Capitolism: Harnessing the Power of Stupid

[jsorens]

At any rate, Nock, although he sometimes called himself an anarchist, endorsed limited government, complete with taxation, at the township level. He favored the Articles of Confederation, with some changes, leaving few functions at the national level. Higher levels of government would have to ask the townships for revenue. Perhaps the best term for Nock is "radical decentralist."

It sounds to me as if Nock endorsed government at a low enough level that it enjoys real consent to an actual social contract, in which case taxation is no longer a violation of rights (e.g., the community association). I endorse his distinction between "government" and "state" if that is indeed the basis of his distinction. There are "governments" everywhere - corporations, nonprofits, & so on. Their only legal powers (should) come from contract.

It seems more like a hybrid of classical liberalism and civic republicanism, like Jefferson's model of ward republicanism, where a citizen acts as their own legislator even though majority may rule. Remember civic republicanism didn't view individual freedom the same way as classical liberalism. CR believed that individual freedom was achieved by practicing virtuous behavior within in small-scale, face-to-face, deliberative bodies whereas CL believed that free will, reason, and a subjective evaluation of self-interest allows individuals to voluntarily contract with any other individual to the betterment of both.

It seems to me that Nock was saying that by definition a state hands out privileges to further "paper" or law-based property as class interests against those being excluded that violates their labor-based property rights. This is a very similar argument to mutualism on the left and southern agrarianism & catholic distributism on the right although their prescriptions are different. Mutualists gravitated to occupancy and use standards to eliminate most of the economic rent (closer to pure anarchism) and SA/CD advocated a much stronger role for government (maybe because they are comfortable with authority/hierarchy via religion) to protect families & communities.

Nock's Georgist background led him to define local governance as legitimate authority because by definition it required an obligation to those being excluded by privilege (community collection of economic rent) to uphold their absolute right to self-ownership. The landowner's right of self-ownership stayed intact because they contributed no labor towards the creation of economic rent. Exclusive use in an inelastic scarcity market like land compels those being excluded to labor (force) as the location that they occupy in proximity is made higher. The reason why local governance as legitimate authority (LGLA) has to have a monopoly on power over a specific region is because the economic rent, which results in compelling those in proximity to the location being used exclusively, is spread over a geographical territory.

Nock was a Georgist early in life but moved away from it later, so that I'm skeptical of that interpretation of his individualist anarchist phase.

[jsorens]

It seems to me that this discussion has broken up into at least three separate questions:

1) Is it wise and prudent to have a legal monopoly in place to enforce contracts and protect rights to life, liberty, and property? I say yes.

2) Is it just and moral to force people to contribute to such a legal monopoly, no matter how efficient, well-intentioned, and even aesthetically beautiful it may be? I say no.

3) Is there any fundamental moral difference between sales and income taxes? I say no.

To hammer the point home on #3, which is really the reason I jumped into this discussion, I'd like to present a couple of scenarios.

Scenario A

My neighbor needs a table for his house. I'm a carpenter. I make a table and want to get $100 for it. The government charges 10% sales tax. My neighbor pays me $110; I remit $10 to the government; and I get $100.

Scenario B

My neighbor needs a table for his house. I'm a carpenter. My neighbor hires me to build the table, and because the government charges a 9.09% income tax, I ask for $110 in gross pay so that I will make $100 net. My neighbor pays me $110; I remit $10 to the government; and I get $100.

Conclusion

If the tax in Scenario A is right, just, and proper, then how can the tax in Scenario B not also be right, just, and proper? If the tax in Scenario B is wicked, unjust, and improper, how is the tax in Scenario A not also wicked, unjust, and improper?

[CNHT]

And someone my age, who has provided for her own maintenance after working a full career, should not have to pay a second tax on anything she gets from that, at all.

I dont know anything about you, but what makes you special that you should now be entitled to the protection of the law without having to contribute?

(please dont mistake this question for an assertion that the law hasnt grown way too big for its own britches)

Why should I or anyone pay taxes a second time on everything I've earned and saved?

