How to Reduce Taxes

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 Germany after World

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 New York sees no reason why he should be compelled by the political ap­paratus to subsidize the citizens of Los Angeles or Dallas. But sup­pose he expresses his opposition materialistically as he invariably does. He may, for instance, com­plain about the cost to him. And, how much is that? Why, only a pittance—30 cents, perhaps. What a niggardly position to take! He, with his big income! And, if he argues that anyone, regardless of how wealthy, can be “pennied and dimed” to death, he is confronted with the impossible task of nam­ing the instances that take so many of his pennies and dimes. He may even generalize about na­tional financial trends but, to do so, he must talk in terms of bil­lions of dollars. Such terms are as incomprehensible to his listeners as are 100,000,000 light years.

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.

Inalienable Rights

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 Dallas would think of going about the country coercively collecting funds for a Dallas hospital, regardless of how urgent the need. No thoughtful businessman would try to keep customers by personally forcing a competitor to raise his price for the same product. No wage earner with any sense of justice would, on his own, forcibly deny the right of another wage earner to any job connection peaceably agreed upon. No sensible individual would have the effrontery to impose his per­sonal idea of a minimum wage or maximum hours on a nation’s citi­zenry.

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?

Self-Discipline Required

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!

Footnotes

¹ See Samuel Noah Kramer, From the Tablets of Sumer(Indian Hills, Colorado: The Falcon’s Wing Press, 1956), Chapter 6, “The First Case of Tax Reduction,” pp. 41-46.

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, Liberty: A Path to Its Recovery by F. A. Harper. Irvington-on-­Hudson, N. Y.: The Foundation for Eco­nomic Education, Inc., 1949.

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., New York, N. Y.

⁴ Dr. Thomas Nixon Carver, thirty-two years Professor of Political Economy at Harvard University, once said to me, “The two most influential books in Western Civilization have been the Bible and Adam Smith’s Wealth of Nations.” Adam Smith and the Biblical writers were, among other things, moral philosophers. Reflect, also, on the thinking that went into the Declaration of Independence, the discussions in the Constitutional Conven­tion, and the arguments set forth in The Federalist Papers. The appeals were not made on the basis of material advantages. The arguments were in the realm of moral philosophy, and the case was won by appealing to man’s sense of justice.

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.

 

 

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Ideas on Liberty

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….

JOHN RUSTGARD