The Objectivist Sales Tax

Ted, with those taxes you propose, we could eliminate all other taxation in its entirety. The downside is that there are economic consequences to taxing some people sums in excess of their entire income, and we would have a massive expansion in the size of government due to the sudden influx of cash. Plus it would be a de facto abrogation of the First Amendment rights for much of the populace, as they would be forced to duct-tape their mouths shut and smash their computer keyboards. ;)

Post 21

Friday, July 25, 2008 - 6:19pm

It seems to me that most of these schemes still assume that the general public will recognize and make rational choices about voluntarily paying. That is a HUGE assumption, and - I think - quite invalid.

Making rules that simply expect everyone to behave rationally, is only sowing the seeds for disaster.

Voluntary fees, the paying of which will insure coverage under the legal system, are both fair and logical. Taxes, for the same purpose, are pragmatic.

This discussion is a second area where Objectivism runs into difficulties when dealing with societies or governmental issues. Objectivism needs to be able to provide more refined answers, that are consistent with how societies (here better defined as groups of individuals) actually behave. The pragmatic view is not necessarily indicated, but a practical view is essential.

jt

Post 22

Friday, July 25, 2008 - 9:13pm

Jay:

It seems to me that most of these schemes still assume that the general public will recognize and make rational choices about voluntarily paying. That is a HUGE assumption, and - I think - quite invalid.

Two things:

1) Most schemes, like health care, insurance, transportation, housing are paid for voluntary by people acting rationally in their interests. How do you reconcile this apparent "rationality" in almost all areas of life except for this one instance where all of a sudden people will abandon all prior conceptions of what is in their own best interests?

2) Why do you assume the government acts more rationally on behalf of yours or my interests above yours or my judgment? What gives them the right?

Post 23

Friday, July 25, 2008 - 11:12pm

Michael,

You said,

If natural law requires that government provide courts, police, and army, then, government must provide them. That means that the courts must exist and be in place and that they be available for citizens (and non-citizens) for conflict resolution between private parites, as well as for law enforcement, in addition to redress of grievances by citizens (and non-citizens?) against the government.

I know of NO natural law like you are talking about. I know of natural rights - ethical rights - and I know of the man made laws that are or could be created to define and protect those rights. There is, therefore, no natural requirement, but instead a logical requirement that we choose the most reasonable implementation - if we choose to honor individual rights.

You said,

So, if my dog digs up your roses, you can sue me. According to the theory proposed by Rand and Machan, there would be some question as to whether or not you could sue me if my dog destroyed your roses. Is there a contract? Who paid the court fees?

There probably isn't a contract in today's society (unless there is a clause that exists in a homeowners agreement that you are both party to, and that clause can be construed to cover damage by pets - that would grant a meeting of the minds).

First, let me point out, that under the Rand's proposed system, society would modify how they structure many different arrangements to ensure that things like that would be covered.

Second, financing the courts through the contract's optional insurance clause was not, by Rand anyway, intended to finance only contract disputes. It could cover appeals of civil cases, administrative costs of the civil court, it could cover the cost of torts. It could cover all civil court costs. And it would not preclude, as others have pointed out, that tort costs could be born by the losing party as an additional source of support for the civil courts.

You say,

That contradicts the expectation that under natural law, an objectively constituted government provides courts of law.

Again, there is no such thing as natural law as you are describing it. What the Objectivists are doing is finding the best method for supporting a society where individual rights are best supported (which includes looking at methods for taking optional services and attaching a fee to support them.)

Your attack on having a set of laws that support individual rights is usually more subtle and more eloquent than this post. Our economy is staggering along, barely, under the horrendous load of current government costs. But you want us to believe that you are all worked up over the costs of a minimal government, while implying that protecting individual rights is somehow to be construed as an unwarranted entitlement violating Objectivism's key tenents. Give me a break!

The cost of a minimal government is tiny - the cost of anarchy would be beyond measurement because of the blood, because of the loss of the free marketplace that can only exist with a common set of laws that define individual rights (and the courts that those laws logically require), and because of the loss of achievements and happiness that could and would have been.

It is anarchy that we can't afford.

Post 24

Saturday, July 26, 2008 - 12:34pm

Jay:

Making rules that simply expect everyone to behave rationally, is only sowing the seeds for disaster.

If you will re-read what I have written about voluntary taxes being made public I think you'll realize that I don't expect that everyone would participate, but there would be repercussions if they didn't. That social pressure wouldn't violate any of their individual right of security of their person.