[jsorens]

It seems to me that this discussion has broken up into at least three separate questions:

1) Is it wise and prudent to have a legal monopoly in place to enforce contracts and protect rights to life, liberty, and property? I say yes.

2) Is it just and moral to force people to contribute to such a legal monopoly, no matter how efficient, well-intentioned, and even aesthetically beautiful it may be? I say no.

3) Is there any fundamental moral difference between sales and income taxes? I say no.

To hammer the point home on #3, which is really the reason I jumped into this discussion, I'd like to present a couple of scenarios.

Scenario A

My neighbor needs a table for his house. I'm a carpenter. I make a table and want to get $100 for it. The government charges 10% sales tax. My neighbor pays me $110; I remit $10 to the government; and I get $100.

Scenario B

My neighbor needs a table for his house. I'm a carpenter. My neighbor hires me to build the table, and because the government charges a 9.09% income tax, I ask for $110 in gross pay so that I will make $100 net. My neighbor pays me $110; I remit $10 to the government; and I get $100.

Conclusion

If the tax in Scenario A is right, just, and proper, then how can the tax in Scenario B not also be right, just, and proper? If the tax in Scenario B is wicked, unjust, and improper, how is the tax in Scenario A not also wicked, unjust, and improper?

I would put it this way...

1. It is wise, prudent, and NECESSARY to have a legal system in place to enforce contracts and protect rights to life, liberty, and property, as without an enforcement mechanism, each individual must defend his own rights, which will result in the death of the weak, and the survival of only the fittest.

2. Unfortunately, if a legal enforcement mechanism is necessary to protect rights to life, liberty, and property, there are some costs which must be paid.  Assuming the mechanism does not suffer from mission creep, these costs are de minimis as compared to having to actively defending all of these rights constantly by ones self, and as such should be born willingly.  If the individual does not wish to be pay for this mechanism, he should have the option of leaving, or isolating himself.

3.  There is a fundamental moral difference between an income tax and a sales tax on non survival goods.  In your hypothetical, you are engaging in a business, not working for a wage.  If you do not wish to pay the sales tax, simply charge your neighbor a wage for your labor, which will be tax free to him, and he can go and purchase the goods, and pay his tax.   

In Scenario B I work for a wage, and a table is a "non survival good." So why again is it OK to impose a sales tax on the table I sell my neighbor but not OK to impose a wage tax on the wage my neighbor pays me to make him a table, when the consequences are exactly the same?

[CNHT]

If you are merely sitting on what youve earned and saved, I cant say that you should pay any taxes for sitting still doing nothing, although some might argue that the tax on property is good because it forces those with property to put it to a economically useful purpose.

However, if you continue to take advantage of roads, police protection, the protection of contract law, the common defense, and the general social fabric that allows you to buy goods much more cheaply than you could manufacture them yourself, how are you in some way entitled to benefit from these things without an obligation to pay for them?

Because yes, I'm sitting (and using) on my money that I've earned and yes, I've already paid taxes on it once or twice before!

[J’raxis 270145]

And someone my age, who has provided for her own maintenance after working a full career, should not have to pay a second tax on anything she gets from that, at all.

I dont know anything about you, but what makes you special that you should now be entitled to the protection of the law without having to contribute?

(please dont mistake this question for an assertion that the law hasnt grown way too big for its own britches)

Why should I or anyone pay taxes a second time on everything I've earned and saved?

If you are merely sitting on what youve earned and saved, I cant say that you should pay any taxes for sitting still doing nothing, although some might argue that the tax on property is good because it forces those with property to put it to a economically useful purpose.

We already have this; it's called inflation. The way our system nowadays actively discourages savings is why millions of Americans are up to their eyeballs in debt, why we have, on the whole, a negative savings rate (people are spending more than they have), and why when the credit crunch comes—wait, that's already happening—there's going to be hell to pay for an awful lot of people.

