220 --> 00:44:46.220 So it's not progressive, any of that stuff. 489 00:44:46.220 --> 00:44:50.540 He'll distort the market, and he induces the case of the Belgian Congo, in which just this 490 00:44:50.540 --> 00:44:55.740 kind of tax was imposed to force people who were otherwise engaged supporting themselves 491 00:44:55.740 --> 00:45:00.060 to go work at what the Belgians wanted them to do. 492 00:45:00.060 --> 00:45:05.760 So all these taxes are problematic, even the one that's closest to meeting the test. 493 00:45:05.760 --> 00:45:09.700 And with that, I'll just say a few things about another piece that's in the Logic of 494 00:45:09.700 --> 00:45:13.140 Action Volume 2, the Myth of Tax Reform. 495 00:45:13.140 --> 00:45:14.740 This is Rothbard's discussion of the flat tax. 496 00:45:14.740 --> 00:45:20.740 The flat tax got a certain amount of play during the Reagan period, and people were saying, well, you know, it's simpler. 497 00:45:20.740 --> 00:45:26.740 And Rothbard says, well, he doesn't care. If it's simpler, is it going to cost more? 498 00:45:26.740 --> 00:45:38.740 You know, in any event, it was part of an attack, partly for political effect, on so-called loopholes. 499 00:45:38.740 --> 00:45:43.740 And again, a loophole doesn't follow that as a subsidy. You're not actually being given something. 500 00:45:43.740 --> 00:45:47.740 to keep something, so he applies this same general approach to that. 501 00:45:47.740 --> 00:45:52.740 And then the flat taxers are proposing to tax all net income, so we're back to having to decide what is income, 502 00:45:52.740 --> 00:45:58.740 and all the same problems come up with any proposition of this type. 503 00:45:58.740 --> 00:46:03.740 And he quotes Mises on the question of loopholes, why they should be considered bad. 504 00:46:03.740 --> 00:46:08.740 He even quotes Mario Cuomo on this point, where Cuomo for once had a good argument and said, 505 00:46:08.740 --> 00:46:14.580 Well, why are people complaining if New York gets a subsidy, aren't you getting subsidies 506 00:46:14.580 --> 00:46:19.940 for the tobacco farmers in North Carolina, who's gotten moral about subsidies, rather 507 00:46:19.940 --> 00:46:28.320 interesting argument. Another argument that was going around that Rothbard critiques came 508 00:46:28.320 --> 00:46:33.580 from the people who admitted that if the point was to bring in the same amount of revenue 509 00:46:33.580 --> 00:46:41.140 through a flat tax, then there might actually be a net increase, and their attitude was, 510 00:46:41.140 --> 00:46:44.460 well, this will force the people to revolt against their state and local taxes, and they'll 511 00:46:44.460 --> 00:46:51.140 bring those down. And Rothbard says these arguments seldom work that way, and if nothing 512 00:46:51.140 --> 00:46:55.140 else, it's like a good argument. It's like saying that we should bring back conscription, 513 00:46:55.140 --> 00:46:59.140 because this will make more people protest the next bad war we get. Well, what it will 514 00:46:59.140 --> 00:47:05.140 And what he'll do is give the government a lot cheaper manpower base and make them more adventurous. 515 00:47:05.140 --> 00:47:10.140 And the effect, the desired effect would take a long time to be realized. 516 00:47:10.140 --> 00:47:13.140 It's going to be a very good argument. 517 00:47:13.140 --> 00:47:20.140 And finally, he says, the flat taxes are proceeding on the assumption that total revenue should remain the same. 518 00:47:20.140 --> 00:47:23.140 You're not actually going to have the government suffer a cut of its income. 519 00:47:23.140 --> 00:47:28.140 You're simply going to have a way they like better to achieve this result. 520 00:47:28.140 --> 00:47:31.540 Well, and he asked, of course, obviously, in a Rothbardian fashion, 521 00:47:31.540 --> 00:47:32.980 why should the revenue stay the same? 522 00:47:32.980 --> 00:47:40.860 Why do we want this portion of GNP that government now occupies to go on? 523 00:47:40.860 --> 00:47:46.340 So I'll read you his final summary of his approach to taxes. 524 00:47:46.340 --> 00:47:48.940 He says, the principle should be clear. 525 00:47:48.940 --> 00:47:55.780 To support all reductions in taxes, whether they be by lower rates or widening an exemption in deductions, 526 00:47:55.780 --> 00:47:59.980 and to oppose all rate increases or exemption decreases. 527 00:47:59.980 --> 00:48:06.580 In short, to seek in every instance to remove the blight of taxation as much as possible. 