The Income Tax: Root of All Evil

by Frank Chodorov

In the American political tradition, which claims kinship with Judeo-Christian morality, all is “evil” that violates the doctrine of natural rights, as set down in the Declaration of Independence. We are agreed on that. We are also agreed—if we accept the tradition—that the source of these rights is God; which is simply an admission that we have scratched our heads for some other explanation of these rights and, having found none, have taken recourse to “the nature of things.”

A people who are intent on getting something-for-nothing from government cannot cavil over the infringement of their rights by that government;

When an “evil” becomes customary, it tends to lose the negative value put on it and in men’s minds tends to become a “good.” And so, we hear much these days in praise of the very kind of government which the Founding Fathers tried to prevent by their blueprint; that is, of a paternalistic establishment ruling for and over a subject people. A virtue has been made of what was once considered a vice.

Why, for instance, should one be charitable when the government provides for the incompetent or the unfortunate? Why should one be honest when all that is necessary to “get by” is to obey the law? Why should one give thought to one’s future when the matter can be left to a munificent government? And, with the government providing “free” schooling, including “free” lunches, even the parents’ obligations to their children can be sloughed off.

THERE ARE taxes and taxes. All are alike in two respects: they are compulsory and they are part of production. “Taxation, says the Encyclopedia Britannica, is “that part of the revenue of the State which is obtained by compulsory dues and charges upon its subjects.”

Indirect taxes are so called because the government does not get them directly from the payer; they are collected for the government by manufacturers and merchants, who recoup their outlay from their customers in the price of goods and services. All indirect taxes are added to price.

Income and inheritance taxes imply the denial of private property, and in that are different in principle from all other taxes. The government says to the citizen: “Your earnings are not exclusively your own; we have a claim on them, and our claim precedes yours; we will allow you to keep some of it, because we recognize your need, not your right; but whatever we grant you for yourself is for us to decide.”

Even a thief will justify his way of life. The human being must have a moral code of some kind to ease the difficulty of living with himself. And there is no difficulty in making up a code to fit any given condition, language being as rich as it is, if one hits on an axiom as a basis; an axiom needs no proof.

What is this thing called government, which can grant and take away rights? There are all sorts of answers to that question, but all the answers will agree on one point, that government is a social instrument enjoying a monopoly of coercion. The socialist says that the monopoly of coercion is vested in the government in order that it may bring about an ideal social and economic order; others say that the government must have a monopoly of coercion in order to prevent individuals from using coercion on one another. In short, the essential characteristic of government is power. If, then, we say that our rights stem from government, on a loan basis, we admit that whoever gets control of the power vested in government is the author of rights. And simply because he has the power to enforce his will. Thus, the basic axiom of socialism, in all its forms, is that might is right.

And that means that power is all there is to morality. If I am bigger and stronger than you, and you have no way of defending yourself, then it is right if I thrash you; the fact that I did thrash you is proof that I had the right to do so. On the other hand, if you can intimidate me with a gun, then right returns to your side. All of which comes to mere nonsense. And a social order based on the socialistic axiom—which makes the government the final judge of all morality—is a nonsensical society. It is a society in which the highest value is the acquisition of power—as exemplified in a Hitler or a Stalin—and the fate of those who cannot acquire it is subservience as a condition of existence.

When the individual says he has a valid title to life, he means that all that is he, is his own; his body, his mind, his faculties. Maybe there is something else to life, such as a soul, but without going into that realm, he is willing to settle on what he knows about himself—his consciousness. All that is “I” is “mine.” That implies, of course, that all that is “you” is “yours”—for, every “you” is an “I.” Rights work both ways. But, while just wanting to live gives the individual a title to life, it is an empty title unless he can acquire the things that make life livable, beginning with food, raiment, and shelter. These things do not come to you because you want them; they come as the result of putting labor to raw materials. You have to give something of yourself—your brawn or your brain—to make the necessary things available. Even wild berries have to be picked before they can be eaten. But the energy you put out to make the necessary things is part of you; it is you. Therefore, when you cause these things to exist, your title to yourself, your labor, is extended to the things. You have a right to them simply because you have a right to life. That is the moral basis of the right of property. “I own it because I made it” is a title that proves itself. The recognition of that title is implied in the statement that “I make so many dollars a week.” That is literally true.

In other words, your ownership entitles you to use your judgment as to what you will do with the product of your labor—consume it, give it away, sell it, save it. Freedom of disposition is the substance of property rights.

