The Purposes to Taxation

There are four purposes to taxation.

1: Destroy money. The government doesn’t need to tax to spend money. It just has to write the check. However, money it spends adds to the money supply, and this would cause inflation if an equal amount of money wasn’t taken out of circulation or destroyed. If money is taken out of circulation but not destroyed, as when the government borrows to spend, (which it rarely has any need to,) and this money is accumulated by the financial sector, the potential for inflation remains, and increases as the amount of money in the financial sector increases.

2: Discourage certain behaviors, or, through negative taxes, ie subsidy, (a word for particular forms of spending,) encourage certain (other) behaviors. All spending, of course, encourages the production of what it is being spent on. (Allowing for profits, of course.)

3: Redistribute demand, and therefore wealth. More or less egalitarian societies, such as democracies, cannot survive an excess of economic inequality. Money represents economic rights. That is, economic rights are proportional to wealth and income. Economic rights cannot be completely separated from political rights. An unequal distribution of economic rights results in an unequal distribution of political rights. This phraseology, however, is sort of a contradiction, since political rights may implicitly be regarded as those rights held, and that wealth shared, equally by all citizens in a society. Precisely: The only difference between economic rights and political rights is the method of allocation, and their resulting distribution. A more proper phrasing, then, would be that increasing economic inequality results in an increasing conversion of political rights to economic rights. A sufficiently progressive tax system can prevent this from arising, and so help to maintain a system of political rights. An egalitarian government, therefore, will tax economic rights, so limiting the scope and degree of inequality, and subsidize political rights, so enlarging the scope and degree of equality. The dynamics and stability of this process is itself interesting, but beyond the scope of this question. However, the first goal of every proto- oligarchy is the reduction of the progressivity of taxation to a level insufficient to prevent the increasing of economic inequality.

4: Validate its currency. By requiring that taxes be paid in its unit of money, the use of that money is (very strongly) encouraged in that economy. Since using a single unit of money increases economic efficiency, this increases the quantity of free resources in that economy. This increases both the rate of sustainable consumption, and the rate of wealth accumulation in that economy.

Why there are no Right Libertarian Societies

Why there are no Right Libertarian Societies 

Despite the attractiveness, to some, of libertarian prescriptions for creating a ‘better’ and ‘freer’ society, there is a notable absence of any examples of states run according to libertarian principles in the record of history.  The reason is that libertarian societies, as a matter of definition, lack an institution, ( a government, basically) capable of redistributing demand.  They thus are incapable of dealing with the producer-consumer problem, (which I describe below,) and so fail.

One of the problems in dealing with libertarian economics is the protean nature of the libertarian state, which, in the hands of libertarians, changes according to the criticism leveled against it.  That is, what ever the libertarian state one criticizes, it is not the state advocated by any libertarians.  

Anyway, from Karl Widerquist (who, granted, seems to be no apologist for libertarians,) “A Dilemma for Libertarians,” we have:

            “Libertarianism can be thought of in at least three ways: It is the ideology

supporting (1) maximal equal liberty understood as self-ownership or noninterference, (2)

strong, inviolable property rights without regard to the pattern of distribution of those

rights, or (3) a so-called libertarian state, which is either a government limited to

protecting property rights and self-ownership or no government at all.

 Natural rights libertarians think of their philosophy as embodying all three of these claims, believing that a commitment to maximal equal freedom entails a commitment to strong property rights, which in turn entails a commitment to a libertarian state.”

http://works.bepress.com/cgi/viewcontent.cgi?article=1005&context=widerquist

Widerquist, whose paper is well worth the read, argues that any libertarian state operating under these assumptions necessarily evolves into what is effectively an absolute monarchy.  (An aside:  A close analysis of the 11 incidents of property,  as described by Tony Honore an conveyed by Widerquist in his paper, at least strongly suggests that it is impossible to eliminate any of the functions of government.  These functions can only be redistributed.  Libertarians, then, seem to believe in appropriating all, or for the minimalist state libertarians almost all, of the functions of government to the individual.)

