For weeks now, I have been thinking about writing a long treatise about income taxes and posting it on tax day, but then I realized that there is nothing I can write that would exceed what was writtenby Frank Chodrov in his book, The Income Tax: Root of All Evil. I happened across this book around 10 years ago and it was mind-blowing to me and, more than any other work, started me along the libertarian road that I walk today.

Chodrov’s “Argument” is reprinted below:

Tradition has a way of hanging on even after it is, for all practical purposes, dead. We in this country still use individualistic terms—as, for instance, the rights of man—when, as a matter of fact, we think and behave in the framework of collectivistic doctrine. We support and advocate such practices as farm-support prices, social security, government housing, socialized medicine, conscription, and all sorts of ideas that stem from the thesis that man has no rights except those given him by government.

Despite this growing tendency to look to political power as the source of material betterment and as the guide to our personal destinies, we still talk of limited government, states rights, checks and balances, and of the personal virtues of thrift, industry, and initiative. Thanks to our literature, the tradition hangs on even though it has lost force.
But there are many Americans to whom the new trend is distasteful, partly because they are traditionalists, partly because they find it personally unpleasant, partly because reason tells that it must lead to the complete subjugation of the individual, as in Nazi Germany or Communist Russia, and they don’t like the prospect. It is for these Americans that this book was written. For their opposition to the trend takes the shape of reform, while nothing will turn it but revo lution. And by “revolution” I mean the return to the people of that sovereignty which our tradition assumes them to have. I mean the return to them of the power which government confiscated by way of the Sixteenth Amendment.

When you examine any species of government intervention you find that it is made possible by revenues. A government is as strong as its income. Contrariwise, the independence of the people is in direct proportion to the amount of their wealth they can enjoy. We cannot restore traditional American freedom unless we limit the government’s power to tax. No tinkering with this, that, or the other law will stop the trend toward socialism. We must repeal the Sixteenth Amendment.
Washington, D.C.

F. C. February 1954

You can download and read the whole thing here.

Remember that this was written almost 50 years ago and then reflect on how much things have changed – and not for the better – since then.

George Will hits it out of the park today.

First, a mention of 3rd party payments and the inefficiencies that such a system has introduced to our healthcare market (if only he had gone on and said more):

Employer-paid insurance is central to what David Gratzer of the Manhattan Institute calls “the 12 cent problem.” That is how much of every health care dollar is spent by the person receiving the care. Hence Americans’ buffet mentality — we paid at the door to the health care feast, so let’s consume all we can.

John McCain had the correct prescription for health care during the 2008 campaign. He proposed serious change — taxing employer-provided health care as what it indisputably is, compensation, and giving tax credits, including refundable ones, for individuals to purchase insurance.

Then, a mention of what is really going on here: Obama really thinks he’s smarter than everyone else and would rather impose a clean solution than deal with the dirt of democracy:

Professor Obama, who will seek re-election on the 100th anniversary of Wilson’s 1912 election, understands, which makes him melancholy. Speaking to Katie Couric on Feb. 7, Obama said:

“I would have loved nothing better than to simply come up with some very elegant, academically approved approach to health care, and didn’t have any kinds of legislative fingerprints on it, and just go ahead and have that passed. But that’s not how it works in our democracy. Unfortunately, what we end up having to do is to do a lot of negotiations with a lot of different people.”

Note his aesthetic criterion of elegance, by which he probably means sublime complexity. During the yearlong health care debate, Republicans such as Sen. Lamar Alexander of Tennessee have consistently cautioned against the conceit that government is good at “comprehensive” solutions to the complex problems of a continental nation. Obama has consistently argued, in effect, that the health care system is like a Calder mobile — touch it here and things will jiggle here, there and everywhere. Because everything is connected to everything else, merely piecemeal change is impossible.

So note also Obama’s yearning for something “academically approved” rather than something resulting from “a lot of negotiations with a lot of different people,” aka politics.

Pretty much.

Note that I’m not saying that I don’t think that sometimes the political process isn’t inefficient or that experts can’t come up with the best solution to a problem. What I’m more concerned with is the legitimacy of the process – the principle that our government is representative and based on inviolable sovereignty of the individual. That’s what gets lost so often in the mind of the modern progressive, that he feels he is smarter than everyone else and is being held back by his less enlightened compatriots. THAT is the real cause of the opposition to Obamacare today: a lack of respect for the individual in favor of paternalism.

