How To Reduce Taxes; L.E. Read

HOW TO REDUCE TAXES THE CUNEIFORM SIGNS, as shown above, are copied from a clay cone now on display at The Louvre. The cone was excavated by the French at the site of ancient La gash, a prehistoric city located in Mesopotamia. The messages on the cone were etched with a reed stylus on soft clay during the third millennium B.C.! While the experts on Sumerian civilization may not agree precisely in their interpretations, the consensus is that the above three signs mean "freedom from taxes." There are two features to observe about these ideograms. 1 See Samuel Noah Kramer, From· the Tablets of Sumer (Indian Hills, Colorado: The Falcon's Wing Press, 1956), Chapter 6, "The First Case of Tax Reduction," pp. 41-46. 431 432 LEONARD E. READ First, the word "freedom" here puts in its earliest writ ten appearance. Second, is the remarkable clarity used to depict "taxes." These Sumerians expressed in a sym bol the nature of governmental "take" better than we express the process in our modern languages. Note its barb or fishhook or harpoon characteris tics, sugges ting, so very clearly, that this instrument is one which can be thrust into, but hardly retrieved from whatever it pene trates. The· nature of taxation· thus revealed itself at the very dawn of history, and experience confirms this early disclosure: Taxes are easy to increase but almost impos sible to decrease.

We need not go beyond the experiences of our own country in this century to verify the one-way tendency of our taxes. They continue to penetrate inexorably deeper, always advancing, never receding. Look at the record: The population of the U. S. A. increased from 76 million in 1900 to 174 million in 1958 while govern ment expenditures per person (in terms of 1947-49 dol lars) rose from $56 in 1900 to $580 in 1958, a more than tenfold expansion of governmental assessments per per son-man, woman, and child. Where is the end of all this? If the trend of the past few decades be projected into the future-the near fu ture even-the prospect is that of a once great economy flying to pieces. The expenditures of government (now equal to 35 per cent of the peoples' earned income) have long since passed the point where they can be met by direct tax levies. Inflation-increasing the volume of money-is then resorted to. This reduces the value of HOW TO REDUCE TAXES 433 the monetary unit. Serious in our country? The dollar has lost ,52 per cent of its purchasing value since 1939!

Historically, in most instances, governments resort to inflation when the collection by government reaches 20 to 25 per cent of the country's earned income. 2 As a rule this is the level beyond which direct tax levies be come politically inexpedient. Inflation, therefore, be comes the only alternative means of financing excessive expenditures. And the more overexpanded the govern ment, the more the inflation! Inflation in the U. S. A., however, is more· dangerous than in other countries and for a simple reason: We are more specialized than other people are or ever have been. We are so specialized· that all of us are dependent upon the exchange of our numerous specializations. In a highly specialized economy such as ours, the exchanges are not by barter; a qirculating medium of exchange is required. This is mo~ey's most important function. Inflation, let it be r~peated, is a politically engineered increase in money volume. This thins or dilutes the cir culating medium. The medium can, assuming a continu ation of inflation, become so thin that it will lose all of its circulating power. This is what happened in Ger many after World War I when 30 million marks would not purchase a loaf of bread.

2 "Dr. Colin Clark, the Australian economist, has concluded from his study of governmental costs that whenever the figure for any country rises to more than 20 or 25 per cent, progressive inflation and the debauchery of the currency is likely." See p. 110, Liberty: A Path to Its Recovery by F. A. Harper. Irvington-on-Hudson, N. Y.: The Foundation for Economic Education, Inc., 1949.

434 LEONARD E. READ The Moral Case for Freedom The purpose of this paper, however, is not to point out the dangers of government in an ever-expanding role with its ever-increasing costs, and the ultimate conse quence of this course-inflation. These threats are well known to all individuals who are likely to be of any help in slowing down and eventually reversing present trends. Not as well known is the fact that a mere rehash ing of these threats, coupled with scoldings and exhor tations, will not turn the tide. People simply are not frightened away from collectivism by statistical or mathe matical or materialistic arguments which show the ex pansion of government, the rise of the debt, the bite of taxation, the erosion of the dollar, the extent of infla tion, and so on. The purpose of this paper, therefore, is (I) to suggest that arguments on behalf of freedom, when confined to the materialistic-which too often they are-account in part for the seemingly irreversible one-way direction of the taxing process and (2) to draw attention to the moral arguments that must be perfected and presented if any change is to be brought about.

Omitting the enormous activities and costs related to the "cold war,"3 government's expansion in the U. S. A.3 While the wastes and excesses in current "defense" expenditures are related to a spreading acquiescence to socialism, this aspect of the subject is beyond the scope of this paper. The purpose here is served by pointing out that for fiscal 1961 "defense" expenditures are one per cent higher than at the end of the Korean War. But, nondefense expenditures are 86 per cent higher! See Monthly Tax Features, February 1960. Tax Foundation, Inc., New York, N. Y.