So we will address libertarianism as described above.  But we will show something different.  (Since here the notion of property is paramount, we will consider this an instance of right libertarianism. Here we will not address the concerns which might be raised by any of the many varieties of left libertarianism.) We show that in the libertarian ‘minimal state’ of government protecting only property rights and ‘self-ownership,’ the economy cannot maintain demand for its production, and so will collapse. (Actually, we will show something quite different from this!)

But consider then a closed model economy, consisting of two sectors: a producing sector, and a consuming sector.  We allocate to the consuming sector a quantity of money. Here we are just talking tokens of demand, as I discussed in “The Standard Definition of Money is in Error.“  With these tokens, this money, the consuming sector buys the products of the producing sector. The consuming sector must spend its money to support itself, since it produces nothing on its own, and therefore can earn no money selling what it produces. So eventually it runs out of money.  (With this model there is no provision for borrowing, or assets.  Adding these features do not change the direction of the dynamics.)  As a result, the consuming sector demand then collapses.  With the collapse of the demand of consuming sector, there is no one to buy surplus production.    Prices crash, and with that crash production, and so the economy.  Adding the possibility of borrowing, or the selling of assets by the consuming sector, does not change the direction of the process, but merely adds to its duration.

Reality is of course, more complicated. First, any economy is more properly divided into net consumers and net producers. Consumers do produce, and producers do consume, but the distinction may still be made.  Now, whenever the consuming sector of the remaining economy is driven from the economy, the remaining economy may still be so divided. That is, the remaining economy cannot produce a net surplus to its own consumption, because there is no one to buy it. No one else has any money.  Therefore, the remaining economy must reduce production to match the reduced demand. Because production is reduced, so is that part of the economy which produces.  Thus, the producing sector is less than the whole of the remaining economy, and so the other part of the remaining economy is necessarily a net consuming sector. But this new net consuming sector has only a finite amount of money, with which to buy the surplus production of what is now the producing sector.  And so the process iterates.  The actual process of collapse, then, can better be described as a continual increase in the concentration of money and wealth, as ever an ever larger portion of the economy is stripped of its demand on the ever shrinking net producing portion of the economy. 

Although we have argued from a closed economy, we can actually start from an open one.  The entire economy then is the net producer, which exports its entire surplus into the exterior. The exterior, however, necessarily starts with a finite amount of money.  And this money necessarily is eventually depleted.  And so we return to the start of the previous process, which we have already shown eventually leads to collapse.

In a more realistic monetary economy, relative profits determines who is a net consumer, and who is a net producer.  The net consumer is the one who profits from his production, and the net producer is the one who loses money from his production.

This is not intuitive.  But suppose a fixed money supply.  The producer who profits, can buy more than he produces.  That is, he can consume more than he produces.  He is a net consumer.  The producer who loses money, can only buy less than he produces.  That is, he can only consume less than he produces.  He is a net producer.  ( I would like to point out here that, under capitalism, labor, certainly at least in private industry, is a net producer. This is because, for the capitalist to make a profit, labor, in the net, must produce more than it consumes.  (Consider first a one product economy.)  Even if we include government labor, if in the net businesses make a profit after taxes, labor as a whole is still a net producer.)

 This fact inverts the conclusion:  It is the net consumer who ends up with all the money and wealth, whereas the net producer is stripped of all his money and eventually all his assets. So as promised, what we have instead shown is that it is production which is decapitalized, and which the economy fails to maintain, and that is the cause of the economy failing. 

Labor, of course, is not the only net producer.

In the libertarian economy, there is no mechanism to redistribute demand, as is required to maintain production. Voluntary redistribution of demand from the net consumers to the net producers cannot work.  The set of all producers represents a commons, and any consumer who restrained his consumption would be exploited by other consumers.  And any compulsive mechanism of redistribution is contrary to minimal government libertarian principles.