So what if everyone didn't participate? This is just another lock-step conformity issue. A person has a right to not act rationally as long as they don't hurt others � people do it all the time, but I don't recommend it.

Sam

Post 25

Monday, August 11, 2008 - 3:16pm

John,

Your post #22.

1) How about police, courts, government administration, raising armies? These are the ones people will be inclined to short on needed revenues. What conceptions do you think the average person has of these?

2) I made no such statement. In fact, I am not comfortable with how well government makes many decisions - one reason I would like to see government more restricted (regulations can cut both ways, you see, but that's another thread).

jt

Post 26

Monday, August 11, 2008 - 3:22pm

Jay:

1) How about police, courts, government administration, raising armies? These are the ones people will be inclined to short on needed revenues.

Why would they be inclined to be short on revenues?

2) I made no such statement. In fact, I am not comfortable with how well government makes many decisions - one reason I would like to see government more restricted

But you still want them to make decisions for you, in a restricted sense (are they unrestricted now?). So why the need for the government to make decisions for you?

Post 27

Monday, August 11, 2008 - 8:45pm

John,

I meant that people would be less inclined to voluntarily pay into funds for those particular purposes. Thus those accounts would be shorted on receiving sufficient funds. We can call it human nature. We can call it irrational. Whatever we care to call it though, people do not generally warm to those government agencies as well as to the others you mentioned.

"want them to make decisions?" Realistically, I don't have that choice. They're making decisions whether I like it or not. I can voice my opinion, and I can cast my vote for a candidate that most closely mirrors my views (if one ever shows up), but I don't get to personally make those decisions anyhow. Government makes them. We could, of course, try to promote anarchy, but that's obviously not an answer either. Government has a job to do, which includes making decisions, and it is therefore best that we do restrict them to making responsible (rational, objective) laws and regulations.

jt

Post 28

Thursday, August 21, 2008 - 9:11am

What about taxing the trade between businesses? While businesses are composed of individuals they act like an entity unto themselves and are therefore not bound by the rights provided in the constitution.

Rights pertain to people and the government many not tax in any way. In this way all people are free to do whatever they wish with what they produce and can dispense with it as they see fit. It is only when individuals form groups that the issue of government taxation arises - and this only applies to the trade between those groups.

Post 29

Thursday, August 21, 2008 - 10:11am

Tim,

Businesses are the property of people, along with their assets, which are what the government would be going after. Still a violation of individual rights.

Post 30

Thursday, August 21, 2008 - 11:06pm

Jay, your discussions of pragmatism remind me of the evil characters in Atlas Shrugged, so be careful. I like Sam's plan but I feel it doesn't take into account one key factor: when you come to the United States, you are choosing to live here. Now, I know this isn't true anymore, but all our musings could come in handy for a future moon colony, so hear me out. The cost of enforcing defense and security is of course a time dependent *service*. As such, there should be a *use fee* for land. Thus, you are charging people for the good you are providing (as a government). Also, this system does not impose economic dis-incentives on business transactions as Ted's system might (if I understand what he recommends correctly). And I'm not so sure that shaming people into paying is a good incentive.

To restate it in a hypothetical, the government of the moon, henceforth dubbed "X", owns all possible land. I want to move to the moon, so I buy a small piece of X's property. However, X still has jurisdiction over the property and *monopoly on the use of force* (the only thing an Objectivist government really has), so while I technically have *bought* my property, I still have to pay X for the *service* of protection.

Now you may ask how X determines how much to charge. Ideally, all countries would adopt this system and you would have competition between countries to offer the best security for the best price on the best land. Of course, beachfront property is far more expensive for the view, and I imagine the moon would be the same. Thus the voluntary part is choosing /where/ you live, and thus you have the choice of what lifestyle you wish to lead without affecting others.

In terms of civil disputes, Ted's caveat emptor is a great reminder. For important contracts, X will provide contract insurance *for those who want it*. Anyone with a dispute can then bring that insurance card to X on a per-transaction basis to have a decision made by a professional judge who makes a living on those contracts. After being licensed by X, judges may set their fees. Good judges will sell insurance much more easily than bad ones (again, a market system). X will then enforce the judges decision on pain of necessary force.

Post 31

Friday, August 22, 2008 - 10:25am

Steve - I don't mean the government can take or tax the product. The government can't tax the property on which the business sits or tax any other part of a business - just the transaction between businesses.