HOW TO REDUCE TAXES 435 and elsewhere, for that matter-is a growth in socialism. It is an increasing practice of the collectivistic concept the notion that the individual exists for the group, by the group's permission, and for the group's sake. This concept denies the Creator and substitutes there for the omnipotent State as the source of man's rights and the dispenser of privileges. State supervision of welfare and prosperity is substituted for personal re sponsibility. The State takes from and gives to, as its political hierarchy sees fit. The Marxian ideal, "from each according to ability, to each according to need," is, quite consistently, part and parcel of the collectivistic doctrine. Ignored is the idea that government is for the purpose of securing the inalienable rights of man. It cannot be otherwise, for the State, not the Creator, is the ultimate sovereign-according to collectivism.

Examples of this from-each-according-to-ability-to each-according-to-need thesis are the progressive income tax, TVA, government mail delivery, government hous ing, compulsory social security, subsidies to farmers, pro tections against competition, federal aid to education, and so on. A specific example would be a federal grant for a local hospital. Taking this specific example, the people who seek fed eral aid for their local hospital present a united front. They achieve a political unanimity, a wholeness, and their demands come through clear and loud. Once the hospital is built it stands as tangible evidence of an "accomplishment," a monumental testimony to the "wis dom" of its sponsors. The good it does is visible. It can 436 LEONARD E. READ be photographed and publicized as a concrete instance of community welfare. Now this federal grantin-aid means of local achieve ment does have some opponents. An observant taxpayer who resides in New York sees no reason why he should be compelled by the political apparatus to subsidize the citizens of Los Angeles or Dallas. But suppose he ex presses his opposition materialistically as he invariably does. He may, for instance, complain about the cost to him. And, how much is that? Why, only a pittance-30 cents, perhaps. What a niggardly position to take! He, with his big income! And, if he argues that anyone, re gardless of how wealthy, can be "pennied and dimed" to death, he is confronted with the impossible task of nam ing the instances that take so many of his pennies and dimes. He may even generalize about national financial trends but, to do so, he must talk in terms of billions of dollars. Such terms are as incomprehensible to his listeners as are 100,000,000 light years.

Opponents of socialism who argue only materialistically would be well advised to add the moral argument. 4 As distinguished from socialism's proponents, with their 4 Dr. Thomas Nixon Carver, thirty-two years Professor of Political Economy at Harvard University, once said to me, "The two most influential books in Western Civilization have been the Bible and Adam Smith's Wealth ot Nations." Adam Smith and the Biblical writers were, among other things, moral philosophers. Reflect, also, on the thinking that went into the Declaration of Independence, the discussions in the Constitutional Convention, and the argu ments set forth in The Federalist Papers. The appeals were not made on the basis of material advantages. The arguments were in the real'm of moral philosophy, and the case was won by ap pealing to man's sense of justice.

HOW TO REDUCE TAXES 437 united front, they are a splintered and fragmented lot. It is next to impossible for them to unite on materialis tic terms. 5 The financial injuries done to them are not alike in any two instances, nor do the injuries, imposed in dribbles, greatly excite the victims. The damage is done more or less unobserved. Nor can these material injuries be photographed, or dramatized with any per suasiveness. Invisible, material erosions of an individual's larder are no match for the huge government dam or the new, merciful, thousand-bed hospital. This is a one sided contest between the seen and the unseen, with the thing seen considered real while the unseen is dismissed as imaginary. Supplying groups of the population with government pap as quickly destroys their capacity to fend for them selves as does the hand-feeding of squirrels. Men as well as animals tend to regard any coddling as a right. Sim ply reflect on any of the thousands of special privileges granted by government, of more than a year's duration, and see if one can be discovered that is not already re5 Experiences of the past three decades support this contention.

Many antisocialists have been certain· of a common private prop erty interest among the millions of insurance policyholders, share holders, and homeowners. However, repeated attempts to organ ize them against socialism have come to naught. They si'mply will not coalesce along materialistic lines. Nor should we believe that wage earners have been brought together in labor unions by reason of monetary motivations. Their enormous memberships have been achieved by (1) coercion and (2) the conviction that the "benefits" they seek are rights. More obvious to many union 'members than to the rest of us is the fact that they do not make money by striking. These costly ventures, like their expensive union memberships, are either forced upon them or charged off to "gaining rights for the workingman."