I know that there is an insurance/health care tax credit for employers that individuals don’t have and I know that it’s a relic of WW2 wage controls. That’s not the question I am asking – what I want to know, what I simply cannot understand – is WHY the tax credit is still there for employers and isn’t available for individuals.

(Actually, strike that question. I am sure there’s a political answer and that it’s a combination of corrupt political rent seeking and overspending by a federal government that is loathe to reduce tax collections in any way… so forget that question)

A better question is this: WHY is there a presumption that employers should responsible for employees’ health care? Why is there an assumption that employers who don’t offer health care plans aren’t doing right by their employees, and why is the underlying objective – on both sides of the aisle – that something should be done to FORCE those employers to offer coverage as opposed to making it EASIER for individuals to get it for themselves instead?

President Obama was giving his closing remarks to the Kabuki Summit yesterday and by the time I was yelling at the television. Why must we infantilize people and assume that they cannot take care of themselves? Why must we assume that the only way to solve a problem is to centralize authority and mandate regulations?

The whole problem with the escalation of health care costs today is that consumers don’t actually pay for what they receive. They don’t get price feedback, so they overconsume and health care suppliers overcharge. If you want to fix that problem, take away 3rd party payment systems – this means all forms of comprehensive health “insurance”, including medicare – and start exposing consumers to the true costs of their decisions. If someone is poor, then subsidize him directly, but don’t pay on his behalf and implicitly encourage him not to ask about price. If someone is already sick and needs acute care that they cannot afford, then use the system we already have, Medicaid. But we should ENCOURAGE people to ask their doctors about the price of procedures, and we should encourage doctors to market themselves and compete on the price to consumers.

That is the ONLY way to fix this.

Doubling down on medicare – which is what Obamacare is, just an expansion of the size of the 3rd party system and forcing everyone onto an even more opaque government system – is only going to make things worse. It’s that simple.

I posted this in a comments section over at Reason this morning and thought it probably described its own blog post. I’ve been thinking a lot about the Joe Stack story the past few days and I think the comments below very neatly encapsulate my thoughts on this sad story:

It’s too bad that he acted out because now people can just ignore his complaints dismissively as the “rantings of a crazy guy” and point to his criticism of the Catholic church and George Bush and all those other things as evidence that all of his other opinions were equally loony.

I got into a message board argument over the weekend with a horribly condescending person, who claimed to be an IRS agent, who honestly tried to make the case that W2 classification of employees is a good thing because it “protects workers”. How? Because it shifts parts of the employment tax burden onto evil greedy employers, who apparently only consider as “employment expense” what they pay as wages and would otherwise pocket the difference if not for the heroic actions of FICA.

When I pointed out that W2 classification also makes tax collections much easier, by restricting taxpayer’s consent and shifting the burden of proof from collector to payer, and enhances revenue by giving government an interest-free float, he called me “paranoid” and told me to go find a therapist.

Thing is, if enhanced collections weren’t the case, why would Obama come out last week and announce a “crackdown” on independent contractors as a revenue enhancement strategy?

Fact is, it’s fairly clear that this man – Joe Stack – was hounded by the IRS for most of his adult life, and whether or not he brought it on himself, the sheer amount of discretionary administrative and enforcement power that the IRS has is a legitimate concern. The income tax is fundamentally inconsistent with the founding principles of this country – 16th Amendment or not – and Congress, using the IRS as its very own special collection agency, has rigged the rules against the average American and built a regulatory system (through the despicable withholding tax, which is a specific topic Joe mentions in his note) that maximizes revenue whole cultivating as much apathy and ignorance as possible among taxpayers.

‘Ole Joe DID try and work peacefully through the system and he did try and work with the IRS to try and fix his problems… and was apparently given no quarter. He quite clearly was driven to such a hopeless place that he felt he had no other choice but to react violently. I’m not all saying that his actions were justified or that he made the right choice, but he does deserve at least a little more sympathy and consideration than many people are apparently willing to give him.

Just because a vast majority of Americans don’t go out and kill IRS agents doesn’t mean that the system is just or fairly structured. There are serious problems that need to be addressed and Joe Stack, through his actions, has ruined it for the time being for those of us who care deeply about tax reform.

That pretty much says it all. Someday when I feel like blogging in depth, I’ll get into John Locke’s natural law and his theory of property and labor and how that’s fundamentally at odds with the income tax. But today I need to work.

