Tax Revolt in the Netherlands

0:00Well, good afternoon. We're going to talk about the Enlightenment. And I think that could well be the best chapter in the book. Probably worth the price of it. Tell me, what was the Enlightenment? Yes? That's good. Yeah, that's right. Yeah. When they kind of tried to sweep away all of the baloney about things and they tried to figure things out for themselves, it was followed the Renaissance, it was a wonderful period, and the American country was formed in that period, and so I think it's a great period.

0:46I might as well give it a charge here. I think that for purposes of taxa, the Enlightenment was a high watermark of man's thinking in terms of taxes. We seem to, when you read back at what these men wrote, you say, well, how could we have There were a number of principles that I put in the book and I have the title that the Enlightenment had the word on taxation, I seem to really know what it was. And we wonder why they were so wise and we're not.

1:33And I had suggested that the reason for that was because the tax philosophy of this time Time grew out of the terrible tax tragedies of the 17th and 16th century. I mean, England had its king beheaded, France was filled with murderous tax revolts of all sizes, Germany had the terrible peasant revolts where they almost depopulated the country. It was a time when if you looked around, Spain of course had been destroyed by six major Tax Revolts, you know, so if you ponder the wreckage, then it wasn't too hard for them to figure out what would be the best form of taxation that we could avoid all these terrible calamities that have fallen upon Western civilization.

2:20So I think they had a pretty good motivation to think, and if the Enlightenment, as you say, was a time for reason, for thinking, they had a lot of thinking to do. It wasn't going to solve the problem by looking back at some ancient sage of 2,000 years ago or some particular. They really had to think, and they did think. That thing impresses me so much that they came up with such terrific wisdom. and the one that, there were so many of them, you know, Jefferson himself would be a child of the Enlightenment, although we don't use him particularly in here. But the one first principle that I like was the principle that government is at best a necessary evil.

3:11How many of you have pondered on that problem? Well, the argument is, if you need government, how much government? And if you do need government, how much government do you need? And that's the debate that lasts right up until today, and we continue to talk about it. You need some sort of a coercive force to make sure that human beings are doing the right thing. If you need government, then where do you stop? Isn't that the next question? I mean, do you stop with a police power to protect you from common crimes and a few things like that?

4:00Or do you go a whole hog like the Soviet Union did? And you figure that the government owns everything, including your socks. I always like that expression. But it was certainly a society of slavery. And my father-in-law, who was a Russian, and I met him before he died, and he just said, We're nothing but slaves. You're referring to life in the Soviet Union. He died before the Soviet Union. And he was quite right. We're nothing but slaves here. And the interesting thing about him is that he made some derogatory remark about Stalin and then about communism and they picked him up in the middle of the night and he disappeared for two years and he probably never would have got out of it, it hadn't been for his brother who was a communist and in the party.

4:58And when I talked to him before he died, a couple of years ago, at that particular time if you went to the Soviet Union there was pictures of Lenin all over the place, they We see that in a lot of totalitarian regimes. Certainly Saddam Hussein was there, he was, and so forth. So I asked him, I said, what do you think of Lenin? Because there was kind of a feeling at times from my education that maybe he wasn't so bad. You know, maybe Lenin wasn't so bad. You know what his answer was? When I look at him it makes me want to vomit. That was his answer. And then he said something that is so wise and probably, I guess, would come as a great surprise to our sovietologist, or whatever we call those so-called experts in the State Department, in the Communist Party, and so forth.

5:53He said that communism will not last to the end of the century. I will not live to see it, but you will, mark my words. Now, nobody would have believed that. This would have been 1971 when I saw him last. Nobody would have believed that. Communism was going to last a thousand years. You know, Hitler's right. And it was a powerful state, you know. As you came in from the outside, I remember the first time I visited the Soviet Union, In the Soviet Union, I thought I was checking in San Quentin or something. I mean, boy, it was really sobering. And then when you left, you also thought you were... The interesting thing, the two times I was in the Soviet Union, when the plane took off from Moscow, everybody clapped.

6:47No, really, it was spontaneous. It didn't when I went out. Isn't that true? I asked him in the flight, and he says, Oh yeah, probably nine down at 10. And I said, no, there was nothing arranged. No, no, a lot of times you might clap because you make a bad landing or something. We all clap because it's a tremendous relief. When the plane took off, he said, Oh my God, we made it. You know, this was sort of your feeling. That's amazing, I've never talked about it. No, I did it twice. Both times it collapsed. And the funny thing about my poor wife, you know, She went to the Ottawa embassy and they said, We know all about you. You know, we have a file on you. Yeah, yeah. So when the plane flew, as you may not have noticed, but after you go a while, the plane makes a turn because of the corridors it has to fly over.

