• Peace, commerce and honest friendship with all nations; entangling alliances with none. – Thomas Jefferson

Defending Paul Hogan, Properly

By Luke McGrath  
Thu, 10/03/2011 - 11:29pm
Sat, 16/10/2010 - 11:00pm

Last month in the SMH, Chris Berg of the IPA came to the defence of Paul Hogan. He criticised the government’s aggressive tactics, saying that this whole episode gives us “a window into just how draconian the government’s taxation and regulatory powers have become.” But though Berg acknowledges the importance of “defend[ing] the rights of individuals against coercive and unjust state power,” libertarians will find his article lacking.

The major reason for this is simple: Berg concedes the legitimacy of taxation. In no way does he dispute the government’s right to force Paul Hogan to hand over his wealth; he just takes issue with the way in which the government is executing this expropriation.

But should it really surprise anyone when a monopolist agency that derives its revenue from coercion, escalates its coercion? Particularly when doing so results in this agency receiving even greater sums of wealth?

Berg claims that “Australians have no moral obligation to pay more tax than the tax law requires.” Thank God for that. I can only assume, though, that he’s therefore claiming Australians do have a moral obligation to pay tax.

Why? What justifies this moral obligation?

Presumably Berg would have us pay whatever is laid down in the tax law, but, as he himself points out, Australia’s income tax law alone is 5743 pages long. This only seems to make this claim appear even more suspect. We have a moral obligation to abide by this gargantuan, sprawling confusion of decrees? I certainly don’t think we do.

Now, let me be perfectly clear. I’m not suggesting we stop paying taxes. I think we should pay them. But this is because of prudence, not morality. I pay my taxes because I don’t want to end up in a government cage.

Unfortunately, however, in cases of (alleged) tax evasion — especially when they involve high profile, wealthy individuals — the general public tends to side with the government. The reason for this, in my view, stems from the widespread belief that a government is the embodiment of the society over which it governs. People mistakenly conflate the two, believing that “we” are the government and the government is “us”.

But nothing could be further from the truth and anyone under any illusions here would be wise to consult Murray Rothbard’s seminal article, The Anatomy of the State. As Rothbard explains, a State (or government) “is that organisation in society which attempts to maintain a monopoly of the use of force and violence in a given territorial area; in particular, it is the only organization in society that obtains its revenue not by voluntary contribution or payment for services rendered but by coercion.”

The government is not some genial group we just willingly choose to become members of. As Joseph Schumpeter has remarked, “the theory which construes taxes on the analogy of club dues or of the purchase of the service of, say, a doctor only proves how far removed this part of the social sciences is from scientific habits of mind.”

By identifying themselves with “their” government, people are predisposed to the following thinking: When John gets away with not paying his tax, the rest of us are forced to pick up his share to make up for the shortfall. Our tax burden is now larger than it would have otherwise been and this is only because John didn’t pay what he was supposed to. I pay my tax — why shouldn’t he?

By this logic, then, it would make sense — and certainly only seem fair — that strict penalties should therefore be imposed on tax evasion. Because this person gets to enjoy the benefits of various government provided goods and services without directly paying for them they’re effectively stealing from the rest of us. Right?

No.

This line of reasoning, commonly held by most people, simply reveals how deeply confused and muddleheaded clear thinking really is when it comes to matters concerning economics and political philosophy.

We shouldn’t denounce people who don’t pay their taxes. We should applaud them. If someone manages to get away with not paying as much tax as they “should” have, then kudos to them.

In one of the above passages I said that, “when John gets away with not paying his tax, the rest of us are forced to pick up his share to make up for the shortfall.” But think for a moment about who, exactly, is causing us to have less money in our wallets. Is it John? Is he the one taking more of our wealth? Of course not. He’s just trying to hold onto his money. He hasn’t taken anything from us. The guilty party should be obvious to all, it’s the government. They are the ones forcing us to hand over more of our money to them and they are the ones we should be condemning.

In “The Moral Status of Relations to the State,” a chapter in Murray Rothbard’s 1982 treatise, The Ethics of Liberty, a number of important clarifications are made as to what, precisely, our obligations are vis-à-vis governments:

If the State, then, is a vast engine of institutionalized crime and aggression … its moral status is radically different from any of the just property-owners … [T]his means that the moral status of contracts with the State, promises to it and by it, differs radically as well. It means, for example, that no one is morally required to obey the State (except insofar as the State simply affirms the right of just private property against aggression). For, as a criminal organization with all of its income and assets derived from the crime of taxation, the State cannot possess any just property. This means that it cannot be unjust or immoral to fail to pay taxes to the State, to appropriate the property of the State (which is in the hands of aggressors), to refuse to obey State orders, or to break contracts with the State (since it cannot be unjust to break contracts with criminals).

So when some individual or group in society, then, is found to be paying less tax than we are, we should not, under the banner of fairness, protest for their taxes to be raised; rather, we should protest for our taxes to be lowered.

But if taxes are illegitimate — and if people stopped paying them — would this mean we’d have no roads, education, hospitals, police, etc.? Oliver Wendell Holmes, Jr. famously said that, “taxes are the price we pay for a civilized society.” Am I (or Rothbard) therefore condemning us all to live in some primitive, lawless society?

Of course not. This is a common misunderstanding people have when encountering this view for the first time. The disagreement libertarians have is with the method of funding and administering various goods and services; it is not necessarily over their provision. Opposition to government schools does not mean you are opposed to schools. Opposition to government health care does not mean you are opposed to health care.

“Public goods” can be (and are) supplied through voluntary means. There are many benefits to this — chief among them is that it’d avoid the coercion that necessarily comes with taxation.