Suppose the freedom of disposition is taken away from you entirely. That is, you become a slave; you have no right of property. Whatever you produce is taken by somebody else, and though a good part of it is returned to you, in the way of sustenance, medical care, housing, you cannot under the law dispose of your output; if you try to, you become the legal “robber.” Your concern in production wanes and you develop an attitude toward laboring that is called a “slave” psychology. Your interest in yourself also drops because you sense that without the right of property you are not much different from the other living things in the barn. The clergyman may tell you you are a man, with a soul, but you sense that without the right of property you are somewhat less of a man than the one who can dispose of your production as he wills. If you are a human, how human are you?

Even more than that, we who have no right to own certainly have no right to give and charity becomes an empty word; in a socialistic order no one need give thought to an unfortunate neighbor because it is the duty of the government, the only property owner, to take care of him; it might even become a crime to give a “bum” a dime. When the denial of the right of the individual is negated through the denial of ownership, the sense of personal pride, which distinguishes man from beast, must decay from disuse.

The ability-to-pay doctrine proceeds from a direct violation of this principle of equality.1 It establishes a legal classification of society. It sets up a principle of government that was not contemplated when this nation was formed; it is a reversion to the caste system that had existed in Europe. The easy argument that is used to slide this caste idea into our law is that those who are rich became so because they enjoy more of the benefits of government and therefore ought to pay more of its expenses. Is that so? Did the government make them rich? If so, then the government is at fault; the only way the government can enrich a citizen is by giving him a special advantage over other citizens, and in that case the government violates its trust.

It is obvious that in handing out special privileges the government is doing what it ought not to do; it is using its power not for the purpose of dispensing justice, but for the purpose of creating injustice.

If I have acquired wealth by way of a special privilege granted me by the government, then when it lays a tax on my ill-gotten wealth it is sharing my unfair advantage; it is, so to say, a partner in my loot.

It is not police protection that makes one rich, the other poor. The differences in personal wealth that arise in any society—barring special privileges granted by government—are due either to accident or to qualities inherent in the individual: industry, thrift, abstinence. But it so happens that those who have and exercise these qualities do not injure others; their very substance indicates that in acquiring it they have benefited their fellowmen. If I become rich by making and selling shoes, it follows that many people have found my shoes desirable, and they have thus profited by my efforts. The wealth of society is in proportion to the productive efforts of the individuals who compose that society, and government has nothing to do with it—beyond the negative function of maintaining order and protecting property. People make wealth; government can only take it. The effect

If we examine the income tax carefully we find that it is not a tax on income so much as it is a tax on capital. What the government takes from me is not what I consume but what I might have saved.

To be sure, I might have spent some of it for a new suit or to paint my house, but some of it I might have put in the bank, where it would have become available, at interest, to someone who would have used it to build a new factory, enlarge his plant, open a store, or buy a farm. That’s what generally happens to savings. Certainly, a good part of the earnings of a corporation are put to plant improvement or expansion, which it cannot effect if the earnings are confiscated. Hence, the effect of income taxation is to impair the capital structure of the country.

Despite all the long words and moral platitudes that have been used to shore up ability-to-pay, the fact is that this doctrine is closely related to the rule of highwaymanry: take where the taking is good. Those who practice that trade have the good grace not to moralize about it; they pick on the traveler who looks opulent and pass up the obvious bum. The government does likewise, and like the highwayman it does not quibble over how the victim came by his wealth.

Income taxation appeals to the governing class because in its everlasting urgency for power it needs money. Income taxation appeals to the mass of people because it gives expression to their envy; it salves their sense of hurt.

The have-nots who support the politicians in the demand for income taxation do so only because they hate the haves; although they delude themselves with the thought that they might get some of the pelt the fact is that the taxing of incomes cannot in any way improve their economic condition. So that, the sum of all the arguments for income taxation comes to political ambition and the sin of covetousness.

The Populists, as do all reformers, assumed that social good can be achieved through political action. They ignored the age-old fact that whenever the government does “good” it acts in the interests of some at the expense of others, meanwhile acquiring power for itself. The end product of government intervention in the economy of the country is more power for government. It never gives up power; it never abdicates.

The theory of republican government is that sovereignty resides in the citizen, who lends it to his elected representative for a specified time. But a people whose wealth is siphoned into the coffers of its government is in no position to stand up to it; with its wealth goes its sovereignty, its sense of dignity. People still vote, of course, but their judgment in the ballot booth is unduly influenced by handouts from their government, whether these be in the form of “relief,” parity prices, or orders for battleships. Though it is not exactly an over-the-counter transaction, the citizen’s conscience is bought. Nor are voters immune to the propaganda issued by the bureaucrats, in their own behalf, and paid for by the voters themselves.