[EthanAllen]

MP-

I have to tell you first that this is one of the most articulate and sophisticated arguments I have read on various FSP boards in probably 5 years. I am very sympathetic to it because, as I am sure you have surmised, I am also a minarchist of sorts. In fact, a geoist is concerned with the private enclosure of BOTH the natural AND social commons. I believe that our form of governance and law-making (a narrow constitutional democratic republic) are actually part of the social commons (what you call "benefitting from the social network built and maintained" by others) along with language, knowledge, currency, etc.

Having said all that, aren't you engaging in a form of question begging though? That the reason we need a monopoly on force is because we can't have arbitrary power based on a market mechanism.

[EthanAllen]

Some argue that without a tax on real property, there isnt much incentive to put a land holding to a valid economic use.  I tend to disagree, but I would strip the ownership of much of that land at death, and put it on the market, so that it goes back into the production cycle, instead of just handed down to someone who did no work to get it.

That is the utilitarian argument. The natural law argument is that exclusive use forces costs in the form of negative externalities on those being excluded in proximity from what they would all have an individual equal access opportunity to occupy if it weren't being exclusively used. These costs compel the excluded to labor for what is synonymous with life itself (to exist is to occupy a location on the inhabitable dry surface of the earth somewhere) which violates their absolute right of self-ownership.

Requiring the economic rent (the flip side of negative externalities) to be shared equally and directly with the excluded doesn't violate the absolute right of self-ownership of the landowner because by definition they do not contribute any labor towards the unmproved land values (economic rent).

Now why not just say that at all title transfer (death or purchase) all of the economic rent has to be collected and shared equally and directly with those being excluded?

[EthanAllen]

When the 'sale' of the table is peformed, one is no longer engaging merely in labor, but is also 'trading', with trading comes profit, and it is impossible to determine what is labor, and what is profit, hell, how do we know that you actually built the table, and didnt just farm the work out to china?

Interestingly, this is part of the geoist & mutualist critique of marxism. That what capitalists are calling "profit" and what marxists call "surplus value" - which they claim is the exploitative of labor inherent to private ownership of the means of production (bourgeoisie property relations) and money - is nothing more than utter confusion over who justly deserves the distributive allocation wages, economic interest, economic rent resulting from the 3 factors of production (hence distributive justice) where privilege leads to unequal exchange.

[jsorens]

The goal of a 'just' tax is to allow those who wish to withdraw their support from the state to do so without risking their very survival.  To ensure this, you cannot tax a wage, because without the ability to work, then one cannot buy the essentials necessary to sustain life.

If one cannot sell goods and services to others, then one cannot buy the essentials necessary to sustain life. You keep looking at this from the buyer's point of view, but the seller is equally harmed by sales taxes. If I am a carpenter who does not know how to farm, then taxing my tables effectively prohibits me from withdrawing my support from the state without risking my very survival.

When the 'sale' of the table is peformed, one is no longer engaging merely in labor, but is also 'trading', with trading comes profit,

With labor comes profit as well, assuming I am paid for it. Selling my labor for $100 is just as much an economic transaction, a trade, as selling the product of my labor for $100. Philosophically and financially, they are identical.

[jsorens]

If one cannot sell goods and services to others, then one cannot buy the essentials necessary to sustain life. You keep looking at this from the buyer's point of view, but the seller is equally harmed by sales taxes. If I am a carpenter who does not know how to farm, then taxing my tables effectively prohibits me from withdrawing my support from the state without risking my very survival.

One can sell his labor and buy the essentials necessary to sustain life, that is enough if he seeks to avoid supporting societies goals.  If you are a carpenter, then sell your labor, your labor is your self.  If you wish to sell tables, you are not a carpenter, you are a furniture trader.

Either way, I'm a trader of both furniture and labor. Labor is worthless without trade. OK, so let's say I decide to sell my labor & buy the necessities of life, instead of working for myself & selling my product directly. So your system would require me to become subservient either to the government or to an employer. How is that better than an income tax?

Besides, let's tease this out. If I sell my labor, it has to be to someone who actually sells a product and makes some money with which to pay me. That person will have to charge sales taxes from consumers under your system. The sales tax makes the item more expensive, which reduces the quantity demanded by consumers, which causes the seller to reduce the amount he sells, which causes him then to reduce the amount of labor he needs. So I make less money from the seller because of the sales tax, because he needs less of my labor. So the sales tax is still harming me, even though I'm doing everything I can to wriggle through that loophole your system provides to those who don't want to pay taxes.