7:39And as soon as the plane turned, they were going back to take her. But he was okay. I asked about his experiences in prison, and having been sent there because of what he said, and he said, if I had to do it over, I'd do it over. I mean, he was a real anti-communist in a sense, but he was very successful, Well, he lived very high. He was an electrician. He traveled around in some of the big power units and was a very smart guy, but, boy, he said, don't... When I sent an article in on this many years ago, I guess to the American Scholar, because some guy had written an article, why didn't we know about the Soviet Union falling apart?

8:25And I wrote back and said, well, my father-in-law knew. He said it wouldn't last until the end of the century. Boy, he sure pegged that right, didn't he? Yeah, but he didn't have much use for Communism as a whole system. Yes? Question, on both those planes, was it mainly about Westerners? We were all Westerners. Yeah, yeah, mine was KLM and the other one, but it was all the same. You always clapped when the plane took off. Well, the funny thing is, my wife, being a Russian soul, when we first flew over from we got Aeroflot out of Montreal to Moscow, and she wanted to fly a Russian airline and got to talk about a piece of junk, you know.

9:23And then when night came and we needed a blanket or something and we asked for a blanket, the stewardess looked like, you know, she looked like Kate Robin University on the football team. And she was a real battle axe type, yeah. Anyway, she said, in the back, meaning we have to get up, go in the back and get it. And the coffee, I think the coffee is something that was held over from World War II. Jesus! Was it awful? And when we landed in Paris, the first thing we wanted was a good cup of coffee. Of course, the French have, you know, the greatest there is. But I think that the view of the Enlightenment, that government is a necessary evil, and when it's not a... at best, and at worst, it's an intolerable one.

10:17We have a bureaucratized society, and I think we just never realized that thing. And his point was, and this Thomas Paine, when government gets too big, when government gets big, excessive revenues are obtained. You go back to taxes here, and when that is done, the country is ruined, were expressions. And then he also says, I like Thomas Paine, he says that they say They say the government is some wonderful mysterious thing, and then he says when you say that, excessive revenues are obtained. So he was a great one for nailing things down. I think that, I'm just trying to think who was, maybe it was Franklin, who said without the pen of pain, Washington would have wielded his sword in vain.

11:10So, Paine was a great writer for the American Revolution, and he believed that America was a wonderful country because, he said, it's a land of low taxes, and it is a land of liberty because it's a land of low taxes. So we keep coming back to this from these great thinkers of the Enlightenment. He talked about revolution. He said revolution was necessary to bring in a government that is less expensive and more productive. We keep getting this less expensive stuff in here. And he said that government is just when taxes are few. So when you read this stuff and you look at our own society today, you say, boy, how come none of that ever rubbed off on anybody around here?

12:02That was certainly the philosophy of Paine. I like Paine too because he thought that he had such great hopes for America because we were a land of low taxes and it always boiled down to that because the moment the government got big, you had too much taxes, then we had too much taxes, then of course you had excessive revenues and you lost your freedoms and your liberty. Europe was certainly more of an example, you know, for them to look at. So that's the first principle, that those of you who have the book, it's on page 282. The second principle, which I have focused on, is the imaginary wants of the state. It's an interesting concept.

12:49And this is for Montesquieu in his wonderful book, The Spirit of the Laws, and he talks He talks about, he said, the revenues of the state are a portion of each subject gives of his property in order to secure the enjoyment of the remainder. Now that's always been a basic rule of why we have tax, so you give up some of your property in order to have the protection of the remainder. And that's old stuff, you know, in terms of tax philosophy. Then he says, to fix these revenues in a proper manner, regards should be had both to the necessities of the state and those of the subject. And then it says, the real wants of the people ought never to give way to the imaginary wants of the state.

13:38A little interesting idea. And then he talks about the imaginary wants of the state. The imaginary wants of the state are those that flow from the passions and from the weakness of the governors. Your men in Congress and your men in the state legislature are from the charms of an extraordinary project, from the distemper of vain glory, and from certain impotency of mind incapable of understanding a tax of fancy. Often it happens that the ministers of a restless disposition have imagined that the wants of the state are those of their own little ignoble souls.

14:29In my book I made an application of this and I made it to Vietnam. I saw in Vietnam a perfect example of what was said here, and it was such a great tragedy in our history, it would be worth thinking. I said, the charms of an extraordinary project, which was America's hegemony over Southeast Asia. The distemper of vainglory, what we might call manifest destiny over the Orient, attacks It's all here except the real wants of the people.

15:18I don't think the American people want to get involved in Vietnam. Yes? Maybe it's, you can tell me your take on this, different people's worldview, where they're coming from, but I have a leftist younger brother who always brings up the example of, well, in London at a certain time period, they were dying like flies from disease, well, the government put in a sewer system, of course they had to collect taxes to put in the sewer system, So that makes government a good force, and people like him would say, well, a private man would never have looked out after the general welfare.

16:09What kind of things would you throw back at somebody like that at that point? The state should only do that which the people cannot do for themselves. Some company would be very happy to build that sewer system and charge the householders for the use of it.

