How to Reduce Taxes
JULY 01, 1960 by LEONARD E. READ
The cuneiform signs, as shown above, are copied from a clay cone now on display at The Louvre. The cone was excavated by the French at the site of ancient Lagash, a prehistoric city located in Mesopotamia. The messages on the cone were etched with a reed stylus on soft clay during the third millennium B.C.¹
While the experts on Sumerian civilization may not agree precisely in their interpretations, the consensus is that the above three signs mean "freedom from taxes." There are two features to observe about these ideograms. First, the word "freedom" here puts in its earliest written appearance. Second, is the remarkable clarity used to depict "taxes." These Sumerians expressed in a symbol the nature of governmental "take" better than we express the process in our modern languages. Note its barb or fishhook or harpoon characteristics, suggesting, so very clearly, that this instrument is one which can be thrust into, but hardly retrieved from whatever it penetrates. The nature of taxation thus revealed itself at the very dawn of history, and experience confirms this early disclosure: Taxes are easy to increase but almost impossible to decrease.
We need not go beyond the experiences of our own country in this century to verify the one-way tendency of our taxes. They continue to penetrate inexorably deeper, always advancing, never receding. Look at the record: The population of the U.S.A. increased from 76 million in 1900 to 174 million in 1958 while government expenditures per person (in terms of 1947-49 dollars) rose from $56 in 1900 to $580 in 1958, a more than tenfold expansion of governmental assessments per person—man, woman, and child.
Spending and Inflation
Where is the end of all this? If the trend of the past few decades be projected into the future—the near future even—the prospect is that of a once great economy flying to pieces. The expenditures of government (now equal to 35 per cent of the peoples’ earned income) have long since passed the point where they can be met by direct tax levies. Inflation—increasing the volume of money—is then resorted to. This reduces the value of the monetary unit. Serious in our country? The dollar has lost 52 per cent of its purchasing value since 1939!
Historically, in most instances, governments resort to inflation when the collection by government reaches 20 to 25 per cent of the country’s earned income.2 As a rule this is the level beyond which direct tax levies become politically inexpedient. Inflation, therefore, becomes the only alternative means of financing excessive expenditures. And the more over expanded the government, the more the inflation!
Inflation in the U.S.A., however, is more dangerous than in other countries and for a simple reason: We are more specialized than other people are or ever have been. We are so specialized that all of us are dependent upon the exchange of our numerous specializations. In a highly specialized economy such as ours, the exchanges are not by barter; a circulating medium of exchange is required. This is money’s most important function.
Inflation, let it be repeated, is a politically engineered increase in money volume. This thins or dilutes the circulating medium. The medium can, assuming a continuation of inflation, become so thin that it will lose all of its circulating power. This is what happened in
War I when 30 million marks would not purchase a loaf of bread. The purpose of this paper, however, is not to point out the dangers of government in an ever-expanding role with its ever-increasing costs, and the ultimate consequence of this course—inflation. These threats are well known to all individuals who are likely to be of any help in slowing down and eventually reversing present trends. Not as well known is the fact that a mere rehashing of these threats, coupled with scoldings and exhortations, will not turn the tide. People simply are not frightened away from collectivism by statistical or mathematical or materialistic arguments which show the expansion of government, the rise of the debt, the bite of taxation, the erosion of the dollar, the extent of inflation, and so on.
The Moral Case for Freedom
The purpose of this paper, therefore, is (1) to suggest that arguments on behalf of freedom, when confined to the materialistic—which too often they are—account in part for the seemingly irreversible one-way direction of the taxing process and (2) to draw attention to the moral arguments that must be perfected and presented if any change is to be brought about.
Omitting the enormous activities and costs related to the "cold war,"3 government’s expansion in the U.S.A.—and elsewhere, for that matter—is a growth in socialism. It is an increasing practice of the collectivistic concept—the notion that the individual exists for the group, by the group’s permission, and for the group’s sake.
This concept denies the Creator and substitutes therefore the omnipotent State as the source of man’s rights and the dispenser of privileges. State supervision of welfare and prosperity is substituted for personal responsibility. The State takes from and gives to, as its political hierarchy sees fit. The Marxian ideal, "from each according to ability, to each according to need," is, quite consistently, part and parcel of the collectivistic doctrine. Ignored is the idea that government is for the purpose of securing the inalienable rights of man. It cannot be otherwise, for the State, not the Creator, is the ultimate sovereign—according to collectivism.