Jonah hits it out of the park today:

What I don’t think we hear enough about is intellectual hypocrisy. What’s that? Well, if moral hypocrisy is saying what values people should live by while failing to follow them yourself, intellectual hypocrisy is believing you are smart enough to run other peoples’ lives when you can barely run your own…

Or consider Rep. Charles Rangel (D., N.Y.), currently subject of a House ethics investigation. Rangel heads the Ways and Means Committee, which writes the tax code. He backs the imposition of an income-tax surcharge on high earners to pay for health care, calling it “the moral thing to do.” Yet he can’t seem to figure out how to file his own taxes properly or, perhaps, legally.

Now, I also know lots of conservatives who are basket cases at everything other than reading and writing books and articles, giving speeches, and thinking Big Thoughts (likewise, I know liberals who despise conservative moralizing about sex and religion who nonetheless live chaste, pious lives themselves). The point is that conservatives don’t presume to be smart enough to run everything, because conservative dogma takes it as an article of faith that no one can be that smart.

This is exactly right. One of the basic tenets of libertarianism and capitalist economics – the principles that this country were founded upon – is that the only person qualified to make decisions for a person is that person himself and I’ve been meaning to blog on this for some time. I have a nice long post in my head on this topic for someday in the future if I can ever get around to it.

On the other hand, the actual hypocrisy that Jonah is talking about here might be that these guys -Barney Frank, Nancy Pelosi, Obama, and the rest of them – don’t actually think they can run things better or that they can accomplish the things they claim, and they know they can’t, rather, their actual reasons for doing what they do are different than what they claim. Anyone with half a brain can see that expanding government entitlements isn’t going to save money in the long run, nor is forbidding malpractice reform going to lower costs incurred by healthcare providers, but if the goal is simply to expand the size and power of the federal government in pursuit of craven political purposes and majority building, then they’re doing a bang up job and are clearly up to the task.

Maybe that’s not hypocrisy, but it is dishonesty.

Like I said, more on libertarian theory later.

I’ve been meaning to get back to blogging and this morning is as good a time as any.

Ed has a good post this morning on the growing debate over the constitutionality of health insurance mandates and the left’s solidifying position that of course it’s allowed because Congress can do anything if they say they’re doing it for people’s own good, which is obviously what the framer’s intended by “general welfare.” (No really, that’s what they’re saying)

So I’ll ask again: What authority does Congress have to mandate that people buy a product?  What precedent do they have to threaten people with imprisonment if they don’t buy a product merely for existing, as opposed to a prerequisite for accessing public roads as with car insurance?  The reason why Pelosi, Leahy, and Hoyer refuse to answer those questions is because they don’t have an answer to them.

I’m not so much going to focus on the specific post content, because Ed’s got the whole constitutionality argument covered, but there were some interesting comments on enforcing the mandates that I wanted to touch on.

As a bit of background, in all of the proposed healthcare bills containing an individual mandate, the mandate will be enforced by the IRS.

Now, knowing that the IRS will be the enforcer of this mandate, what can one logically conclude about the following statements?

its like taxes, pay voluntarily so you don’t get fined or thrown in jail.

If this monstrosity passes, I can all but guarantee you will see MILLIONS dare the feds to imprison them.

And here’s the rub with the individual mandate: yes indeed, paying income taxes is considered to be voluntary, but for tens of millions of people in this country, it’s voluntary only to the point where it’s also voluntary to go to work and get a paycheck. Yes, self-employed people (I’m ignoring corporations in this argument, because they aren’t applicable) have to actually write a check and have a little flexibility in deciding whether or not to write that check, but for millions of Americans, they pay their taxes every two weeks whether they want to or not. It’s called “payroll withholding” and it’s insidious.

They don’t withhold taxes from your paycheck because it’s more convenient for everyone that way (although that’s how they justify it). They withhold taxes from your paycheck because it makes you more docile and ignorant and easier to be lied to. This is why the IRS is always so interested in trying to classify people as employees when they might not actually consider themselves to be, because the IRS gets more money with less hassle that way and you’re not as informed about how much you’re actually paying.

So what does this have to do with the individual mandate? Like a lot of things, the actual enforcement mechanism will be a matter of regulation rather than statute, but my guess is that signing your paperwork when you start a new job will become something like registering your car at the DMV: you’ll have to show proof of insurance when you fill out all of the forms and if you can’t, they’ll just automatically take the fine/fee/premium out of your paycheck just like normal income taxes and it will be up to you at the end of the year to prove that you were really insured so that you can get an interest-free refund of the nominal amount they withheld. No one will be wiser and there will be no way for anyone to protest or otherwise not pay.

