The Chimera of Tax Fairness
Buffett's secretary is overtaxed.
In his State of the Union speech Tuesday night President Obama played the fairness card in calling for higher taxes on upper-income people. He said:
[W]e need to change our tax code so that people like me, and an awful lot of Members of Congress, pay our fair share of taxes. Tax reform should follow the Buffett rule: If you make more than $1 million a year, you should not pay less than 30 percent in taxes. [Emphasis added.]
And:
When Americans talk about folks like me paying my fair share of taxes, it’s not because they envy the rich. It’s because they understand that when I get tax breaks I don’t need and the country can’t afford, it either adds to the deficit, or somebody else has to make up the difference. . . . [Emphasis added.]
There are lots of claims there that cry out for examination. For example, what’s need got to do with it? Does Obama really favor a tax system that leaves you only what you need — as determined by someone else? And look at that term “tax breaks.” If a burglar decides not to break into your house and take your things, have you gotten a break? Or have you simply kept what is yours? Is Obama really suggesting that how much of your income you retain should depend on what “the country” can afford? What does that even mean?
Buffett Rule
All that aside, I want to home in on Obama’s notion of fairness. “If you make more than $1 million a year,” he says, “you should not pay less than 30 percent in taxes.” How does he know that constitutes fairness? Obviously 30 percent is an arbitrary figure. If he’s concerned that income and payroll taxes take a smaller percentage of Warren Buffett’s income than the percentage they take from his secretary’s income, why not reduce his secretary’s tax rate? It’s certainly not obvious that Buffett should pay more. (For an interesting discussion of the secretary’s tax rate, see this and this.) Obama (like most other politicians) regards government spending growth as inexorable and virtually untouchable, but why? (Proposed “cuts” are merely reductions in the rate of growth.)
On this matter of tax fairness, no one tops Murray Rothbard’s discussion in his classic Power and Market: Government and the Economy (online in PDF format here). Rothbard starts by noting that for many years people thought products had a “just price.”
It is clear, even to those (like the present writer) who believe in the possibility of a rational ethics, that no possible ethical philosophy or science can yield a quantitative measure or criterion of justice. . . . Economics, by tracing the ordered pattern of the voluntary exchange process, has made it clear that the only possible objective criterion for the just price is the market price. For the market price is, at every moment, determined by the voluntary, mutually agreed-upon actions of all the participants in the market.”
Rothbard of course is talking about a market unblemished by government monopoly privilege and other interventions.
He goes on next to ask: “If the search for the just price has virtually ended in the pages of economic works, why does the quest for a ‘just tax’ continue with unabated vigor? Why do economists, severely scientific in their volumes, suddenly become ad hoc ethicists when the question of taxation is raised?”
We might also ask why a president makes ethical pronouncements about levels of taxation without first laying out his moral philosophy plainly for all to judge.
Canons of Justice in Taxation
Thus the “canons of justice” in taxation must not be taken for granted. Calling something just does not make it so. Rothbard writes:
The prime objection to these “canons” is that the writers have first to establish the justice of taxation itself. If this cannot be proven, and so far it has not been, then it is clearly idle to look for the “just tax.” If taxation itself is unjust, then it is clear that no allocation of its burdens, however ingenious, can be declared just.
A few pages earlier Rothbard defined taxation, uncontroversially, I hope, as “a coerced levy that the government extracts from the populace.” Pulling no punches, he quotes his mentor Frank Chodorov, once an editor of The Freeman:
A historical study of taxation leads inevitably to loot, tribute, ransom — the economic purpose of conquest. The barons who put up toll-gates along the Rhine were tax-gatherers. So were the gangs who “protected,” for a forced fee, the caravans going to market. The Danes who regularly invited themselves into England, and remained as unwanted guests until paid off, called it Dannegeld; for a long time that remained the basis of English property taxes. The conquering Romans introduced the idea that what they collected from subject peoples was merely just payment for maintaining law and order. For a long time the Norman conquerors collected catch-as-catch-can tribute from the English, but when by natural processes an amalgam of the two peoples resulted in a nation, the collections were regularized in custom and law and were called taxes.
“Why do not economists abandon the search for the ‘just tax’ as they abandoned the quest for the ‘just price’?” Rothbard asks.
One reason is that doing so may have unwelcome implications for them. The “just price” was abandoned in favor of the market price. Can the “just tax” be abandoned in favor of the market tax? Clearly not, for on the market there is no taxation, and therefore no tax can be established that will duplicate market patterns.
