Tuesday, 05 October 2010 | libertarian · activism

Transitioning to Liberty

by Carl Milsted , Senior Editor , Free Liberal

Money from the government: Are you getting your fait share?

I admit it. I have given up on seeing a libertarian society in my lifetime or even a reasonable approximation thereof. I have thus redirected my efforts toward intermediate goals, to somewhere between here and the ideal state of liberty. Old news, I know, but bear with me. My plans for that intermediate state may interest some of you.

The liberty movement, even broadly defined, is too small to win nowadays. Sometimes it appears to win in the guise of a Republican takeover, but the history of the Bush Administration exposes that illusion. To have even a modicum of more liberty, those of us who want it need to ally themselves with those who want something else. Right now, economic libertarians ally themselves with neocons and social conservatives, with limited results to put it mildly. I’m toying with an even more unlikely ally: those who want free money from the government(!)

OK, maybe I’m completely corrupted by activism. Maybe I need to cut back on the caffeine and get more sleep. Maybe I need to harden my heart and stop caring about the plight of the poor or the good of society. But even if so, I am in good company. I’m joining in with the likes of Charles Murray, Thomas Paine and Robert Heinlein. Not bad company.

Our government is so monstrously complicated because it halfway wants to transfer money from the rich to the poor, while at the same time it halfway wants to pretend it isn’t in the game of gross wealth transfer, that it is only helping out the very needy. I say let’s drop the pretense and just do the wealth transfer. Tax the rich and divide the loot. But do it simply! And don’t tell people how to spend the largesse in great detail. Do this and we cut the number of non-defense government employees by an order of magnitude. We also simplify taxes, reduce teen pregnancies, cut crime and come close to eliminating poverty. I think I can sell these things easier than I can sell borderline anarchy.

Realistic politics. What a dirty business! I can just see the lily white libertarians shouting “Icky poo!” and running off to the nearest sink to wash their eyes from reading these words. Heartier spirits might be moved to leave a nasty comment.

But before you do so, realize my proposal is not as dirty as you might think on first exposure. Have a look at my rather long list of justifications for handing out free money. Some of those justifications are indeed utilitarian. But others are in fact crude approximations of libertarian justice.

Crude justice, yes. But a better approximation of justice than switching over to the libertarian ideal overnight!

Taxation, plunder, subsidy mooching, conquest, and slavery are all theft. Put an end to these things and you still have people enriched by past injustice, and others impoverished by past persecution. Today’s wealth distribution is in part the result of slavery and subsequent racial persecution. Wealth redistribution is a crude form of compensation.

But today that compensation is wasted. It goes to dysfunctional inner city schools and welfare programs which discourage marriage and encourage sloth, recklessness and criminality. A citizen’s dividend is truly free money. It adds to what you earn. It is seed capital for those who choose to use it as such and a bouncy safety net for those who need it.

It is also a safety net for those harmed by changes in the rules. Eliminate the mortgage deduction and home prices drop. Eliminate inflation and real interest rates on mortgages are retroactively increased. A rapid change to a libertarian society could bankrupt the middle class. My proposal for free money for all means a transfer not only to the poor, but also to the middle class. They will need it if we are to even go halfway to liberty. And any plan for liberty which bankrupts the middle class means no liberty at all.

So, can you stomach half measures for liberty in your lifetime or do you prefer to daydream the ideal while experiencing continued growth of the welfare state?

About Carl Milsted

Dr. Carl Milsted, Jr. is a Senior Editor of Free Liberal and is a member of its founding committee. He is the author of Holistic Politics and the Enhanced Precision Political Quiz, an online version of the popular Nolan quiz.

Comments

Very close to Milton Friedman’s idea of a negative sales tax which I like a little better, though this is a good choice too. It cuts out the bureaucracy and eliminates all the perverse incentives.

Milton Friedman pushed a negative income tax, not a sales tax. The Fair Tax people push the sales tax idea.

My problem with the negative income tax is that it is still an income tax. OK for the near term, but longer term I’d like to move to something else. Any clawback as income rises requires knowledge of individual incomes. This gives the government more knowledge than I want it to know.

The resistance comes largely from a sanctimonious place — a holier-than-thou attitude. Building a theoretical construct and doggedly, “consistently” defending it provides utility for the dogmatist, a sense of moral superiority over those willing to get engage in things as they are.

Did I type sales tax? My bad. The advantage of the negative income tax is that it is something we can do right now and cut out the bureaucracy and perverse incentives without even getting into the ‘should we be helping people’ argument. It is a Pareto improvement, as much as that is over-used, because we can either give the money currently eaten up by the bureaucrats to the poor, making them better off, or provide the same amount of support for less money. It also eliminates the really horrible incentives.

Of course this is not from the perspective of politicians and bureaucrats, who would be the big losers. I guess that means it wouldn’t be a Pareto improvement. But an improvement none the less.

Negative income tax has possibilities, but I still prefer free money. This opens the door to tax simplification in a major way.

But the first simplification should be merging the existing income taxes (income tax, FICA, Medicare, unemployment insurance) into one 25% bottom bracket. This would jump start the economy by making life considerably easier for small businesses.

Call me a libertarian heretic, but if the only state involvement in aid to the indigent/infirmed was an LVT-funded citizen’s dividend, then I could definitely live with it.

I tend to agree with you on giving away free money, but that should be tied to wages and be a credit against the employer’s business income tax, which should be paid by all employers on all value added (including wages) and replace survivors insurance for non-retirees, hospital insurance, disability insurance, unemployment insurance, and the middle 15-20% of income tax liability. All tax credits for health insurance purchasing, child care and the child tax credit (expanded to $500 per child per month) should be taken against this tax as well, so it should be about 33% federal. It should also have an education credit (both higher education and secondary/elementary) to allow for alternative funding of non-governmental schools, as well as income support to adults in remedial education rather than welfare. Ideally, the business income tax would simply motivate funding of private social services and education without a dime going to the government.

Old Age/Survivors Insurance should still be a separate levy so it can eventually be converted to private accounts invested in employee-owned firms in the form of voting stock (i.e., the cooperativist solution aka, libertarian socialism ala Kerpotnick and Mondragon). The low rate income taxes should be in the form of a VAT and should fund discretionary spending – with full receipt reporting – to replace the bottom 10% and a portion of the 15% tax bracket.

I would still retain a 4% to 28% income tax on family income over $150,000 per year, with 4% increments every $75,000. The individual levy would be at the $75,000 level with $37,500 increments. This tax would fund debt repayment, net interest, overseas military deployments and other international spending (CIA, State Dept, IMF debt forgiveness and closing costs) and would sunset when the debt is paid off, the troops are all home and the Federal Reserve no longer holds government bonds (and can therefore not issue currency as a government entity – although it could still be a clearlinghouse for private financial dealings between employee owned companies).

Talk of getting rid of all income taxes or the federal reserve is silly until the debt is paid (repudiating it or simply closing the Fed would cause chaos, hence violence – and would therefore not be a Libertarian act).