The best solution seems consist of the continual issuance of money by the producers, (as defined in the more realistic monetary economy,) and, in order to prevent inflation, be attendant by the extinction of money among the consumers.  This is another way of saying money is taken from the consumers and returned to the producers.  This requires an instrument of compulsion, a government.  Such government must remain an instrument of the (real) producers, or it will fail to adequately return demand to the producing sector, and the economy will increasingly, de facto, approximate the character and trajectory of a libertarian society, and collapse.    

Two final notes:

1) Principle never stood in the way of profit. For instance, there is profit to be made from slavery, that is, the violent appropriation of the ‘ownership of self’ by others.  It took a war to establish the principle, and overcome the profit.  And there is profit to be made from the violent appropriation of property. In the absence of a mechanism to enforce principle, principle is empty. While libertarians enunciates the doctrines of “(1) maximal equal liberty understood as self-ownership or noninterference,” and “(2) strong, inviolable property rights without regard to the pattern of distribution of those rights,” the ‘libertarian state’ libertarians promote provides no effective mechanism to guarantee these rights.  Indeed, the very existence of such a mechanism is anathema to Libertarianism. 

So the preservation of individual rights, civil, political, and economic, requires a mechanism to guarantee those rights:  A government. This government requires a sufficient input of real resources to both to maintain itself, and to be able to act to effect such guarantee. It must also answer to those whose rights it guarantees.  Where the input of resources to this government erodes, or where that government less and less answers to the people, so must the rights of the people that government guarantees, erode. 

2)We will divide the functions of government into two:  internal and external.  We will suppose the external functions of government to be a net consuming sector of the economy. That is, any society with external functions of government has less wealth to distribute among its members.  That every society, or more certainly, almost every reasonably complicated society that we have ever known of, has had these external functions of government, despite the net cost, suggests that at least the leading members of those societies considered those functions necessary.  

Suppose now that all the internal functions of government were necessarily a net consuming sector.  That is, any society with a government would necessarily have less wealth to distribute among its members than a society without the internal functions of that government.  There are two possibilities.  The internal functions of government are used and maintained as an instrument for the oppression of the majority of the people by some ruling elite, to that elite’s profit.  That is, the benefits of those internal functions to that elite would be greater than the cost, to that elite, of maintaining and operating those functions.   Or, it would be preferable to the members of that society to have no internal functions of government, since then they wouldn’t have to pay for any functions.  That is, the people would be better off, and presumably choose, the internal functions of the libertarian state.  (Except, perhaps, for internal functions to enforce taxation to support the external functions.)  However, we have not seen this, or at least have not seen it perpetuated often enough for it to make the record, so we must assume that such an internal libertarian state must be unstable, and evolve as described above. (One possible example, though, might be the Old West.  Which raises other issues.)

The Lone Star Strategy for National Impoverishment

Angry Bear:
http://angrybearblog.com/2013/09/the-lone-star-strategy-or-the-house-that-conservatives-built.html#more-18416

and Senator Bernie Sanders of Vermont
http://www.sanders.senate.gov/newsroom/video-audio/the-lone-star-strategy

itemize some of the features of the Texas Republican Party platform 2012:
http://www.tfn.org/site/DocServer/20...pdf?docID=3201

“1. An orderly transition to individual private retirement accounts and the elimination of Social Security.

2. Privatization of Veterans health care.

3. Abolish all federal agencies who’s activities are not enumerated in the constitution including the department of education and the department of energy.

4. Oppose mandatory kindergarten

5. Abolish the EPA

6. Abolish the 16^th amendment and thus get rid of the IRS to be replaced with a national, state collected
sales tax.

7. Abolish the capital gains tax and estate tax.

8. Repeal the minimum wage.”

_______________

Each of these points will transfer wealth and income upward, even the elimination of mandatory kindergarten.  Indeed, what will remain after the implementation of these policies is a rump federal government, incapable of securing even the meanest rights for its poorer citizens. And this will be most of its citizens.  Each agency is an empowerment of the people, a securing of rights they would not otherwise have. The federal government will not be capable of securing the interests of its citizens even within the borders of the country, much less beyond them.