So let’s hear no more about tax fairness, unless it’s to point out that fairness is approached as tax rates move toward zero.
Comment by Tara Cox on 27 January 2012:
I am afraid I fell for it at first glance – the Buffet/Obama rhetoric, that is. Thank you for pointing this out and giving me ammunition for my conversations.
Comment by Libertarian Jerry on 27 January 2012:
The Freeman,Ideas On Liberty Site consistently,over the years,has done an excellent job of pointing out the hypocrisy and double standards of the Political Class in its efforts to confiscate and steal the fruits of the labors of the Economic Class. It always seems that in the 1st few months of any given year,usually around Tax Reporting season, that the Political Class’s domination of the News Media kicks in with its annual “pay your fair share” propaganda. This usually consists of belittling talk about “tax cheats” and “tax protesters.” Or it consists of stories about some poor soul or some celebrity that gets convicted of some kind of “tax crime” and is sentenced to prison time. Of course, the media never tells you that Federal Income Taxes are only a part of the tax bill paid by the average American. If you include all Federal,State and local taxes, the average American is now working 8 out of 12 months to pay all their taxes,directly or indirectly. Making most productive Americans Tax Serfs. Somehow the Political Class and its propagandists,the Main Stream Media,never talk much about the waste,corruption,duplication or fraud in government. Or the fact of what 90% of what the Federal Government does is either illegal or Un-Constitutional and therefore these functions shouldn’t even exist. These same pundits never talk about how government grows and grows every decade, and why this government growth is needed,yet you,as a private citizen living and paying your bills is somehow irrelevant. Instead they use class warfare to divide the country. The sad part of the Tax Story is that for every Freeman Site in cyberspace there are probably 6 or 7 other sites on the internet practicing some form of Class Warfare. Blaming not failed Socialism and Government incompetence for the problem of high taxes,but that somehow somewhere somebody is not “paying their fair share.” Well now after decade upon decade of failed government programs and useless wars America is hopelessly bankrupt. Now what? All 10 planks to The Communist Manifesto have been woven directly or indirectly into the American fabric. Maybe its soft Communism but Communism nonetheless. The 2nd Plank of the Communist Manifesto calls for a heavy Progressive Income Tax. So I would say that anyone that supports any kind of Income Tax is a practicing Communist. 50 years ago Nikita Kruschchev came to America for a State visit. While being interviewed by American reporters he blurted out that someday America would become a Communist country and elect their Communist leaders into power. The reporters laughed in disbelief. Well now it seems that 50 years down the line Nikita has had the last laugh. Yes,America has been collectivized. And unfortunately most of our “leaders” are practicing Communists.
Comment by norman on 27 January 2012:
Since all men are created equal, they should all pay the same exact dollar amount of taxes whether they’re black or white, rich or poor. If the government of the people and for the people believes it must provide a special service such as mail delivery, then they should charge the same for each letter even though it would be “just” for Buffet to pay $10 postage for his letters since he can afford it. This would definitely help the USPS balance their budget and sponsor a bicycle racing team for the 2016 Olympics.
Comment by Blaine on 27 January 2012:
The central government doesn’t have a revenue problem. It takes in more than enough money to pay for its legitimate roles. Instead, it has a spending problem — most of which is on roles for which the central government has no constitutional authority and from which it is specifically prohibited by the Constitution!
Comment by Paul in NJ on 27 January 2012:
For another interesting look at Buffett’s secretary, see “Despite Unfair Tax Burden, Warren Buffett’s Secretary Was Just Able To Buy A Second Home”:
http://www.thesmokinggun.com/buster/warren-buffett-secretary-homes-654812
Comment by Mark on 27 January 2012:
Libertarian Jerry, awesome stuff. I loved this part “So I would say that anyone that supports any kind of Income Tax is a practicing Communist.”
Taxes on natural resources are fair. Nature is for us all, so if you want to exclude everyone else from a part of it, you should compensate them. And then the fruits of your labor are tax-free.