With labor comes profit as well, assuming I am paid for it. Selling my labor for $100 is just as much an economic transaction, a trade, as selling the product of my labor for $100. Philosophically and financially, they are identical.

No, this is not true.  You already own yourself.  trading a percentage of your life for a dollar value is not a profit, it is an equal exchange.

What does "equal exchange" mean? And how is a "profit" not "equal exchange"?

This is not philosophically or financially identical to selling a table, because unless we know what the market price is relative to what the cost of your labor would be, we have no way of judging what profit or loss might be involved.

Huh? In my thought experiment, I specified the market price of the table: $100. That is the value of my labor, and that is the value of the table, because that is what my labor produces.

The value of your labor is yours by your very existence.

And a table I create isn't? If I own the wood, and I own the labor, why do I not own the table I create by mixing my labor with the wood? Why does the table belong to the government?

It's curious & downright bizarre that you think that somehow "society" is in no way involved with the sale of labor to an employer, but it is involved with the sale of physical goods & services!

[EthanAllen]

You already own yourself.  trading a percentage of your life for a dollar value is not a profit, it is an equal exchange.  This is not philosophically or financially identical to selling a table, because unless we know what the market price is relative to what the cost of your labor would be, we have no way of judging what profit or loss might be involved.

The value of your labor is yours by your very existence.  Society has an interest in any profit, because society maintains the networks by which the profit is generated.

In the classical liberal 3 factor production and distribution system, there was no talk of "profit". There was only talk of:

1. economic rent as the return on "land".
2. wages as the return on labor.
3. economic interest as the return on capital.

So the selling price of the table has to include a return to each of the factors of production. The labor required would represent the market price to labor paid in wages to produce a table. The labor has to occur somewhere on "land" using "land" (in this case a tree) to transform into a table. The capital used (hammer and saws) also have to have a return and this is called economic interest.

Society should only have an interest in insuring that the collection and distribution of economic rent goes to those who are excluded from an equal access opportunity right to what they have a birthright to uphold their absolute right of self-ownership.

[EthanAllen]

You already own yourself.  trading a percentage of your life for a dollar value is not a profit, it is an equal exchange.  This is not philosophically or financially identical to selling a table, because unless we know what the market price is relative to what the cost of your labor would be, we have no way of judging what profit or loss might be involved.

The value of your labor is yours by your very existence.  Society has an interest in any profit, because society maintains the networks by which the profit is generated.

In the classical liberal 3 factor production and distribution system, there was no talk of "profit". There was only talk of:

1. economic rent as the return on "land".
2. wages as the return on labor.
3. economic interest as the return on capital.

So the selling price of the table has to include a return to each of the factors of production. The labor required would represent the market price to labor paid in wages to produce a table. The labor has to occur somewhere on "land" using "land" (in this case a tree) to transform into a table. The capital used (hammer and saws) also have to have a return and this is called economic interest.

Society should only have an interest in insuring that the collection and distribution of economic rent goes to those who are excluded from an equal access opportunity right to what they have a birthright to uphold their absolute right of self-ownership.

Ethan, I think I have already spoken to this so Ill be brief.

Your 3 factor test is incomplete.  There is a fourth factor to consider, and that is the market.  the vig.  Like it or not, it adds value, and must be paid for.

I am not so sure that is why I am keenly observing and participating in this debate.

In economic terms, "land" represents the entire material and non-material universe outside of human being themselves and their labor. Folks in the "commons movement" talk about this as the natural AND social commons. So what you are talking about "societal network", etc. is nothing more than the social commons (laws like IP law, language, our form of governance, scientific knowledge, etc.) that is not the result of an individuals labor but only in the context of a "social network or web".

So in my mind it is the very same thing.

[J’raxis 270145]

[jsorens]

J, Ive reached the point where Im unsure if you are being dense or obstinate.  Ill try to rephrase this one more time but then Im not going to waste anymore time.

