Free Liberal

Coordinating towards higher values

The Problem with Gary Johnson’s Campaign

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Gary Johnson, former governor of New Mexico, seeks to be the Libertarian Party candidate for the President of the USA. The main problem with his candidacy is Johnson’s advocacy of a national sales tax (see Gary Johnson on Tax Reform).

Johnson’s embrace of consumption taxes has influenced many libertarians to not only favor this tax as the least worst, but to even assert that sales taxes are voluntary. Thus even worse than advocating a regressive and market hampering tax, Johnson’s advocacy is affecting the libertarian conception of voluntary action. The organized movement for a national sales tax calls it a “Fair Tax” and claims that such a tax benefits the economy.

A government intervention alters what people would otherwise voluntarily do. By raising the price relative to there being no tax, a sales tax reduces the quantity that people buy. Taxes on goods as well as on wages tend to push people towards more leisure and less labor, as people shift away from taxed goods and towards untaxed leisure. Therefore a sales tax is an intervention, and it is not voluntary.

One can understand the political motivation to avoid saying “taxation is theft,” but if taxes there must be, there are options that are better for the economy and for liberty. User fees could be expanded. Taxes on pollution, which replace regulations, would be good for both the environment and the economy. Taxes on land value avoid the disincentives of other taxes and prevent the subsidy to landowners caused by the increase in rent due to public goods.

Johnson and the “Fair Tax” movement seek to replace the income tax with the sales tax. But this switch could make many enterprises shut down. If a firm makes little profit, it pays little income tax. But a sales tax acts as a gross receipts tax, and if a business cannot pass on the tax due to global competition, it will shut down. There is no economic gain from taxing income when it is spent rather than when it is earned. A tax on goods taxes the wages that pay for the goods.

Since Gary Johnson is committed to a national sales tax, his candidacy will distort the educational value of a libertarian candidacy. Some members of the Libertarian Party will favor Johnson as the lesser evil, but since a libertarian candidate cannot win, the LP membership should not settle for a lesser evil, but stick to its stated virtue of being the “party of principle”.

About

Dr. Fred Foldvary teaches economics at San Jose State University and is the author of several books: The Soul of Liberty, Public Goods and Private Communities, and the Dictionary of Free-Market Economics.