Comment by Anonymous on 27 January 2012:
I liked the example of Buffet paying $10 for each postage stamp…… ahhahahahaaa this site is so awesome 99guspuppet
Comment by Joe Schmoe on 28 January 2012:
The reality is, the rich pay far more in taxes than they get back in dollar-for-dollar expenditures. Or so this study from the tax foundation concludes:
http://www.taxfoundation.org/files/wp1.pdf
Comment by taxkilla on 28 January 2012:
the simple fact is all americans can use the tax system to their advantage. there are countless loopholes open and the rules can be used as tools. http://www.taxkilla.com
Comment by d daxx on 28 January 2012:
If you read the tax law, the Statute for the normal tax located in Volume 38, page 166, A discerner, after reading the Congressional Record, the intent of the lawmaker, will surely realize that the income tax does not pertain to any entity that is not “doing business” in a statutory manner and under the jurisdiction of the federal government. I have prepared the following letter that is in accordance with the law, to wit:
ACME Financial Corporation
12345 Nowhere Ave.
MidTown, Euphoria, 98765
To Whom: Ref: (Whatever account number)
Please be advised that each and every person, individual, association, organization or entity that either knowingly or unknowingly accepts the word or document from an alleged federal agent or agency without verifying that said agent or agency has the authority, or the jurisdiction, to demand any form of tax, assessment or property, in accordance with the law, can be, and will be held completely liable for damages, penalties and possible incarceration.
The courts and the law have, and do, clearly state that any person or entity, that accepts the word or action of an agent or agency without substantiating or demanding proof of authority, will do so at their own risk: Federal Crop Insurance v. Merrill, 332 U.S. 380; The U.S. Supreme Court (ruled/opinioned) “—–anyone entering into an agreement with the (federal) government takes a risk – - – that he who purports to act for the (federal) government stays within the bounds of his authority—.” There are a myriad of additional court determinations stating the same or similar warnings.
The law is clear and explicit that a notice of Levy (NOL) (or a notice of deficiency NOD) is only a notice and does not have the force of law: The federal court(s) to wit: United States v. O’Dell, 160 F.2d 304 (1947), and Williamson v. Boulder Dam Credit Union, Justice Court, Boulder Township, Nevada, Case #97AO17, decided May 19, 1998, both determined that a Notice of Levy is only a notice, it is not a levy and has no ‘force of law’: Levy is not effected by mere notice: No warrants of distraint were issued.
Note: The 6th Circuit opinion in O’Dell has never been overturned.
The internal revenue service (IRS) has absolutely no authority to issue a lawful levy, or deficiency, so the miscreant and mendacious agency issues an NOL knowing full well that a third party, in fear of the coercion, intimidation and retaliation by the IRS, that utilizes both misinterpretation and misrepresentation to induce third parties to perform an action that will be illegal, will concur.
There are sufficient other documents and case law to verify the false and fraudulent actions that the IRS perpetrates upon both private citizens and especially third party entities, such as the banks, financial institutions and the Social Security Administration, to coerce and intimidate them to believe that the IRS has the power and authority {jurisdiction} that has never been granted.
In conclusion, the courts have repeatedly stated that ignorance of the law is no excuse, therefore, it is incumbent upon you, as a third party, to honor the trust that the undersigned has given to you to know and realize what the law requires. I would prefer to avoid the situation where you might put yourself in jeopardy. Therefore, this letter is sufficient to provide actual and constructive notice of your fiduciary responsibility and potential civil liability. You, according to the law, must require the IRS to verify its authority, 31 CFR Pt. 1, Appendix B of Subpart C §2, [in Leagvel v. Blades, the court said: “When the tax gatherer puts his finder on the citizen, he must also put his finger on the law authorizing it”] other-wise, you will be the party held responsible for whatever damages and liabilities that may be incurred.
John Billybob: of the Doe family
12345 Elm St.
Anwhere, State, uSA [98765]
Comment by d daxx on 28 January 2012:
I have amended the above letter to include what is stated in the Congressional Record from 1910 to 1913 when the so-called income tax was enacted. Again the discerner must read the Constitution to know and understand exactly what Article 1 Section 8 states; “–the Congress may tax to pay the debt!” If it doesn’t state anyone, and it doesn’t, then it can only tax whoever is under the jurisdiction of the federal government, and ‘it ain’t you and me!
ACME Financial Corporation
12345 Nowhere Ave.
MidTown, Euphoria, 98765
To Whom: Ref: (Whatever account number)
Please be advised that each and every person, individual, association, organization or entity that either knowingly or unknowingly accepts the word or document from an alleged federal agent or agency without verifying that said agent or agency has the authority, or the jurisdiction, to demand any form of tax, assessment or property, in accordance with the law, can be, and will be held completely liable for damages, penalties and possible incarceration.