Examples of this from-each-according-to-ability – to-each-according-to-need thesis are the progressive income tax, TVA, government mail delivery, government housing, compulsory social security, subsidies to farmers, protections against competition, federal aid to education, and so on. A specific example would be a federal grant for a local hospital.
Taking this specific example, the people who seek federal aid for their local hospital present a united front. They achieve a political unanimity, a wholeness, and their demands come through clear and loud. Once the hospital is built it stands as tangible evidence of an "accomplishment," a monumental testimony to the "wisdom" of its sponsors. The good it does is visible. It can be photographed and publicized as a concrete instance of community welfare.
Pennies or Principles?
Now this federal grant-in-aid means of local achievement does have some opponents. An observant taxpayer who resides in
Opponents of socialism who argue only materialistically would be well advised to add the moral argument.4 As distinguished from socialism’s proponents, with their united front, they are a splintered and fragmented lot. It is next to impossible for them to unite on materialistic terms.5 The financial injuries done to them are not alike in any two instances, nor do the injuries, imposed in dribbles, greatly excite the victims. The damage is done more or less unobserved. Nor can these material injuries be photographed, or dramatized with any persuasiveness. Invisible, material erosions of an individual’s larder are no match for the huge government dam or the new, merciful, thousand-bed hospital. This is a one-sided contest between the seen and the unseen, with the things seen considered real while the unseen is dismissed as imaginary.
Supplying groups of the population with government pap as quickly destroys their capacity to "fend for themselves as does the hand-feeding of squirrels. Men, as well as animals tend to regard any coddling as a right. Simply reflect on any of the thousands of special privileges granted by government, of more than a year’s duration, and see if one can be discovered that is not already regarded as a right. How can it be otherwise if the collectivistic notion is accepted that government is the grantor of rights as well as the dispenser of privileges? The opponents of socialism are on weak ground if they rely on materialistic arguments against those who believe in their privileges as rights. The socialists bring "human rights" to their side; the adversaries only complain about pilfered pennies and dimes.
A Moral Reorientation
Over the past fourteen years I have lectured at scores of meetings before audiences of nearly every type. In most of these lectures, I have expressed in materialistic terms the course our country is now on, and my conclusions—also in materialistic terms—have been actually frightening. Never once have my facts, the documentation, or the conclusions been challenged. Yet, in all these years, I have never witnessed a single individual who was moved away from his collectivistic notions by reason of a fear of what the future held for him materialistically.6 The collectivist, communist, socialist, state interventionist—call him what you will—merely responds, in effect: "I will suffer any indignity for my faith!"
However, during these years, I have noted countless individuals who have made the ideological switch from collectivism to freedom. In every case, where diagnosis has been possible, the individual made the switch because he had grasped, for the first time in his life, the right and wrong of it all. The experience was a moral reorientation!
The materialistic argument has only the force of shouting, "Fire!" or "Man overboard!" It can compel attention. And there, it seems, its usefulness ends. If, after getting attention, one cannot advance the moral argument, he may only add to the state of confusion—like not being able to point out where the exits are, or not knowing how to conduct a rescue operation.
Adherence to Principle
It is only in the moral realm that socialism’s antagonists—freedom’s devotees—can find any common ground for concerted or unified effort. Where we can make no impression at all over the personal loss of 30 cents, or any multiplication of small change, we can win agreement on the point that there is no difference in principle between the forcible extortion of 30 cents and the forcible extortion of one million dollars. One is misappropriation as well as the other. The distinction is one of degree, not of kind. To violate the principle, even minutely, is to compromise the amount but not the principle. The principle is surrendered, regardless of amount. To forswear allegiance to honesty and integrity—the principle here at issue—is to destroy the moral underpinnings without which no good society can endure.
Legalizing the forcible extortion of the citizens’ resources does not alter the morality of the act. It merely absolves the offender of his crime—in the eyes of the legal apparatus! Not in the eyes of one’s Maker! Absolution by the State has meaning only if it be conceded that man’s rights to life and liberty are endowments of the State, that is, are endowments of those quite ordinary human beings who succeed in attaining political office. That these people are the source of rights is no more valid than the divine-right-of – kings thesis. It is only the modern way of rendering an old world fallacy.
Once we accept the only alternative to state omnipotence, namely, that man is endowed by his Creator with certain inalienable rights, we cannot, logically, grant to government any powers which do not pre-exist in the individuals who organize it. These rights of the individual in relation to others, when viewed personally, are fairly clear and need little in the way of elaboration.