The EPA was established by necessity, unregulated industry having made such a mess of things that rivers burned, and people died from breathing the polluted air.

Privatizing Social Security and Veterans health care is sure to make a few rich, at the expense of many.

Item 6 is obviously regressive, since poor and middle class consume a larger portion of their income, and thus will end up paying a higher percentage of their income as tax than the wealthy.  

 Item 7 will result in the establishment of a moneyed aristocracy, something which is an anathema to a democracy. 

Repealing the minimum wage will create downward pressure on all wages, making the poor poorer, and impoverishing even those who now get by.  It shows the Texas Republicans to be parochial and shortsighted in their thinking, even with regards to their own fortunes.

They make the fallacy of composition.  They imagine that if they cut the expenses of their businesses, which, in one way or another are compensation to the people, they will make greater profit, and be richer.

But by cutting these expenses, they impoverish the people, and they destroy the market for the production of their own farms and factories, and render idle the foundation of their own fortunes. With the Texas strategy, they seek to impoverish everybody, themselves included. 

Putting Armed Guards in All the Schools is Nuts

Putting armed guards in all the schools is nuts.  There's like 100,000 public schools in the US, which, with (just) two guards apiece, at say $60,000 per year comes to $1.2 Billion.  This is a cold calculation, but this investment would have to stop the killing of about 300 people, children, valued at $4 Million a person, a child, each year to be worth the cost to the economy.  Note the phrase: "would have to stop the killing of."  Even with this security there is no guarantee of efficacy.  Besides, there's the school buses, too, which would have to be protected.  And then there are shopping malls, public parks, and all kinds of public events where people gather.  A society is simply a soft target, which is why societies have traditionally sought to fight their wars somewhere else besides their home turf.   

 The $4 Million figure is roughly the economic contribution made by a person to society (in the US) during his lifetime. Figure 150 Million people actually working in a $15 Trillion per year economy makes the average of each person’s contribution $100,000 per year. Figure 40 years effective working life, $4 Million total contribution.  The actual average contribution is probably a little less, (although one can argue also considerably more, as much of an individual’s contribution to society is not measured,) so even this overvalues the economic value of a life. This site gives a figure of $5 Million, depending:

 http://www.lifeslittlemysteries.com/2764-infographic-the-dollar-value-of-a-human-life.html. 

The EPA in 2010 said $9.1 Million as the value of a life, but that’s too much, and overvaluing life is as harmful as undervaluing it. If you spend too much money trying to save lives you don’t spend enough money living life.   Suppose you valued people’s lives at $1 Trillion dollars each.  Then you would spend that much money keeping each person from getting killed. But you’ve only got $15 Trillion to spend, so you could only keep 15 people per year from dying. You and everyone you knew would spend your entire labor insuring those 15 people didn't die. And then you wouldn’t have any money for anything else.  

About 2,500,000 people die each year in the US, and gun violence, especially when you subtract out gangs, is not more than a blip. Deaths due to medical error is about (at least, either about 100,000 or 200,000, depending on who you ask) 10 times as much, and one can argue that 'guns to protect people’s rights' is, like medicine, a necessity, despite the unfortunate statistics, for both the gun industry and medicine.

Homicide of all sorts came in at number 16 in leading causes of death in the entire population, in 2011, firearms accounting for 11,100 or so.  But... If you tease the data a little bit, homicide is 3rd or 4th leading cause of death up to age 34, comparable to suicide, ahead of cancer, and only clearly behind unintentional injury, (ie accidents, I suppose,) compared to which rate it is about a third.  This will get you to the site:
http://webappa.cdc.gov/sasweb/ncipc/leadcaus10_us.html  About 4/5ths of these homicides are gun related.  So for that age group at least, gun control advocates have an issue.