Ditto!

The system doesnt require you to become subservient.  Selling your labor doesnt make you an asskisser.

Paying an income tax doesn't make you an asskisser either; that's not the claim. You're claiming that an income tax is a violation of the rights of labor because you can't get out of it. I've just shown you that a sales tax violates the rights of labor just as much, because it makes it impossible for you to sell your labor or the fruit of your labor without being adversely impacted by the sales tax.

Yes, I agree that the sales tax has some impact, but keep in mind that SOCIETY maintains the conditions that allow sales to even occur.
  Without a rule of law, you are going to be too busy keeping people from stealing from you to get much benefit from trade.

This is precisely and exactly as much true for sales of labor as it is for sales of the products of labor! When you go to work for someone, that is a trade, an economic transaction benefiting both parties. You need a legal framework to prevent someone from stealing your labor (enslavement, violation of the labor contract) or abolishing your capacity to labor (maiming, murder). So your distinction between sales taxes as somehow good & innocent because they fund this legal framework, and income taxes, which are wicked because society is allegedly not involved in assuring you the right to labor, is a nonsensical distinction.

I have stated that I prefer the sales tax  with an exception for survival goods, because it is the one that is easiest for a dissident to opt out of, and only for that reason.

A dissident cannot opt out of a sales tax any more than he can out of an income tax. I don't know how I can't demonstrate this any more conclusively than I already have. I'll just re-organize the argument one more time to make the point:

1) If you sell the products of your labor directly, as a self-employed person, you are not allowed not to charge sales tax. There's no way to opt out.

2) If, instead, you work for someone who sells the products of your labor, that person has to charge sales tax, which reduces your wage below what it would be if there were no sales taxes. In fact, it reduces your income by exactly as much as your income would be reduced if you were selling tables yourself, i.e., none of the onus of the sales tax lies on the employer, because in general equilibrium profits equalize across industries (controlling for risk). There's no way not to be affected just as much by the sales tax as if you were self-employed.

I've also shown that income taxes are very easy to design so that people can opt out of them completely by making less than a certain amount of money.

What does "equal exchange" mean? And how is a "profit" not "equal exchange"?

this is basic economics.  some call it 'surplus value'.  It is the difference between the cost of producing something, and the value the market assigns to it. 

"Equal exchange" is "surplus value"? Isn't "surplus value" profit? So equal exchange is profit by definition! You were making a distinction between them. Or did you not mean that "equal exchange" is "surplus value" when you wrote, "some call it 'surplus value'"?

This is not philosophically or financially identical to selling a table, because unless we know what the market price is relative to what the cost of your labor would be, we have no way of judging what profit or loss might be involved.

Huh? In my thought experiment, I specified the market price of the table: $100. That is the value of my labor, and that is the value of the table, because that is what my labor produces.

No, there are two markets.  One is the market for your labor, the other is the market for tables.
[/quote]

Without a market for tables there is no market for labor. There's a demand for labor only because of what it can produce. The two are inseparable. If you impose crushing sales taxes that kill the demand for tables, you've also killed the demand for table-makers. If you impose crushing income taxes on table-makers that kill the supply of table-making labor, then you've also killed the supply of tables.

You are mistaking my point.  I didnt say that society has no interest in the sale of labor, (it does, but the sale of labor is where socieities interest is the least justified) I said that since labor is essentially the person, as opposed to an object, that I favor not taxing that market, because to do so would invade individual sovereignty more than to tax other types of trade.

Well, here is the key point of disagreement. I would agree with you if you were to say that taking a chunk of flesh from a person's body is a particularly invasive and bad form of tax, because it literally invades your bodily rights. But taking someone's income is not the same as taking someone's flesh, part of the essential person. Income from sale of labor is external property, exactly like income from sale of goods, and both depend equally greatly on a legal framework for their security. If you sell your labor to a table-maker and make income, or if you make & sell a table directly and make income, either way you get income, & that income comes from the exact same labor. Either way, taxing that income is taxing the proceeds of labor. No moral difference a-tall.