Post 32

Friday, August 22, 2008 - 1:27pm

Tim,

I wasn't very clear. What I meant to say was that the money that the government takes out of that transaction belongs to the business at the time they take it. The business will have to adjust in some way and all of the ways that are available have consequences.

It becomes a cost of doing business. When that tax is first introduced it will put things out of equilibrium and different businesses will adjust in different ways. Most businesses will raise their prices to customers and that will mean a some decrease in volume. So the owner pays some of the price and the customers pay some. And if the decrease in volume is enough it will result in layoffs and the employees will also pay.

Or the owner accepts a smaller profit (that will only be the choice where some competitive alternative makes it impossible to raise prices without driving customers away). Overall, this decreases the profitability in that industry which will result in less capital going to that industry and that will result in diminished supply over time. Owners take a loss, employees see layoffs, and the industry starts being less able to survive.

Or the business might try to maintain the same margin of profitability by either cutting quality somewhere (if it reduces business costs) but that will diminish value to the customer and will result in lowered demand, and that will take money away from the owners.

Or the business might lower costs, by lowering wages or laying off workers. This will diminish quality and will reduce demand. These will both end up costing the business, customer and employees.

Bill Buckley used to call ALL taxes on business 'Boob Taxes' because, he said, only a boob thinks that businesses pay taxes, they only collect them from the customers and pass them on.

Post 33

Sunday, August 24, 2008 - 9:07pm

Ben,

urQ "Good judges will sell insurance much more easily than bad ones (again, a market system)."

Unfortunately, I do not believe this to be a reliable conclusion. Given that not all individuals in a society will act in rational self interest, bad judges (those willing to show favoritism) in that scenario could well be more popular. Don't think you'd want the judges tied to any particular insurance seller.

jt

Post 34

Sunday, August 24, 2008 - 9:39pm

Ben, I'm not sure how my notion that one must pay a one time fee to establish or transfer land title (with certain exemptions) amounts to a disincentive, other than in the most broad sense, and only for unnecessary land transfers. Being a unique and limited commodity, I doubt my plan would have dire consequences.

In any case, welcome, and please fill out your user profile.

Post 35

Thursday, August 28, 2008 - 9:30am

Steve
I wasn't very clear. What I meant to say was that the money that the government takes out of that transaction belongs to the business at the time they take it. The business will have to adjust in some way and all of the ways that are available have consequences.

I agree - there are going to be some effects in taxing a sale from one business to the next. However, the question in my mind is "Is it ethical for the government to tax a business."

Here is my thinking. Rights are rights of people - not of businesses. A business is a group of people and what they produce as individuals is THEIRS because they produced it. When a business decides to sell or buy product from another business its not individuals who are doing the buying and selling - its the business. (The computer I use at work is the "company machine.") Hence, the product of company "X" is not my product, his product, her product at the point of sale - it is company product. Because it is company product - and companies don't have rights by definition - a government, if it chooses to do so, may enforce a tax on the exchange of product. - It violates no ethical principle.

Post 36

Thursday, August 28, 2008 - 9:51am

A company is a fiction, it consists of nothing more than individuals and their acts. All company property belongs, in the end, to individuals. If a company is liquidated, its assets ultimately become individual property. To assert that because ownership is indirect that in effect it doesn't exist is perceptual level thinking.

Post 37

Thursday, August 28, 2008 - 10:01am

Are we talking just real estate property here, or are we also talking general sales tax. I'll admit I would not care for businesses to have to pay sales tax on commercial (as opposed to retail) sales. Goods would be taxed several times before reaching the consumer.

jt

Post 38

Thursday, August 28, 2008 - 5:22pm

Tim, you said, "Because it is company product - and companies don't have rights by definition - a government, if it chooses to do so, may enforce a tax on the exchange of product. - It violates no ethical principle."

Every company is the property of individuals - corporations have stock holders, who are individuals, and they are the owners. Other businesses are single proprietorships or partnerships - again, owned by individuals. Even not-for-profit organizations are owned by individuals. Only governmental organizations are not owned by individuals.

So, EVERY tax on a business ends up getting paid by INDIVIDUALS - and there are some significant differences: 1) the tax is, to a degree, hidden - as an added cost of a product, or a change import/export ratios (people start buying from another country), or unemployment, or some combination. 2) Like Jay mentioned, the tax law causes some taxes to result in double taxation.

It is always better to tax individuals rather than businesses, since the tax pain should felt by the tax payer directly and it should never be hidden.

Post 39

Saturday, December 20, 2008 - 5:35pm