Why Must Governments Tax Us?

A Proposal for Eliminating Taxes

by Thom Riddle jtriddle@adelphia.net

My answer to this question and proposal may surprise you, but first I need to make sure we have a common understanding of a few terms. For the purpose at hand, the following definitions from Merriam-Webster will be used:

Part of the American dream is to have a comfortable retirement. With the social security system being what it is, a comfortable retirement requires additional income sufficient to cover the cost of living. Unless one wins the lottery, is supported by a healthy trust fund, inherits wealth and manages it well, or has a very good defined benefit retirement package (very rare these days except for government bureaucrats), there is only one legitimate way of achieving a comfortable retirement. You must become a capitalist. I know this word has some non-flattering connotations but they derive from actions of some infamous capitalists, and are not part of the definition of the term.

Put in the simplest terms possible, to become a capitalist from oneís own efforts requires one to maintain oneís outgo at a level less than oneís income, thus generating a regular surplus that can be saved and invested at a compounded return. Like gravity, this is one of the simplest of laws that, so far, no one has been able to change. In the good old days, before easy credit, outgo for most folks was just the cost of food, shelter, clothing, transportation, entertainment, etc., the basic requirements for sustaining life in the modern world. Those were the days of "save now, buy later". Since the advent of easy credit and the concomitant instant gratification, a major portion of many budgets has become debt service, "buy now, pay later." Unnecessary or unwise debt is the single biggest obstacle to becoming a capitalist. Actually the lack of self-discipline is the root cause of unnecessary or unwise debt. Unwise debt has created the situation for many folks where they "buy now and pay forever."

During childhood we are generally supported by our families or the state and are net consumers and non-producers. Once we enter the labor market we become producers but are also consumers. The first goal in becoming a capitalist, while working for a living is to learn to live within your means. Most people who aspire to becoming capitalists focus on increasing income when it is generally easier and more fruitful to focus on reducing outgo. During this phase, if one has the desire, understanding, and discipline, one begins to save and invest his surplus. The earlier one starts the easier it is to realize the goal of becoming a capitalist in time to retire in comfort. If one lacks the discipline then he is probably doomed to an uncomfortable retirement unless he is a government bureaucrat or wins the lottery etc. As one saves and invests over time, a larger and larger portion of his income comes from his investments. Once his investment income is sufficient to cover his cost of living, he is able to retire in comfort, and he has become a capitalist!

Now we know that becoming a capitalist by definition is not a bad thing but a good thing. A capitalist does not depend upon the state or the largesse of his former employer for comfort during retirement. With the exceptions listed above, a capitalist has created his own financial security by managing his income, outgo, cost of living and capital! The vehicle (stocks, bonds, real estate, oneís own business, etc.) for generating income from capital is completely up to the aspiring capitalist.

Now back to our government and taxes. Our government is capitalist in the sense that it permits individuals to become capitalists. But what if our government was itself a capitalist entity by the above definition? Most folks would be happy if their government would just live within its means and even happier if it got out of debt. But what if our government went even further? What if our government became a truly capitalist government? A government that not only lived within its means but began saving and investing its surplus, just like a good capitalist individual. A government that eliminated all its debt so that all its income went toward its cost of living (providing necessary services) instead of paying so much interest on the outrageous debt. A government whose investment income grew to where it could provide the necessary services without taxing us at all!

So my answer to the title question is that a government does not have to tax us. It persists in depending upon tax revenues and mis-managing its income and outgo for the same reasons that most middle class folks fail to become capitalists and end up retiring in poverty. Lack of desire, understanding, and discipline.

Do you want to fix the economy? Imagine a government that did not need to tax us because it was a self-sustaining capitalist government. Imagine a tax-free economy where you did not have to work the first five months of every year to pay for government services, and yet the services were still being provided. Imagine a government that became truly wealthy from its capitalist investments, that it actually paid a dividend to it constituents rather than tax them. I know it may seem bizarre but there is nothing illegal, nor immoral about a government that is not only solvent but self-sufficient. On the contrary, if the government is by the people and indeed for the people, it should not have to tax the people.

To become truly capitalist and to pay dividends to its constituents, the government must do the same thing you and I have to do as individuals to become capitalists, support ourselves during retirement, help others less fortunate, and enjoy the good life. The government must:

  1. Live within its means.
  2. Pay down the debt.
  3. Save and invest surplus in income/dividend producing investments.
  4. Reduce taxes as investment income warrants.
  5. Declare dividends to citizens as investment income exceeds actual needs.

The next time a government bureaucrat espouses capitalist economic views and then votes to increase the budget deficit, either by lowering taxes before balancing the budget OR increasing expenses without the income to cover it, remember the lie and vote him out. The next time the government has an actual budget surplus (not an imaginary one like we supposedly had a few years ago), tell your representatives to pay down the debt. Will this come to pass? Not likely but it is indeed possible and as with individuals who aspire to financial self-sufficiency, it canít happen until the first baby steps are taken in the right direction.