The courts and the law have, and do, clearly state that any person or entity, that accepts the word or action of an agent or agency without substantiating or demanding proof of authority, will do so at their own risk: Federal Crop Insurance v. Merrill, 332 U.S. 380; The U.S. Supreme Court (ruled) “—–anyone entering into an agreement with the (federal) government takes a risk – - – that he who purports to act for the (federal) government stays within the bounds of his authority—.” There are a myriad of additional court determinations stating the same or similar warnings.
The law is clear and explicit that a notice of Levy (NOL) (or a notice of deficiency NOD) is only a notice and does not have the force of law: The federal court(s) to wit: United States v. O’Dell, 160 F.2d 304 (1947), and Williamson v. Boulder Dam Credit Union, Justice Court, Boulder Township, Nevada, Case #97AO17, decided May 19, 1998, both determined that a Notice of Levy is only a notice, it is not a levy and has no ‘force of law’: Levy is not effected by mere notice: No warrants of distraint were issued.
Note: The 6th Circuit opinion in O’Dell has never been overturned.
The internal revenue service (IRS) has absolutely no authority to issue a lawful levy, or deficiency, so the miscreant and mendacious agency issues an NOL knowing full well that a third party, in fear of the coercion, intimidation and retaliation by the IRS, that utilizes both misinterpretation and misrepresentation to induce third parties to perform an action that will be illegal, will concur.
There are sufficient other documents and case law to verify the false and fraudulent actions that the IRS perpetrates upon both private citizens and especially third party entities, such as the banks, financial institutions and the Social Security Administration, to coerce and intimidate them to believe that the IRS has the power and authority {jurisdiction} that has never been granted.
There is a clear-cut three (3) step validation process to determine if a private, lawful and sovereign man/woman is ‘one required’ as so stated in the internal revenue code and regulations, to wit: 1. In order to be classified as ‘one required’ that man/woman must be “doing business” in a statutory manner and under the jurisdiction of the federal government; 2. In order to be classified as ‘one required’ that man/woman must be “doing business” for a ‘gain or profit’ in a statutory manner and under the jurisdiction of the federal government; 3. In order to be classified as ‘one required’ that man/woman must be “doing business” for a ‘gain or profit’ that can be effectively-connected to a taxable event in a statutory manner and under the jurisdiction of the federal government. It must be clearly understood that the function of “doing business” MUST be performed in a statutory manner and under the jurisdiction of the federal government. Therefore, since the federal government does not have ANY implied powers nor ANY implied jurisdiction, it is incumbent upon any and all third parties to know the law and its application.
In conclusion, the courts have repeatedly stated that ignorance of the law is no excuse, therefore, it is incumbent upon you, as a third party, to honor the trust that the undersigned has given to you to know and realize what the law requires. I would prefer to avoid the situation where you might put yourself in jeopardy. Therefore, this letter is sufficient to provide actual and constructive notice of your fiduciary responsibility and potential civil liability. You, according to the law, must require the IRS to verify its authority, 31 CFR Pt. 1, Appendix B of Subpart C §2, [in Leagvel v. Blades, the court said: “When the tax gatherer puts his finder on the citizen, he must also put his finger on the law authorizing it”] other-wise, you will be the party held responsible for whatever damages and liabilities that may be incurred.
John Billybob: of the Doe family
12345 Elm St.
Anwhere, State, uSA [98765]
Comment by d daxx on 28 January 2012:
Please note that the above letters should be sent to each and every third party that has, or will have, any responsibility for handling the assets of any lawful sovereign. If enough Americans would get off their duffs and study and learn the law the infernal revenue disservice would not be able to steal the labor earnings of the working American, nor would they be able to steal any of the profits of the businesses that are not under the jurisdiction of the federal government.
Unfortunately, the masses-r-asses, as I call them have been so dumbed-down as so eloguently and intelligently compiled in “The Deliberate Dumbing-Down of America” by Charlotte Iserbyt that can be obtained for free by doing a search of her name and arriving at her website and then search and locate the book. She provides the book for free because the lawful sovereign Americans need to know how they have been deliberately and intentionally dumbed-down!
Comment by Mike in MI on 28 January 2012:
In a free democratic republic, if Obama can speculate on what he thinks is fair, so can we the people. Before 1913, we had federal tax rates of 0%, and I think that’s fair. The federal government did only what it was authorized Constitutionally, we had a fine defense, and we were not using the Fed to borrow ourselves into oblivion. Check out what our national debt was in 1910! No class warfare. Life was good for America. And later came Calvin Coolidge, one of our greatest presidents!