528 00:48:06.580 --> 00:48:09.380 So I will close with that. 529 00:48:09.380 --> 00:48:12.380 Oh, yes. 530 00:48:12.380 --> 00:48:40.380 It seems like a sign from trying to lower the burden, lowering the rate, we have a sales tax consumption tax right now, where it's collected through existing retail outlets and we're able to reduce the IRS workforce from 300,000 to 100,000. 531 00:48:40.380 --> 00:48:49.380 It's stated now that the current income tax and compliance costs are anywhere from $300 million to $600 million a year. 532 00:48:49.380 --> 00:48:58.380 If you could knock at the cross of compliance with the time and effort, 533 00:48:58.380 --> 00:49:05.380 you know, you hear about corporations whose tax returns are still at this room, 534 00:49:05.380 --> 00:49:11.380 It would seem like that would be a benefit. 535 00:49:17.380 --> 00:49:22.380 Politically, you'd have to propose it that way in the beginning. 536 00:49:22.380 --> 00:49:25.380 But you've really got to work on the spending side. 537 00:49:25.380 --> 00:49:31.380 To get rid of that onerous time and money compliance. 538 00:49:35.380 --> 00:50:05.380 and then somebody figured out how many bureaucrats would be going around keeping track of that and it didn't seem to be much of a gain in that sense and if sales taxes didn't inspire people to not comply I don't know any way it would be running across the Indian reservation between Ontario and some other places as much as they do so I don't know I speaking for myself I don't see any great advantages to it 539 00:50:05.380 --> 00:50:11.380 I mean, I'd have to think about it, and I know Rothbard wouldn't want to be bogged down in that kind of... 540 00:50:11.380 --> 00:50:16.380 What's the cost to the taxpayer to get prepared for? 541 00:50:16.380 --> 00:50:21.380 You know, there is that, and I wouldn't deny that... 542 00:50:21.380 --> 00:50:28.380 Well, again, it's interesting, but... 543 00:50:28.380 --> 00:50:36.620 But if you can get a movement to bring this about, it seems like you can also just get 544 00:50:36.620 --> 00:50:39.860 a movement to bring down the rapes. 545 00:50:39.860 --> 00:50:40.860 I don't know. 546 00:50:40.860 --> 00:50:41.860 Dan? 547 00:50:41.860 --> 00:50:44.860 Oh, I was just going to say, first of all, for that point, I think it's quite right that 548 00:50:44.860 --> 00:50:49.860 one can never be sure what the compliance costs are going to be before a tax is initiated. 549 00:50:49.860 --> 00:50:53.860 It may very well be that the apparatus required to enforce the sales tax could be every bit 550 00:50:53.860 --> 00:50:56.860 as bad as the one we have for the income tax. 551 00:50:56.860 --> 00:51:03.860 It is an issue, but one has to be careful and make sure that you're not just trading one thing for something else that's bad or even worse. 552 00:51:03.860 --> 00:51:12.860 I did have a question for you, though, about whether Rothbard had said anything about our friend Milton Friedman who gave us the withholding pass, and whether Rothbard had talked about that. 553 00:51:12.860 --> 00:51:20.860 Well, not in the sources I was using today, but he does mention this here and there in his writings and his polemics against Milton Friedman, yes. 554 00:51:20.860 --> 00:51:30.860 In fact, there's the piece, or I don't know what else to call it, the sort of anti-Chicago issue of the Journal of Libertarian Studies. 555 00:51:30.860 --> 00:51:38.860 They reprinted, this is a couple of years ago, Rothbard's piece on Friedman from The Individualist, first published in 1971. 556 00:51:38.860 --> 00:51:41.860 And I'm sure that was mentioned there. 557 00:51:41.860 --> 00:51:46.860 And it was on the Libertarian Forum, so he's quite aware of Friedman's role. 558 00:51:46.860 --> 00:51:52.060 Actually it comes up in one of the things I was talking from today, but just in the 559 00:51:52.060 --> 00:51:58.820 context of a temporary tax that's never repealed, but again it's sort of like, I'm sure you 560 00:51:58.820 --> 00:52:06.660 know that the telephone tax goes back to 1898, so there is a tendency for these things to 561 00:52:06.660 --> 00:52:10.700 not be undone, or at least to only be undone partially. 562 00:52:10.700 --> 00:52:14.620 Well, I'll get to you. 563 00:52:14.620 --> 00:52:24.120 Does Rothbard deal at all with the sort of widely held, widely accepted view that some kind of taxation is necessary to fund defensive wars? 564 00:52:24.120 --> 00:52:32.820 No. No, he's being Rothbardian. He would reject that argument. 