How will ending the income tax help the poor?
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Question:
I was unable to persuade a liberal friend that the income tax is evil because it is essentially forced labor through coercion, or that we could largely pay for the elimination of the income tax simply by halting our overseas empire (it seemed best to use a liberal priority in this instance). He maintained that eliminating the income tax would benefit only the wealthy. Could you help me show that eliminating the income tax is in everyone’s best interest?
Answer:
Ultimately, the poor are hurt most by income taxes and government spending of any kind.
When government spends, it must tax or run a deficit. Both harm the poor. Deficit spending results in inflation. People on a fixed income, low income, or no income at all are hurt most by inflation. The little money that they have buys even less than before.
When government taxes middle or upper income individuals, money is diverted from consumer spending, spending which otherwise would create jobs that might lift some of the poor out of poverty.
Instead, the tax dollars go to government spending, which delivers half the service at twice the price of the private sector. Gross domestic product (GDP), a measure of wealth creation, goes down as government spending goes up (for details, see Chapter 12 of my book, “Healing Our World,” available as a free download [1992 edition] at www.ruwart.com or [greatly expanded and footnoted 2003 edition] for purchase from The Advocates).
Less wealth creation means that goods and services are more expensive than they otherwise would be. The poor are hurt the most when prices rise or do not fall as they otherwise would.
Thus, when government spends, GDP falls and inflation grows, middle and high income individuals cut back on discretionary spending, like vacations; the poor, however, must cut back on necessities, such as food, safe housing, and preventative medicine.
On the other hand, when government spending slows, inflation slows too and jobs increase. Some of the poor move into the workforce and become more affluent.
Income taxes are bad for everyone, but the poor are hurt the most. The hidden negatives are often overlooked, and those who are trying to help the poor often hurt them out of ignorance.
QUESTION: I am a homeowner in a low-income neighborhood. I work hard to keep my property up, and my yard is beautiful. I am enraged by people who leave tires and garbage cans in front of their houses, don’t cut the grass, and scatter their garbage all over the street. They do not have the right to denigrate my quality of life.
QUESTION: I am concerned about the problem of blackmail. Some libertarians, as you recently discussed, consider blackmail simply an economic interaction involving the exchange of information that, however distasteful, does not involve direct use of force against others, and therefore should be legal. However, I am hard pressed to think of any instance of blackmail where no one is being harmed. As libertarians shouldn’t we base our actions upon sober observation of what is actually happening in a given situation, not on some abstract concept of free speech?
protection of children within the home. I’m struggling a little to find a happy medium between a total “hands off” approach that would balance my rights, as homeowner, to leave big nasty kitchen knives lying around, electrical sockets exposed with metal objects stuck in them, big holes in the ground, staircases with boards missing, etc. (I know some of those are silly/extreme examples but legislation typically makes no distinction between the sensible and the surreal), with the rights of children in the house.
QUESTION: If you free big businesses from government regulations, how do you keep these same businesses from becoming an aristocracy and turning America into a feudal state?
principle.
In a libertarian society, laws enforcing segregation could never have been passed in the first place. Slavery would never have been legal. In short, if the U.S. had been a totally libertarian society, Africans would never have been enslaved and given second-class status. Government creates conditions that foster racial prejudice, then creates backlash and further prejudice by forcing people together.
MY SHORT ANSWER: Each libertarian might answer this differently, so I can only give you my personal favorites. If I could magically change our government ten ways, I would end all taxation (1), confiscation (2), and eminent domain (3), effectively cutting off the government’s revenue. The borrowing powers of the government would be rescinded to prevent it from deficit spending in retaliation (4). Any outstanding obligations would be retired (5), as much as possible, from sales of government property (including about 42% of our country’s land mass).