Just watch.

One of the first things that new economics students are taught is the perverse effect that minimum wage laws have on the people they’re purportedly intended to help. That while the per unit price for labor can be adjusted by government decree, the total amount employers have budgeted and can afford to pay still stays fixed. Ergo, the only solution to the math problem is for employees to work fewer hours. So instead of helping “the poor” (”unskilled” is a better descriptor), minimum wage laws hurt them overall.

With the bad – middle of recession – timing of the recent increase in the federal minimum wage, lots of stories have come out in the press on this subject. Caroline Baum at Bloomberg has one of the best:

There is never a good time to raise the minimum wage. Just ask the people working in low-skilled jobs that are laid off as a result.

Now is a particularly bad time. Yet the federal minimum wage is scheduled to rise to $7.25 on July 24, the third step of a $2.10 increase enacted in 2007. In more than half the states, the minimum wage already exceeds the current national minimum of $6.55 an hour.

While President Barack Obama and his economics team have been mum on the issue, I’ve got to think they are worrying, at least among themselves, about the impact given the current state of the labor market.

A total of 14.7 million people were unemployed in June. About half of them joined the ranks of the unemployed since the start of the recession in December 2007. The U.S. unemployment rate stands at 9.5 percent, almost 4 percentage points higher than it was a year ago.

And these statistics understate the toll the recession has taken on those at the bottom rung of the job ladder. The unemployment rate for people without a high-school diploma is 15.5 percent. Teenagers and minorities have been hit even harder. These are the folks most likely to be working in low- skilled, minimum-wage type jobs. And yes, these are the same folks a minimum-wage increase purports to help.

Fred Barnes also makes a similar point in a slightly broader – and harsher – column at the Weekly Standard: Obama’s an Economic Illiterate:

At his press conference, Obama endorsed a surtax on families earning more than $1 million a year to pay for his health care initiative. This is no way to get the country out of a recession. Like them or not, millionaires are the folks whose investments create growth and jobs–which are, after all, exactly what the president is hoping for.

Another tax hike–especially on top of the increased taxes on individual income, capital gains, dividends, and inheritances that Obama intends to go into effect in 2011–is sure to impede investment. It’s an anti-growth measure, as those with even a sketchy grasp of economics know. But Obama doesn’t appear to.

The president also spoke favorably at the press conference of taxing “risky” ventures by Wall Street investors. It wasn’t clear what risky investments he had in mind. Never mind. Reckless risk-taking is hardly a problem at the moment. It’s the lack of any risk-taking at all by investors that’s holding back the economy…

Then there’s the matter of corporate profits. You’d think Obama would love profits since they nurture a robust economy and job growth and are largely responsible for the rise in the stock market last week to its loftiest point since January. And strong profits may foreshadow an economic recovery. But the president’s opinion of profits ranges from ambivalent to hostile.

He declared it “a good thing” that banks are profitable again, but he couldn’t leave it at that. He went on to bemoan the absence of “change in behavior and practices” among bankers. As for the “record profits” of insurance companies, he had nothing but disdain. “What’s the constraint on that?” he asked, as if those profits should indeed be constrained.

A good example of Obama’s economic shallowness is his unrelenting defense of the $787 billion “stimulus.” Enacted in February, it has had minimal impact on the economy. Yet Obama has no second thoughts. He says he wouldn’t change a thing about the stimulus. It has “already saved jobs and created new ones,” he said at the press conference, neglecting to note that 2 million jobs–a net 2 million–have been lost since it was passed.

It’s only fair to point out that Obama isn’t responsible for the minimum wage increase – Congress passed the law back in 2007 and tied the increases to an emergency war spending bill that President Bush needed to keep funding our troops during one of the most difficult times in the war. The economy was booming at the time and the war certainly had precendence then.