565 00:52:32.820 --> 00:52:42.020 I mean, I can show you readings where he goes into this, but no, he doesn't accept even the defense argument as an ultimate necessity. 566 00:52:42.020 --> 00:52:47.580 I think his attitude in the end is that, pragmatically, we're sort of stuck with states and they can do a lot of harm. 567 00:52:47.580 --> 00:52:55.100 So, in the short or even medium term, we want to keep them doing as little as possible. 568 00:52:55.100 --> 00:53:01.820 But he was always pretty certain you didn't actually have to have them, period. 569 00:53:01.820 --> 00:53:06.100 So, it's a matter of principle, yes. 570 00:53:06.100 --> 00:53:23.100 Did Rothbard address the taxes from the legal standpoint, or just from the way it was administered, in the economic sense? 571 00:53:23.100 --> 00:53:35.100 Well, who was liable to pay the different taxes, and how they could be collected, and how they could determine who was liable for it, etc. 572 00:53:36.100 --> 00:53:42.100 I think he's more interested in this first article, the one from, he wrote in 1952, that was just published recently. 573 00:53:42.100 --> 00:53:48.100 He talks about Blumenkauwens dismissal of constitutional arguments. 574 00:53:48.100 --> 00:53:53.100 And this would be the argument that even with the 16th Amendment, 575 00:53:53.100 --> 00:53:57.100 the way in which taxes are supposed to be proportioned does not change. 576 00:53:57.100 --> 00:54:03.100 And there was an important constitutional argument that had been first dismissed kind of out of hand 577 00:54:03.100 --> 00:54:07.960 I have a hand by a couple of Supreme Court justices, I think Rothbard calls their argument 578 00:54:07.960 --> 00:54:13.040 sheer nonsense or something, or sophistry, and then the economists take it up and say 579 00:54:13.040 --> 00:54:18.080 there's no legal problems, and everything else is just the administration and whatever 580 00:54:18.080 --> 00:54:22.840 Congress votes it can do, and then the courts sustain it. 581 00:54:22.840 --> 00:54:26.160 So he's had some interest in the constitutional questions, but I don't think, I don't know 582 00:54:26.160 --> 00:54:28.920 offhand if he did much with the kind of thing you're talking about. 583 00:54:28.920 --> 00:54:32.920 Well, the way I've read it, I've stated this a little bit. 584 00:54:32.920 --> 00:54:40.920 The Constitution allows the Federal Government to tax in two different ways, direct taxes and indirect. 585 00:54:40.920 --> 00:54:53.920 And the direct taxes, the Constitution also states that the Federal Government cannot directly tax an individual within the States. 586 00:54:53.920 --> 00:55:10.160 And then the indirect taxes on exports, tariffs, excise taxes, and so forth, and the question 587 00:55:10.160 --> 00:55:19.680 came up about the 16th Amendment in Brashova v. Union Pacific Railroad, it stated that 588 00:55:19.680 --> 00:55:35.760 the tax was constitutional because it kept the indirect tax as an indirect tax on privileged 589 00:55:35.760 --> 00:56:05.760 And so a privileged activity had to be named in order for an entity to be liable for the tax, and while also there's a distinguish between natural persons and artificial persons, natural persons have God-given rights, whereas artificial persons, like 590 00:56:05.760 --> 00:56:30.760 There are corporations, statutory trusts, limited liability groups, and other situations like that are subject to the government and operated at swim, therefore, our official persons are required to pay, and that is indirect exercise on the previous activities. 591 00:56:30.760 --> 00:56:45.640 Well, I think I can say that I don't think Rothbard ever looked into this area, and it's 592 00:56:45.640 --> 00:56:51.240 not my area, so he did ask someone else about that, about the kind of common law and so 593 00:56:51.240 --> 00:56:53.240 forth, aspects of it. 594 00:56:53.240 --> 00:56:55.840 I'm sorry, I can't be much help on that. 595 00:56:55.840 --> 00:57:14.840 Well, you know, I've studied that a good bit. He seems to take the presumption that the person, or the natural person, is liable for it before the artificial person is, and it's completely contrary to what I've read in my opinions. 596 00:57:14.840 --> 00:57:22.840 Well, he takes the position that the natural person is real, but that's another matter we don't want to get into right now. 597 00:57:22.840 --> 00:57:26.840 Anything else? I guess we're out of time. So thank you.