No sane farmer, in his capacity as an individual, would dream of forcibly collecting from all citizens a sum of money as payment for not growing wheat. No respected resident of
Moral standards for individuals, fairly well established by all the world’s moral and ethical systems, find no reasonable sanction for modification by individuals acting concertedly, whether organized as governments or labor unions or trade associations. No new rights come into existence by collectivizing two persons or a million of them. If this is not a correct conclusion, then, pray tell, what is the magic number at which new rights originate?
The above is only suggestive. It has been set forth merely to stake out the area in which each of us should strive for perfection. For it is only in moral philosophy—the study of right and wrong, a qualitative discipline—that the case for freedom and the rights of man can be won. Short of a growing effectiveness in this area, we are committed to a continuance of the present course. The only end to this course of governmental expansion and its ever-penetrating tax take is, as history seems to reveal, either atrophy or revolution.
It is only when we understand that government can have no rightful powers of control, over and beyond the powers that inhere in individuals as moral rights, that we can clearly recognize the proper limitations of the State. With this recognition will come the trimming process: government reduced to the enormously important function of securing the rights of man. Limited to this role—its only competence—government will become an aid, not an ailment; a bargain, not a burden. Taxes will then be a matter of relative unimportance.
Summarized, this paper insists that the only way to reduce taxes is for each devotee of liberty to become, as best he can, a moral philosopher. Too difficult? Only if the Golden Rule, the Ten Commandments, and the Declaration of Independence are beyond one’s scope!
¹ See Samuel Noah Kramer, From the Tablets of
2 "Dr. Colin Clark, the Australian economist, has concluded from his study of governmental costs that whenever the figure for any country rises to more than 20 or 25 per cent, progressive inflation and the debauchery of the currency is likely." See p. 110,
3 While the wastes and excesses in current "defense" expenditures are related to a spreading acquiescence to socialism, this aspect of the subject is beyond the scope of this paper. The purpose here is served by pointing out that for fiscal 1961 "defense" expenditures are one per cent higher than at the end of the Korean War. But, no defense expenditures are 86 per cent higher! See Monthly Tax Features, February 1960. Tax Foundation, Inc.,
4 Dr. Thomas Nixon Carver, thirty-two years Professor of Political Economy at
5 Experiences of the past three decades support this contention. Many antisocialists have been certain of a common private property interest among the millions of insurance policyholders, shareholders, and homeowners. However, repeated attempts to organize them against socialism have come to naught. They simply will not coalesce along materialistic lines. Nor should we believe that wage earners have been brought together in labor unions by reason of monetary motivations. Their enormous memberships have been achieved by (1) coercion and (2) the conviction that the "benefits" they seek are rights. More obvious to many union members than to the rest of us is the fact that they do not make money by striking. These costly ventures, like their expensive union memberships, are either forced upon them or charged off to "gaining rights for the workingman.
6 The material needs of Americans are satisfied to an unprecedented degree. This explains, in part, why appeals to material well-being are so futile. Douglas Murray McGregor of Massachusetts Institute of Technology has this to say: "Man is a wanting animal—as soon as one of his needs is satisfied, another appears in its place…. Man’s needs are organized in a series of levels—a hierarchy of importance…. Man lives for bread alone, when there is no bread…. But when he eats regularly and adequately, hunger ceases to be an important motivation…. A satisfied need is not a motivator of behavior!" See The Management Review, November 1957.
The Problem of Poverty
A community which lacks the thrifty type will soon drift back into savagery whence it sprang…. The distinct trait of the savages, as has been shown, is to live without thought or provision for the future. They are much like animals—they eat their fill as soon as they catch their prey, then sleep until they get hungry, then starve until they make another catch. It cannot be too often repeated that he who lacks sense enough to save, lacks the fundamental requisite for enabling him to lead a civilized life, and for sustaining personal independence. The seed of success is not in him. He is, and will remain, an inferior and a dependent.
But the contrary doctrine is frequently defended. So many treat thrift as a vice and prodigality as a virtue. Spend, it is argued, "spend until it hurts"; it is the spender that keeps the wheels of industry moving; the more one consumes, the more does he stimulate production. It is the slogan of the super salesman. Whether anyone really believes in this philosophy or not, it has afforded an excellent excuse for prodigality, both in private and public economy….