That said, everything that was in the Barnes piece about demagoguery and ambivalence towards business can not only be said about Obama, it can be said of  most politicians from both parties these days : in the past 200 years of history our country has come to be ruled by a permanent political class that requires anyone who wants to be successful at it to start at a young age and commit himself to polling cycles and soundbites at the expense of gaining real world business experience. (I’m not counting a handful of years spent on Wall Street as real-world business experience, because it’s not – it’s just a different segment of the privileged class structure with its own round of cars and drivers and suits and expensive lunches, only in a different city. Unless you’ve ever had to worry about making payroll, you don’t have real world business experience…)

The founding fathers didn’t have this political class in mind when they designed our system of government. Yes, Jefferson was in favor of the everyman citizen-farmer ideal and Madison promoted a more elitist system that favored merchants and industry (and their wealth), but what both groups had in mind was that government would be secondary to everyone’s everyday lives, including the politicians themselves. Politicians would be citizens first and leaders second. Under such a system we wouldn’t necessarily have to worry about economic ignorance from Congress and the president because a.) they would have real world experience to draw on and interests to protect and b.) an idea like a “federal” minimum wage wouldn’t have even been considered because it was by definition beyond the scope of the federal (and not national, as we think of it today) government.

I need to flesh this idea out more, because I think it is a signifcant piece of many of the challenges we have today as a country. State and local governments, the governmental levels that are closest to citizens’ everyday lives and should theoretically have a greater influence on them, has been and is slowly being neutered and consumed by an ever expanding state colossus. The reasons for that are myriad (although I have two personal favorites that complement one another), but regardless of the reasons why, that the political class is dominated by politicians first and not citizens has a profound effect on the effectiveness of its work, in particular with regards to economics and the rights of business.

–

UPDATE: Here’s Boortz on the minimum wage increase. As always, he does a very good job of explaning in a very personal and vernacular kind of way, but that’s his job, after all.

Fortune has a good piece on some of the structural costs  of the two healthcare “reform” bills:

Freedom to be rewarded for healthy living, or pay your real costs

As with the previous example, the Obama plan enshrines into federal law one of the worst features of state legislation: community rating. Eleven states, ranging from New York to Oregon, have some form of community rating. In its purest form, community rating requires that all patients pay the same rates for their level of coverage regardless of their age or medical condition.

Americans with pre-existing conditions need subsidies under any plan, but community rating is a dubious way to bring fairness to health care. The reason is twofold: First, it forces young people, who typically have lower incomes than older workers, to pay far more than their actual cost, and gives older workers, who can afford to pay more, a big discount. The state laws gouging the young are a major reason so many of them have joined the ranks of uninsured.

Under the Senate plan, insurers would be barred from charging any more than twice as much for one patient vs. any other patient with the same coverage. So if a 20-year-old who costs just $800 a year to insure is forced to pay $2,500, a 62-year-old who costs $7,500 would pay no more than $5,000.

Second, the bills would ban insurers from charging differing premiums based on the health of their customers. Again, that’s understandable for folks with diabetes or cancer. But the bills would bar rewarding people who pursue a healthy lifestyle of exercise or a cholesterol-conscious diet. That’s hardly a formula for lower costs. It’s as if car insurers had to charge the same rates to safe drivers as to chronic speeders with a history of accidents.

And one I find really scary (being assigned a doctor?):

Freedom to choose your doctors

The Senate bill requires that Americans buying through the exchanges — and as we’ve seen, that will soon be most Americans — must get their care through something called “medical home.” Medical home is similar to an HMO. You’re assigned a primary care doctor, and the doctor controls your access to specialists. The primary care physicians will decide which services, like MRIs and other diagnostic scans, are best for you, and will decide when you really need to see a cardiologists or orthopedists.

Lost freedoms aside, this is a good story in that it’s not just a rehash of dubious insurance practices or government proposals to fix them and the authors here do a good job of trying to disconnect insurance from the story. I’ve been saying for some time now that what really needs to be done in America is to get away from the health insurance as warranty mindset that pervades our thinking today – that the cost of taking normal routine care of our bodies is someone else’s responsibility:

The bills threaten to eliminate the one part of the market truly driven by consumers spending their own money. That’s what makes a market, and health care needs more of it, not less.

Hundreds of companies now offer Health Savings Accounts to about 5 million employees. Those workers deposit tax-free money in the accounts and get a matching contribution from their employer. They can use the funds to buy a high-deductible plan — say for major medical costs over $12,000. Preventive care is reimbursed, but patients pay all other routine doctor visits and tests with their own money from the HSA account. As a result, HSA users are far more cost-conscious than customers who are reimbursed for the majority of their care.

More insurance, or even better insurance, is not necessarily the answer to the problems we are facing today. Rather, health insurance, as it’s currently thought of in our society today is the problem. What needs to happen is a reconnection between supply and demand – between patients and providers – before overall cost and accesibility improves.