But I don't think it is worth the cost, given history and the culture.  Although I also think gun advocates are off a little, too.  Organization, not individual gun ownership, is necessary to protect against tyranny.  And here, for instance, the effective destruction of labor unions, which many gun owners favored, has removed one of the people’s great barriers to tyranny .  Militias?  As long as the government can concentrate force, and is the corrupted captive of Finance...

Also, there is a certain amount of hypocrisy behind the gun lobby’s proposal.  It is often the same people who argue against universal health care.  If they really valued those children’s lives, they would favor universal health care, since the denying of insurance is effectively a devaluing of life.  They propose to spend $40 Million per saved life due to gun violence, ( and expand the government’s police force by 200,000,) but they won’t spend the thousands per life, and save the many thousands of lives, to reduce the death rate of the not so well to do to one or another possible medical problem. 

Needs of Society

Society has its needs. Indeed, a society must meet these needs, before it can do things like protect itself and its members. In a viable society, its institutions must each produce more that they cost society. That is they each must produce more than they consume.

If the worker costs more than the value of what he produces, there is no point for the capitalist to hire him. Only if he is worth more to the capitalist than his cost, is it worth the capitalist employing him. It can be said that a worker must produce more than he consumes.

Just as the capitalist must take his profit from the worker, so must society take its profit from the capitalist. Only when the capitalist allows society to take its profit from him, is it worthwhile for the society to have him around. That is the capitalist entity must produce more than it consumes.

The capitalist may do this two ways. He may pay his employees enough that they can contribute to the tax base, that is, that society may take its profits off the employees, or he may allow society to take the taxes directly out of his own profits.

Society must take these profits, since otherwise it will fail. One way society does this is to have a strong enough government to take its profit from its producers. That is the government must be able to collect enough in taxes to sustain itself. If its government fails to do this, that society will fail.

Now one can say that since what a capitalist does is make and build, taxes, and a government, are unnecessary. But what is necessary is the commons, those goods and services which government secures, and often provides. The common welfare, the common capital, is what taxes support. A wealthy society seems to need a large commons, and seems to need a large and strong government to maintain it.

We think we have a strong government. It is not. It is weak. It cannot collect enough in taxes to support itself, and maintain the services and infrastructure(capital) it provides. It cannot convince its people, or its wealthy, that they should pay their taxes. It must borrow, a sign of weakness. Also, it is corrupt. It is captive to many special interests. This is a sign of weakness. It wastes its resources on things that are not needed, that may of themselves be wasteful. And it fails to do needed things. It fails to protect and preserve its commons. It fails to preserve and protect its tax base.

The people borrow to purchase things from foreign countries, things the producers of the country do not make for its people. Society cannot produce enough to exchange for the goods and services it imports. Also a sign of weakness, and of either sloth or misapplied effort.

There are those who do not want a strong government, or at least do not want to pay for one. They think that they will be able to wage war with a weak government. They think they will be able to defend their country with a weak government. They think they will be able to defend their industry with a weak government. They think they will be able to secure and maintain their wealth with a weak government, and a small commons.

They of course do not think of it these terms They merely resent the fact that society must take its profit from them, and therefore they take steps to avoid this. They try to minimize the amount they pay labor, so the government cannot collect sufficient tax from labor to maintain itself, and having corrupted the government, they manipulate the system so that they do not have to pay the necessary taxes out of their own profits. Since these taxes are both inevitable and essential to the maintenance of any society, and a fair amount of taxes for a modern society, they work the destruction of their own society.

From the point of view of society, of course, those who demand more than they contribute, and at no matter what scale, who refuse to let society take its profit off of themselves, are worse than useless.

This is all according to the principle that it is better to produce than consume. A society whose members produce and give to society more than they consume will become unimaginably wealthy, while a society whose members consume more than they produce will consume its capital, and become poor.