While we are on this subject of immunity of the body, we should mention the fact that though we long ago abolished debtors’ prisons, we do have prisons for those who violate the income-tax laws. We can cheat one another with impunity, but not the government.

And so with every activity of government turned Santa Claus by the income tax: a mass of propaganda introduces the new practice and more propaganda justifies it, until the people think as the government wants them to think. Free judgment becomes next to impossible.

The class-war doctrine is most vicious not in that it sets man against man, producer against producer, but in that it diverts the attention of the contestants from their common enemy, the State. Men live by production, but the State lives by appropriation.

At this writing, the fictitious reserve fund has accumulated fifteen billions in bonds. Already some economists are beginning to wonder how the government will be able to pay benefits to all those who during the past sixteen years have been making “contributions” when they will have reached the age of sixty-five. Figurers have shown that the interest will not be sufficient to keep the aged barely alive, if they have to depend on these stipends; and under the law they are deprived of these stipends if they earn more than $75 a month extra. This is the answer: The government will meet its obligations by handing out brand-new printed dollars, with declining purchasing power, and the old folks will have to depend on what support they can beg from their taxridden children.

The reason for the failure of social security in Germany, and wherever else it has been tried, is psychological, not political. When the individual is relieved of the obligation of self-respect, he acquires the habits of helplessness; he is inclined to retreat to the security of the prenatal state. The more he is taken care of the more he wants care.

There have always been, and perhaps always will be, people who are averse to letting other people alone. Recognizing the human inclination to err, they are impelled by their kindness of heart to overcome this imperfection; invariably they come up with a sure-proof plan that needs only political power to become effective. Political power is the essential ingredient of every one of these plans to improve the human.

When you dig down to the psychology of our States’ Rights tradition you see the soundness of the collectivists’ tactics. The legal difficulties that the division of authority presents is not their main trouble; these can be circumvented by new laws, political deals, and judicial interpretations.1 The real obstacle is the psychological resistance to centralization that the States’ Rights tradition fosters. The citizen of divided allegiance cannot be reduced to subservience; if he is in the habit of serving two political gods he cannot be dominated by either one. History supports the argument. No political authority ever achieved absolutism until the people were deprived of a choice of loyalties.

If we were living in forty-eight separate nations our lot, as individuals, might be worse; it probably would. Some people, using Switzerland as example, maintain that the smaller the nation the more freedom. But the Central American dictatorships refute that argument. The characteristic of the Swiss government that is often overlooked is the division of authority between the federal establishments and the cantons. That is the essential ingredient: only when the central authority is kept off balance by competition from autonomous sub divisions are the rights of citizens more secure.

Freedom is the absence of restraint. Government cannot give freedom, it can only take it away. The more power the government exercises the less freedom will the people enjoy. And when government has a monopoly of power the people have no freedom. That is the definition of absolutism—monopoly of power.

The object of monopoly, in any field, is to compel the customer to accept the services offered by the monopolist at his own terms. It is a take-it-or-leave-it arrangement. Competition, on the other hand, compels the servicer to meet the standards set by his competitors, with the customer the final judge as to proficiency. The beneficiary of competition is the buyer. In the matter of government services—which is the protection of life and property—the customer is the citizen.4 The...

Throughout history, those to whom the job of rulership has fallen, whether by heredity or popular selection, have shown a tendency to use their position to dominate, not serve, the ruled.

Popular suffrage is in itself no guarantee of freedom. People can vote themselves into slavery. The only way, then, to prevent the monopoly of power from becoming absolute is to create a competitive market for government; to give the citizens, the customers, a choice of jurisdiction.

The fires of freedom are stoked by the will to be free. It is not the promise of bread alone that will spur a people to shed their shackles, but rather the hope that they may attain the dignity of self-respecting individuals.

The rank and file, those whose principal preoccupation is with the problem of existence, are in no mood to argue with the beneficent State; they are for letting well enough alone. Those Americans who have pretensions to over-average capacities are also quite willing to put their self-esteem on the barrelhead. The entrepreneur whose venture would not exist but for government loans or government contracts readily makes peace with government regulation. So long as government bonds pay interest, the banker will not quarrel with government intervention. The farmer does not object to a meddlesome federal agent who brings him a gratuity, and the professor who lives by subsidie s will write books in praise of the subsidizing State. Who wants freedom?