438 LEONARD E. READ garded as a right. How can it be otherwise if the collec tivistic notion is accepted that government is the grantor of rights as well as the dispenser of privileges? The op ponents of socialism are on weak ground if they rely on materialistic arguments against those who believe in their privileges as rights. The socialists bring "human rights" to their side; the adversaries only complain about pil fered pennies and dimes. A Moral Reorientation Over the past fourteen years I have lectured at scores of meetings before audiences of nearly every type. In most of these lectures, I have expressed in materialistic terms the course our country is now on, and my conclu sions-also in materialistic terms-have been actually frightening. Never once have my facts, the documenta tion, or the conclusions been challenged. Yet, in all these years, I have never witnessed a single individual who was moved away from his collectivistic notions by rea son of a fear of what the future held for him material istically.6 The collectivist, communist, socialist, state in terventionist-call him what you will-merely responds, 6 The material needs of Americans are satisfied to an unprece dented degree. This explains, in part, why appeals to material well being are so futile. Douglas Murray McGregor of Massachusetts Institute of Technology has this to say: "Man is a wanting animal as soon as one of his needs is satisfied, another appears in its place . . . . Man's needs are organized in a series of levels-a hier archy of importance .... Man lives for bread alone, when there is no bread .... But when he eats regularly and adequately, hunger ceases to be an important motivation .... A satisfied need is not a motivator of behaviorl" See The Management Review, Novem ber 1957.

HOW TO REDUCE TAXES 439 in effect: "I will suffer any indignity for my faith!" However, during these years, I have noted countless individuals who have made the ideological switch from collectivism to freedom. In every case, where diagnosis has been possible, the individual made the switch be cause he had grasped, for the first time in his life, the right and wrong of it all. The experience was a moral reorientation! The materialistic argument has only the force of shout ing, "Fire!" or "Man overboard!" It can compel atten tion. And there, it seems, its usefulness ends. If, after getting attention, one cannot advance the moral argu ment, he may only add to the state of confusion-like not being able to point out where the exits are, or not knowing how to conduct a rescue operation. Adherence to Principle It is only in the moral realm that socialism's antagon ists-freedom's devotees-can find any common ground for concerted or unified effort. Where we can make no impression at all over the personal loss of 30 cents, or any multiplication of small change, we can win agree ment on the point that there is no difference in principle between the forcible extortion of 30 cents and the forci ble extortion of one million dollars. One is misappro priation as well as the other. The distinction is one of degree, not of kind. To violate the principle, even mi nutely, is to compromise the amount but not the princi ple. The principle is surrendered, regardless of amount.

440 LEONARD E. READ To forswear allegiance to honesty and integrity-the principle here at issue-is to destroy the moral under pinnings without which no good society can endure. Legalizing the forcible extortion of the citizens' re sources does not alter the morality of the act. It merely absolves the offender of his crime-in the eyes of the legal apparatus! Not in the eyes of one's Maker! Absolution by the State has meaning only if it be conceded that man's rights to life and liberty are endowments of the State, that is, are endowments of those quite ordinary human beings who succeed in attaining political office. That these people are the source of rights is no more valid than the divine-right-of-kings thesis. It is only the modern way of rendering an old world fallacy. Inalienable Rights Once we accept the only alternative to state omni potence, namely, that man is endowed by his Creator with certain inalienable rights, we cannot, logically, grant to government any powers which do not pre-exist in the individuals who organize it. These rights of the individual in relation to others, when viewed person ally, are fairly clear and need little in the way of elaboration.

No sane farmer, in his capacity as an individual, would dream of forcibly collecting from all citizens a sum of money as payment for not growing wheat. No respected resident of Dallas would think of going about the coun try coercively collecting funds for a Dallas hospital, reHOW TO REDUCE TAXES 441 gardless of how urgent the need. No thoughtful busi nessman would try to keep customers by personally forc ing a competitor to raise his price for the same product. No wage earner with any sense of justice would, on his own, forcibly deny the right of another wage earner to any job connection peaceably agreed upon. No sensible individual would have the effrontery to impose his per sonal idea of a minimum· wage or maximum hours on a nation's citizenry. Moral standards for individuals, fairly well estab lished by all the world's moral and ethical systems, find no reasonable sanction for modification by individuals acting concertedly, whether organized as governments or labor unions or trade associations. No new rights come into existence by collectivizing two persons or a million of them. If this is not a correct conclusion, then, pray tell, what is the magic number at which new rights originate?

The above is only suggestive. It has been set forth merely to stake out the area in which each of us should strive for perfection. For it is only in moral philosophy the study of right and wrong, a qualitative discipline that the case for freedom and the rights of man can be won. Short of a growing effectiveness in this area, we are committed to a continuance of the present course. The only end to this course of governmental expansion and its ever-penetrating tax take is, as history seems to reveal, either atrophy or revolution. It is only when we understand that government can have no rightful powers of control, over and beyond 442 LEONARD E. READ the powers that inhere in individuals as moral rights, that we can clearly recognize the proper limitations of the State. With this recognition will come the trimming process: government reduced to the enormously impor tant function of securing the rights of man. Limited to this role-its only competence-government will become an aid, not an ailment; a bargain, not a burden. Taxes will then be a matter of relative unimportance.

Summarized, this paper insists that the only way to reduce taxes is for each devotee of liberty to become, as best he can,a moral philosopher. Too difficult? Only if the Golden Rule, the Ten Commandments, and the Declaration of Independence are beyond one's scope!