The wealthy set the pace. They lead both by deed and example. A society whose wealthy elevate consumption over production, who refuse to let society take its profit off of them and instead insist of taking their profits off of society, is not viable, and will destroy itself. It will consume its capital and become poor, its institutions collapsing.

Leaders are leaders not because of what they take, but because of what they give.

On Rights

These truths are self-evident:

All rights are the creation of men. It is the desire of men to have rights, which creates rights. Rights derive from the relations between men, and the resources available to men. Men give rights, so that they may have them. They are property, which each man possesses to one degree or another. Rights have value. The value of a right is not its formality, but its effect. Each man values each right, to one degree or another, according to its effect on his life.

All rights are by the consent of others. Since the consent of others is always contingent, no right can be absolute or inalienable.

Each society has available to it, even where it extracts rights from other societies, only so many rights to distribute among its members. A society with more resources has the potential for more rights. It may have less.

Each right that a person has is a limitation on the rights of others. Each right is a burden on others.

Rights incur responsibilities. The failure to meet those responsibilities is a cause tor the alienation of those rights. The first responsibility is the granting of rights to others. The second responsibility is their enforcement. The third responsibility is mercy. Since the responsibility of rights represents a burden, the fourth responsibility is the minimization of that burden, given the maximization of those rights, given the resources available. The fifth responsibility is the education to those rights, and their responsibilities, and their burden.

The people of a society grant rights for their own benefit. Rights are granted where the effective benefit of those rights is greater than the real burden of the responsibilities. Where the people benefit less than the burden, those rights will be discarded.

The people of a society develop institutions for securing their rights. These institutions formalize the granting of rights, and their enforcement. These institutions are themselves granted rights, to the benefit of and at the expense of the people. Such institutions necessarily also increase the rights of a few. To such degree as they use force, or are inefficient, they reduce the rights available to the people and increase the burden of those rights.

In a society, there is a natural distribution of rights, which depends on the resources available to that society, demanding the least force and incurring the least inefficiency, which maximizes the value of rights available to the people. The institutions chosen by the people need not guarantee that distribution, and indeed may be chosen to impose distributions of rights different from this natural distribution. The additional expense, the loss of rights to a society, will be more than proportional to the deviation from the natural distribution.

So by consent, the members of a society may make certain rights universal, and held in equal quantity by all, and inalienable except for failure to meet the incurred responsibilities. These certain rights then represent a form of property which cannot be bought or sold. A society may consent to this, at the expense of other rights, that the few more fortunate of more able, shall not otherwise acquire those certain rights of the many less fortunate or less able.

And by consent a society may make certain rights held by a few, who incur greater responsibilities. It may assign these rights, and those responsibilities, to the few, in
various manners. These certain rights then represent a form of property, which may also be bought and sold. A society may consent to this, at the expense of other rights, if the many choose to not effectively exercise themselves those responsibilities these rights incur.

Properties are rights, and by the consent of others. Therefore, no property is absolute or inalienable. Others consent to properties, so that they may also have properties. Those who consent to have less, do so in the expectation that they may attain more, either in the present, or in the future. Since properties are rights, those with more properties have more rights than those who have fewer. Those with more properties also impose greater burdens on their society, and incur greater responsibilities. Since there is a natural distribution, those with more properties may impose a disproportionately large burden of their society, and incur disproportionately greater responsibilities.

There will always be those with many rights. There will always be those with few. When those with few are many, and those with many few, a society is poor.

Where many rights are narrowly held, where the many have few, either the few exercise their responsibilities, and impose the lesser burden on society, or they impose the greater burden of society, and the consent of the many is obtained and maintained through fraud and excess force. The many may either shake off their burden, or succumb to it. The resources taken to enforce fraud and excess force take away from the rights available to society.

That distribution of rights which maximizes the value of rights, and minimizes fraud and force, is most just, and most merciful.

Subject to revision.