How much taxes should you pay? How should you pay them? The answer depends on who you ask.
Most right-wingers believe that taxes should be around 25% to 33% at the most, and that everyone, regardless of income, should pay more or less the same tax rate.
Most left-wingers believe that taxes should be decently high, as in 40%, 50%, even 70% or 80% in some cases, and that you should have as many types of taxes as you can possibly get away with. Left-wingers in Europe, particularly in Scandinavia, want taxes high on pretty much everyone. Left-wingers in America instead tend to like taxes on a sliding scale, with moderate taxes on the poor and middle class, with rates increasing as you make more money, ending with sky-high taxes on the rich.
That covers both types of people who are uncomfortable with personal freedom, but how would taxes work in an actual free society?
If you’re an anarchist, you believe tax rates should be zero, since there should be no government at all. I am not an anarchist. I think that like communism, true anarchy is a utopian concept that sounds great on paper but would not work in the real world populated by real human beings. If you magically eliminated all governments right now, by tomorrow morning people would start gathering together to form little governments all over again.
Sadly, human beings like government. So while I philosophically agree with anarcho-capitalism, I am instead a libertarian minarchist, meaning that I accept we need government, BUT, we need to do our very best to make sure it stays small, local, and decentralized. Therefore, government should indeed cover a few basics like cops, an army, courts, roads, a patent office, and three or four other basic items, and that’s it. Everything else would be handled by the free market and nonprofit organizations. That’s as free as you’re going to get within the real world, and since free is a good thing, let’s discuss how taxes would work under a realistically free society.
First off, there would be no income tax, no property taxes, and no corporate tax. Why? Because income and property taxes are theft, and theft is wrong. A third party called “government” pulling out a gun and going into your paycheck to rip money out of there without your permission is theft. Your money is your property. No one has the right to take your property away without your permission, and if they do, that’s stealing.
If your knee-jerk response is “You used the pubic commons like roads and stuff to make that money, so the government has a right to take some of your money!”, then just hold on, I’ll cover that in a minute.
The other problem with income tax is that it requires you to file a tax return every year, telling the government how much money you made, how, and from whom. How much money you earn isn’t any of the government’s business. Forcing you to file tax returns is a massive violation of personal privacy.
Property tax is also theft, since you already paid the taxes on the money you used to purchase your property. You made your money, paid taxes on it, used that money to buy a house, and then the government comes in and taxes you again(!), every year(!), on the house you already paid taxes on(!). WTF? If you don’t pay these repeated taxes, the government sends guys with guns to your house and takes your house away from you. Obviously, all of this is blatant extortion and theft, immoral in the extreme, and no better than the mafia.
Corporate tax is the exact same thing as an income tax, and therefore it is wrong and would not be allowed in a free society. Many will argue that since corporations are not people, they could and should be taxed. The reason for this thinking is the modern-day hatred of the word “corporation.” When people hear that word, they envision some gigantic, “evil” company like Comcast or Wal-Mart. The problem is that the vast majority of corporations, over 80%, are small businesses, often owned and operated by one, lone hard-working entrepreneur, who is creating products, services, goods, tax revenue, market demand, and jobs for the economy. If you eliminate the income tax but then enact a “corporate tax” on this person, you’re doing literally the exact same thing as an income tax. You’re just calling it by a different name.
(If you’re wondering about capital gains taxes, that’s simply another form of income tax.)
So under a free society, there are no income taxes, property taxes, or corporate taxes whatsoever. How does the government get its money then? We need roads don’t we? Well, fortunately there are other kinds of taxes besides income and property that are not theft and don’t require you to file a tax return. Here are a few types that would be perfectly acceptable under a free society.
Sales Tax or VAT Tax – This means you pay a tax on things you buy at point of purchase. This is not theft, since if you don’t want to pay the tax (or less of it), you would simply refuse to buy things, or buy less things, or buy things of lower cost, or buy things that have no sales tax. In other words, the tax is largely voluntary. It’s true that’s not completely voluntary; you could probably never get your sales tax to absolute zero, and in that respect you may argue that it’s then theft also. It’s a grey area but you get my point. No force is used on the consumer for its collection.
Tariffs – This is a tax other countries pay in order to sell you stuff. This would be perfectly acceptable to have in a free society, since you’re not the one directly paying it. Having high tariffs is not a good idea for a free country, and that leads into a very big and complicated debate about free trade vs. fair trade, which I won’t discuss today. My point here is that paying, for example, a 2% tariff on imported goods would be a perfectly acceptable tax to have in a free society.
