Selective Taxation Worse

To the Editor:

Lawrence Reed argues against taxation of Internet sales in his recent article “Don’t Tax the Internet” (June 2000). There is an evil worse than excessive taxation: that of selective taxation . . . . Exemption of Internet-originated sales from taxation, while still allowing taxation of phone-originated sales taxes, amounts to a form of discrimination. Indeed, arguments in Congress for the temporary moratorium on Internet sales taxes always talk about trying to support the nascent industry.

A better solution is to allow jurisdictions to levy sales taxes based on the source point of the sale (rather than the destination). This would encourage competition between taxing entities as merchants move from high-tax states to low-tax states in order to offer best prices to consumers.

—John Shelton
Redwood City, California

Lawrence Reed replies:

Mr. Shelton is right that “selective taxation” is bad because it involves government’s creating an unlevel playing field by picking winners and losers and bestowing discriminatory special privileges. But it’s important to remember that government indirectly taxes some Internet purchases already (those made through dial-up connections) via the taxes it imposes on telephone service. Also, Internet firms do pay all relevant taxes in the respective states where each is physically located, just like other companies.

One could argue that allowing jurisdictions to levy sales taxes based on the source of thesale rather than the product’s destination would be the fairest solution, but that would require the five states that do not currently levy a sales tax to begin doing so.

If the moratorium on new Internet taxes serves to restrain increases in existing sales taxes or even to spur reductions, then we all will benefit.

Defending the Rich

To the Editor:

“In Defense of the Rich” by Mark Skousen (June 2000) is not only an amoral defense of the rich, it is much more sinister than that: It is an immoral defense of the rich. In the article, Dr. Skousen discusses the auxiliary benefits that the rich provide society, as well as some of the moral attributes and undertakings of some rich people. No argument could be made that is more harmful to capitalism, and no argument could more effectively deliver up the rich to their attackers than the one offered in this article.

The only proper defense of the rich is a moral one. In a free society, the people who own a large sum of wealth created it by means of their own toil, and this is why they are entitled to it. The wealth that they created is their own, regardless of whether this is good for the economy, and regardless of what the people who own it spend it on. The argument that is used in the article is in defense of the latter two issues instead of the primary one. This is an egregious error because it abdicates the moral argument . . . . As long as the majority of people think that all wealth is created and owned by society, then an attempt to persuade people in favor of the rich is doomed. Just imagine the implications of such an idea: if society owns the wealth, then it is by the grace of society that any person can own property. An attempt to persuade people that it is better for them not to confiscate the property of the rich and to wait patiently for whatever crumbs the rich people drop their way will convince only a very few people. The implicit argument of the article is as follows: “The rich are good citizens. They pay their taxes, they give to charity, and they have families. And since they create opportunities for the rest of us, let us as a society decide to let them keep their money.” Not only will this fail, but it is immoral because using this type of argument strips the rich of the proper moral defense that is necessary for people to understand if they are ever going to be convinced that capitalism is a just system.

Just as it is in every other aspect of capitalism, it is interesting and useful to examine the reasons it is actually better for the people “as a whole” if they are secure in their property. But the positive attributes of capitalism should not be used as its defense for the reasons stated above. By titling his article “In Defense of the Rich” and then leaving out the moral, i.e., proper, defense of the rich, Dr. Skousen is promoting the downfall of that which he claims to be defending . . . . That having been said, the information contained in the article is interesting to read, but any future attempt to defend any aspect of capitalism needs to include the moral argument.

—Nicholas A. Curott
Colorado Springs, Colorado

Mark Skousen replies:

Nicholas Curott protesteth too much. I agree wholeheartedly with his moral defense of property. Everyone, rich or poor, has a right to his own wealth—to spend, invest, or even waste it as he pleases. The state has no right to tax or confiscate his property without his permission, no matter how egregious his behavior. I did not think such an elementary principle needed to be explained to readers of Ideas on Liberty.

But amoral? Give me a break. If anything, my article is all about high moral standards and how the rich have a responsibility to make money honestly and to spend it wisely. Otherwise, politicians and the media will continue to bash the rich and promote high marginal tax rates and anti-rich policies. My purpose was to debunk a long-standing myth held by the public and the media—that the rich are profligate pigs, womanizers, and “robber barons” who engage in “conspicuous consumption.” I wished to dispel the Marxist view that “behind every great fortune is a great crime.” Early critics such as Thorstein Veblen, Matthew Josephson, and Sinclair Lewis portrayed the wealthy as robber barons who smoked $100 bills, built 25-room mansions, and abandoned their families in favor of trophy wives and frivolous activities. This negative image was far from harmless. It created an age of envy and censure—and inevitably high income-tax and estate-tax rates, and attacks on big business.

My purpose in writing my column was to alert the readers to the growing evidence favoring a better image for the rich and for capitalism, and to diffuse the anti-capitalist agenda of the politicians and the media. Recent evidence from Professor Thomas Stanley and others confirms an unusual statement made by Nassau Senior, the first professor of political economy, who said in his inaugural address at Oxford in 1825, “the pursuit of wealth . . . is, to the mass of mankind, the great source of moral improvement.” Finally, in the year 2000, Professor Senior’s statement is coming true.

This is all good news, and we need to spread the word rather than to accentuate some extreme laissez-faire tenet. If indeed the wealthy are today more actively pursuing the old-fashioned virtues of frugality, modesty, and faithfulness, then the public and our legislators need to know it. They are less likely to attack the rich and engage in anti-capitalist policies. They may even encourage wealth accumulation. I’m happy to report, by the way, that my column has been reprinted around the country and been translated recently into Spanish and published in several Latin American newspapers.