Ending Tax Socialism; J. Dorn

A progressive income tax violates the very heart and soul of the Constitution. Our con stitutional government rests on the principles that individuals are equal under the law, that consent is the basis of just laws, and that the powers of the federal government are strictly limited. None of those principles are consis tent with taxing incomes at progressively higher rates. It's time to expose the pretense of morality that is inherent in progressive taxation and to end the system of tax socialism that has eroded economic and personal lib erties in the United States. A "Calamitous Monstrosity" Prior to the passage of the Sixteenth Amendment in 1913, the Supreme Court consistently struck down attempts to legis late a federal income tax. There was little public support for such a tax. Indeed, when the first income tax was passed by Congress in 1894, the New York Times called the legislation "a vicious, inequitable, unpopular, impolitic, and socialistic act," and the Wash ington Post added, "It is an abhorrent and calamitous monstrosity."

Constitutional principle and justice require Mr. Dom is vice-presidentfor academicaffairsat the Cato Institute. that individuals be treated equally under the law and that the law itself be just. A progres sive income tax, which discriminates against individuals simply because they have higher incomes, is based on an arbitrary precept that would never gain universal consent. The mi nority would never consent to be enslaved by the majority. Because there is no objective way to mea sure social justice, there is no end to the redistribution that can occur under a progres sive tax system. Under such a system, neither persons nor property are safe from the hand of the state. In his Constitution ofLiberty, the late Nobel laureate economist F. A. Hayek wrote, "Pro gression provides no criterion whatever of what is and what is not to be regarded as just. It indicates no halting point for its application, and the 'good judgment' of the people on which its defenders are usually driven to rely as the only safeguard is nothing more than the current state of opinion shaped by past policy."

Hayek was right and Marx and Engels were wrong. Yet conservatives and liberals alike fall into a populist trap by trying to justify progressive income taxation on the basis of majority rule. Elevating democratic values above individual rights to achieve equality of result, however, violates the very rules of just conduct that lie at the heart of a free society. A flat-rate tax is consistent with the rule of law and with the principle of nondiscrimina tion. Everyone pays the same tax rate on their taxable income, and income from both labor and capital are treated alike-there is no 747 748 THE FREEMAN • NOVEMBER 1996 double taxation of interest and dividends. If the flat-rate tax is applied to consumption rather than income, the current bias against saving would disappear and economic growth would increase. One major benefit of a flat-rate tax is that it would make the cost of government expan sion visible to all taxpayers, especially if government were required to balance its budget each year. There would be a built-in incentive to compare the costs and benefits of new government programs.

Under progressive taxation, on the other hand, there is a constant temptation to raise tax rates on productive citizens to pay for new programs. At the limit, persons with high incomes may face a marginal tax rate of 100 percent, while those with low incomes pay nothing. (During the 1950smarginal tax rates exceeded 90 percent in the United States.) That's tax socialism in spades. Progressive taxation is not a virtue but a vice. It presumes that the property rights of the wealthy are not as sacred as the property rights of the poor, and that the values of the majority are superior to the rights of the minority. Those who support progressive taxation pretend to be on the moral high ground but, in fact, they have no ground to stand on. Envy, not justice, is at the root of the argument for discriminatory taxation. If we let constitu tional principles be eroded by majority rule, in the name of social justice, then both freedom and true justice will be lost.

"Law is the bond of civilsociety, and justice is equality under the law," wrote Cicero. Ifwe are to restore civil society and move from tax socialism to tax justice, we need to abolish progressive taxation, institute a fair flat tax, and limit the size of government. Otherwise class warfare and·welfare will prevail. D 1.:. TWICE f( MONTHLY! r-------------------------, I fo~~li~;:~~~o: Name: I : TURN Address: : I Box 22036 City: I State: 1Zip: I I Lansing, MI VisalMC# I I 48909 I S' Ior fax to (517) 351-2907 Exp.: 19nature: .J ~-------------------------(c) 1996.MqqlwIos MediaOroop. Inc. SAMPLE ISSUE $2 (MAIL ORDER ONLY) Endorsedby syndicatedcolumnist Joe Sobran THEFREEMAN IDEAS ON LIBERTY For Appearance'sSake by James D. Saltzman D on't let people control the appearance of their property. That's the view of Mont gomery County (Texas) Judge Alan "Barb" Sadler. During the spring of 1995, he pro posed a law to restrict commercial signs on strips of privately owned land along rural highways in his county. Mr. Sadler decried the "general decay of the area, and by decay I mean unlimited signage.... It's a classic case of private property rights versus beauti fication and environmental concerns."l This belief that private property rights compromise a "public interest" in "beautifi cation" has generated a host of legal proce dures allowing the government to veto an owner's wishes for the appearance of his property. There are ordinances to prescribe landscaping, boards to oversee alterations to "historic" buildings, bodies to govern changes to trees, committees to dictate the design and color of new buildings, commissions to restrict "eyesores" such as strip shopping centers, and laws-as were proposed in Montgomery County-to prohibit such forms of "visual pollution" as billboards and other types of outdoor advertising.