Pingback by Obama’s fairness doctrine a recipe for AMP (Assured Mass Poverty) « The Greenroom on 29 January 2012:
[...] an article at The Freeman, editor Sheldon Richman remarked on some of the will-o’-the-wisp notions Obama used to pepper his State of the Union [...]
Comment by Jay on 29 January 2012:
“And later came Calvin Coolidge, one of our greatest presidents!”
“In a free democratic republic”
“The federal government did only what it was authorized Constitutionally”
You’re a clever one, you sly dog.
Comment by Michael from WA on 29 January 2012:
I have been reading the Freeman for some time now, often thinking to comment, but have felt inept at having a full understanding of comcepts laid out. I especially enjoy reading Sheldon Richman’s articles as they speak not just to my mind, but also to my heart; the words etch deep. This article speaks volumes toward the concepts of “fairness” and “justice”, and Obama’s use of “fair” with respect to taxes just didn’t ring true with me the moment I heard it. If taxation is “just” because the Constitution allowas for it, I can accept that. The subsequent paragraphs in Section 8, all delineated by semicolons, define the use there-ok. Most listed seem “fair”. I suppose my only issue comes into play when I see my taxes misused, especially by those who live off of them and live far better lives than I, and with seemingly far fewer restrictions placed on their lives. Keep writing, Mr. Richman, I will keep reading and learning.
Comment by Bruce Hall on 29 January 2012:
“Or we can restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules.” – President Obama SOTU
Gee, that sounds really good… but what does he mean?
What is getting a “fair shot?” No, really, what is fair? Do we all get to go to Harvard because President Obama did? I’d like to see my grandchildren get a “fair shot” at the White House if they want it. If a child chooses to drop out of school, did that child have a “fair shot?” If that child had irresponsible parents, did that child have a “fair shot” and, if not, does someone else’s responsible parents have to make up the difference?
What’s doing a “fair share?” If I have a protected job that lets me goof off for several hours, have I done my fair share simply by being someplace for eight hours? If I’m a businessman who works 14 hours per day for 6 days per week, is that a “fair share”… even if I get paid more? What if I invest my after-tax earnings in risky business ventures and some of them return big profits for me? Have I done my “fair share” by building up those businesses and creating lots of jobs with the infusion of my money, or am I “not playing by the same rules” as someone who spends their extra money on beer and gambling or drugs?
Yes, Mr. President, it sounds really good… this “fairness doctrine” of yours… but I’m still having trouble with your concept of fairness. Do you mean that the results for every person should be pretty much the same regardless of effort or risk or achievement?
Or do you mean that everyone is required to do as much, risk as much, and achieve as much as everyone else? No, that’s not likely.
No, Mr. President, I think your idea of “fairness” is that if you do more, risk more, and achieve more… you should have more taken from you.
By the way, I’d like to have one of your limos and maybe one of your smaller helicopters.
http://hallofrecord.blogspot.com/2012/01/play-fair-mr-obama.html
Comment by Sheldon Richman on 30 January 2012:
Michael from WA: Thanks very much.
Comment by Dan on 30 January 2012:
What has particularly irked me with the Buffet/Obama sobbing is the bald-faced lying they continue to do about it. They claim Buffet paid about 17.5% and his secretary about 30% and “how is that fair” is the begger…
Well how about this: “Jim paid $120,000 for his top-of-the-line BMW but John only paid $15,000 for his gently used Honda. How is that fair? We should force John to make up the difference, right?” After all, they both bought cars but paid different rates!
That is the Buffet/secretary argument, really. Yes, they both paid taxes (paid for a car), however, they were paying for different kinds of taxes (cars). Thus the rate difference. Buffet paid mostly capital gains tax and his secretary mostly income taxes. Different products have different prices. The out-right lie from Buffet/Obama is they knowingly ignore the different products (taxes) being paid for.
For taxes, at minimum let’s talk about lowering the secretary’s rate to Buffet’s number, not the reverse.
Comment by Justin on 6 February 2012:
If Obama is concerned about him and members of congress paying their “fair share” of taxes to help out with the national deficit, then why don’t they just chop it at the roots and take a pay cut?
Comment by Dong on 7 February 2012:
Bless you for finding the time to describe the terminlogy towards the starters!