Idaho's Weekly Journal of Local & National Commentary Week 2815


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by Free Market Duck

Why we don't need property taxes
...Part I

Boise, ID – Whenever Albert Einstein, Sir Isaac Newton, and many of the greatest thinkers of the past – including America’s Founding Fathers such as Benjamin Franklin and Thomas Jefferson – bumped up against “unsolvable” problems, they typically took a giant step back, re-thought the basic premises and then discovered or created a simple solution.  E=mc2, F=ma, and “When in the course of human events…We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, ... "

   So here we are in Idaho in 2006 stumbling around with a seemingly “unsolvable” problem:  skyrocketing property taxes.  Like the great thinkers of the past, we need to step back and re-think everything about why we’re paying property taxes in the first place.

  1. What is the function of any tax?
  2. What is a property tax?
  3. Is there a better method, financially and morally, to pay for services than using property taxes – or any taxes?

Instead of incessantly arguing about everybody’s personal preferences for inflicting property taxes upon their neighbors while creating exemptions for themselves, we need to question our original premises.

 What is the function of a tax?

   A tax is simply a set of rules for the government to take money from individuals or corporate entities for some stated government purpose, such as building state schools or redistributing income from Peter to Paul for real or imagined “equality” or other “altruistic” reasons.

    A property tax is the set of tax rules using “property” as the basis for the confiscatory tax.  The function of a property tax is the same as for any tax:  payment for communal services or goals.

    Now comes the thinking that separates geniuses from the average Joe Doe:  questioning why we have chosen the method called “taxation” to try and achieve our common goals.  For example, the thinker will ask, “If our goal is to provide great low-cost cars, computers, schools, farm crops, and yo-yos for everybody as cheaply and efficiently as possible, what method should we implement?”  A free market, socialism, fascism, a dictatorship or what?  The non-thinker will not ask this basic question and, in fact, has little patience with anybody who does.  The non-thinker does not see a connection between basic premises and the results.  Also, there are those who don’t want to change because they benefit greatly by the status quo – often because they set up the current system the way it is to benefit themselves.

   Back to the premise of taxation.  What’s the most efficient and moral – i.e. fair, just, adhering to individual rights – method for a community to pay for each service?  Is it private enterprise and the free market or heavy taxation with lots of governmental intervention and controls?

   Let’s ask this important question within the framework of two basic concepts.

 What’s best according to:

  1. Empirical evidence, (observable historical facts) and
  2. Philosophy (conceptual theory that brings about empirical facts).

   In other words, what does history and current facts plus theory of human action show us about using taxation to achieve our stated common goals in the economy?

   Empirically, history and the current structure of most economies in the world today show us that heavy taxation does not achieve our stated common goals of services such as education, health, energy, or agriculture.  Dictatorships, wars and individual rights violations are the direct result of moderate to heavy taxation, which means heavy governmental intervention.

   Historically, those nations with little or no taxation typically achieved their stated common goals through a free market or limited governmental intervention.  The U.S., Hong Kong, and other free markets (mostly) are obvious examples.  The U.S.S.R., China, South America, the mid-East and the entire history of mankind are obvious examples of taxation and government intervention that has failed miserably.  Simply put, free markets and individual freedom works.  Heavy taxation and governmental interventionism doesn’t work.

   So what are the philosophical or conceptual reasons that explain these empirical results that taxation doesn’t work while free markets do work?

   Cultural anthropology shows us that individuals compete for survival.  Since governments are instituted with the power of the collective coercive power of force, if a culture routes individual competition through the government – i.e. heavy taxation and governmental intervention – then we end up with competition for survival embedded within the bureaucracy of the government.  Which means Kings and Queens and Dictatorships and Pork Barrel U.S. politics with paid-off politicians.  Power politics rule; individual rights and free markets are sacrificed when competition is re-routed through the government.

   Note what we now have at the local Idaho taxation level:  the Governor pays 41-cents per acre in property taxes ($5.72 for 14 acres in 2005) in Valley County near multi-million dollar Tamarack Resort while others in Valley County pay thousands of dollars in property taxes – and for much less property.  In Ada County, the Friends of the Ada County Judicial System, Inc. (judges and lobbyist lawyers) paid ZERO property taxes in a fake lease-purchase of a $4 million piece of property in downtown Boise which they unconstitutionally obtained (at taxpayer expense, by the way) to build their Court House.  Meanwhile, Boiseans pay thousands of dollars per year for residential property taxes.  At the national level, the Jack Abramoff lobbyist scandal of political contributions buying Congressional votes plus the over 14,000 pieces of pork-attached legislation last year show that taxation and its corollary hidden tax, deficit financing, represents competition for survival routed through government institutions.  Clearly, empirical examples show what happens when competition for survival is routed through taxation and the government

   From a purely free market economics theory, the destruction of the free market pricing mechanism through taxation and government intervention while attempting to obtain the stated common goals of creating and exchanging goods and services for education, newspapers, cars, computers, groceries, and all other market goods, will ultimately cause market dysfunctions and dislocations.  Without qualitatively determined prices (i.e. free market prices without government intervention) tied to real supply and demand, business and government planners have no means of true economic calculation and thus no means for future planning.  In a controlled environment, controlled markets stagnate and go into recessions.  Raising taxes or increasing government intervention as a “solution” simply throws more gasoline on the already-created government bonfire.  That’s why fascism and socialism – the ultimate in taxation -- doesn’t work:  both systems destroy the means, true market prices,  to their ends, the stated goals of the common good (such as public education or nationalized airlines).  The U.S. does not have a true free market; it is more like a highly government controlled market, unfortunately, much like Italy’s economic fascism under Mussolini in the 1930s.   (Stay tuned for Part II next week) -- FM Duck

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