Poll Tax or Head Tax – This means you pay a small tax when you go to vote. If you don’t want to pay the tax, don’t vote. While this type of tax may make some left-wingers uncomfortable, it’s a perfectly acceptable tax to have in a free society as long as it was small and thus payable by anyone at any economic level.
Excise Tax – This means the manufacturer of product or good pays a tax based on how much they produce or sell. The company then passes the cost of this tax onto you. In a way, it’s sort of a hidden sales tax. Excise taxes were one of the few taxes the US Constitution allowed. Excise tax is another grey area. It’s a little too close to a corporate tax, so it’s not exactly something you’d want in a free society. However it might be acceptable in lieu of other tax types listed above.
Usage Fees – This is the absolute best way to tax a population. You charge people a small fee for using a particular item or service. If they don’t use it, they don’t get taxed. Only the people consuming that item are the ones who pay for it. It’s by far the most fair way to tax the citizenry.
You’re already familiar with parking fees and bridge tolls. In many cities, like San Francisco, drivers have a small device that automatically bills them whenever they drive over certain roads or bridges. That’s a fantastic, fair, and honest way to tax people.
In a truly free society, this would be taken a step further. Since there would be no income tax, corporate tax, or property tax, the city you lived in would send you a bill once a month. Let’s call it a “city bill.” On that bill, it would itemize all the local services the city was responsible for maintaining that you were using. Your monthly city bill might look something like this:
Police Protection: $22.24
Local Roads: $9.73
Local Parks: $4.32
Sanitation Services: $2.42
Total Due: $50.44
Things like fire protection and ambulance services wouldn’t be on there, since those functions would be covered by insurance companies. Education wouldn’t be on there since that would be more than adequately handled by local religious organizations, nonprofits, and the free market.
You could also remove certain items from your city bill by opting out of particular services. For example, you could opt out of your local library. You could then not use the library for any reason, but you wouldn’t be charged for it any more. The same would apply to parks and the like. With today’s technology, this would be very easy to do.
You probably could not opt out of things like police protection, but every city would make their own judgements about that, based on the will of their local voters. Emphasis on the world “local.” People in San Francisco could vote on how to run San Francisco, but they would have no say whatsoever on how to run Miami.
Attached to the bill would be a monthly budget of exactly how much money your city was collecting in taxes, and how much it was spending, and on where. It would be as transparent as possible.
If you didn’t like what you were being charged for, or what your city was spending its money on, and your voting just didn’t cut it, then you’d move to a different city. All cities and towns would have their budgets published online so you could pick out the exact city you’d like the best. Cities would compete against each other for the best lifestyle for the lowest cost.
You’d pay your city bill just like you’d pay your electric bill. No one would be putting a gun to your head and pulling money out of your paycheck without your permission, nor forcing you to file a tax return, nor forcing you to pay taxes on something you purchased that you already paid taxes for.
What if you didn’t pay your city bill? It would be the same as if you didn’t pay any utility bill like your electric bill. You’d get several nasty warnings, then you wouldn’t be allowed to drive on roads, then you’d get sued or worse. You’d better pay your city bill, or you’d be in big trouble, again, just like any other utlitiy bill.
How It All Ties Together
In a free society, since government would be doing so little, it wouldn’t need to tax you very much. If all the government was doing was providing basic services as I listed above, then you could easily have a federal government that was completely funded with a 2% national sales tax, a 2% or 3% tariff on imported goods, and a $10 poll tax whenever you went to vote. Your local city would be covered by your monthly city bill. That’s it. No other taxes needed.
If the United States had that tax system with those percentages, the federal government would receive around $500 billion every year; more than enough to support a limited, constitutional government. Cities all over the nation would be funded from their usage fees. Ideally, there would be no state government system; just a federal government and cities, since things like “provinces,” “states,” and “counties” are just more useless layers of government (but that’s a conversation for another time).
Even if you feel those percentages are too low, you could easily double them without much trouble. Have 4% national sales tax and a 6% tariff on imported goods. The government gets double the money, around 1$ trillion a year. Moreover, there would still be no one paying any income taxes, capital gains taxes, corporate taxes, or property taxes, so the economy would boom. A booming economy means even more money for government. Everyone wins, except for people like left-wingers or neocons who love big government. But hey, the world is a very big place. Left-wingers are always welcome to move to Sweden whenever they want, and those warmongering neocons can always move to Russia.
Then everyone gets what they want! Now that’s freedom!