16:44One of the people that wrote in and said, as I mentioned her tax policy, well she should have charged more taxes, though they could pick up the garbage and not have the plague, so forth. Now there's a couple of things wrong with that. It wasn't the garbage that caused the plague. In the 19th century, the British made some studies and they noticed that the plague and the deaths of the plague were along the Thames. And as you got away from the Thames, the plague disappeared. And the reason was because they were throwing all of the human refuge into the river. And then people were drinking it and they would get these terrible diseases. So in that sense, it wasn't the garbage.

17:29The second thing wrong with that was that the city of London was richer than she was. And if anybody had picked up the garbage, the city of London should have picked up the garbage. It was their problem, not hers. She was the Queen of England, but she wasn't the ruler of London. But it just shows you how people would go after something, you know. But I think he answered the question right there. We do need government for all kinds of things. And the thing is we've learned that every time they do something that they tend to screw it up. They're not good at it. Well, the other side will make hay with things like, now the British rail system, they're giving people a tale about how the services decline terribly because of privatization.

18:19Would you say most of the time privatization works better than... Yeah, it usually does. I always point out the minor number of failures as a reason not to go ahead and continue more and more from what it seems like.

18:55I can't help but also say that the famous study which involved the contamination of the water in London because of cholera was a position by the name of John Snow. John Snow was totally independent of the government and I think the real irony is that his legacy is manifest in the John Snow Foundation, which is now very involved in combatting HIV AIDS in Africa and they have always been ruthless. They will not take a penny from any government for that very reason.

19:41Give that to your brother. Well, I think that you can think of so many examples of where the state does stuff and it turns out to be such a mess. At least we have, in America, been pretty good about keeping the government out of businesses, about airlines and things like that. We've done a pretty good job in that department. And a lot of countries, you know, the first thing you want is a national airline, you know, and then the second thing is you never want to fly it. Well, they've all failed. I know. I remember that. Oh, yeah. Even Air Canada, which was supposed to be the darling of Canada, is a big mess, and they're trying to sell it out to some guy from Hong Kong.

20:28You know, they can't make it work. I remember flying on, what is the airline that goes out of Columbia? Columbia, Venezuelan, not very, no, anyway we were lying there once and my wife looks out the window and the guy is hammering on the cowling with a hammer to try to get the cowling on, you know, of course she's afraid of flying, of course anyway it didn't fall The government has all these wild, unhealthy ideas that we get sucked into and I think Vietnam was probably one of the worst ones because of the terrible tragedy it was to the American people and to our country and our faith in ourselves and our young men.

21:29I lost some friends over there, they were killed, and even in the Korean War, I lost two of my high school buddies over there, they were killed there, and that was a senseless war, and in many ways it took. But anyway, so that's the imaginary wants of the state, and I think that makes good sense. The third point I make is the government should stay out of business, and that's what we've been touching upon, because every time they do, you know, you go to the Soviet Union, nothing worked. You know, the washing machines were a joke, and the cars were a joke, and the whole thing was a disaster. The Soviets couldn't make anything, and I went over there back in 70 and 71, In 1971, we went to this famous department store in Moscow, a big, huge thing, and you started seeing what they had to sell, you know, it was just awesome, terrible, I mean, they had very different colors, you know, today it would just be junk, even then nobody

22:40would have bought it, but it's the government getting involved in business, and the way Adam Smith explains why government should get out of business and it's a pretty good quotation because he says that the agents of the prince, he uses the prince being here, regard the wealth of the master as inexhaustible, are careless in what price they pay, are careless in what price they sell, and are careless in what expenses. And so when we see governments start to do stuff, they don't do it very well. I've often wondered about this latest thing at the airports where we turned it over to, you know, created a new government grant with the searches and stuff like that.

23:29I don't know what was wrong with the older ones. And I've been in Europe where they're pretty thorough, I thought. I remember once they had some Arab guy in Amsterdam, and they nailed him as he was getting on the plane, and he's yelling and screaming as they're hauling him down the hall, and he kept saying, kaput, kaput, kaput. I don't know what he was being accomplished by that, but they were pretty—the Swiss The U.S. was pretty sensitive to it. They did a very good job of protecting the safety of the airplanes. They had one blow up once, and the pilot radio, you can do nothing for us now, but they never do that again.

24:15In that sense, you're right. We have to have government do, but we don't want to have them do any more than they have to do. And look at the, well look at the Concorde, that was the British government and the French government, and they made this airplane that used jet fuel like it was water, you know. And America's Boeing and Douglas looked into it and they said, well it can't pay. And that was when oil was three bucks a barrel or whatever it was in those days, and they just figured that it couldn't pay.

25:24Canada is a wonderful example of where the government ought to stay out. Everything the Canadian government does is just stupid. It's just unbelievably stupid. They wanted to improve the quality of life out in the Maritimes, out in Nova Scotia, and so forth. So they said, well, we'll build a steel mill, and we'll have all these wonderful jobs. So they built a steel mill. You can go see it today. Just sitting there empty. It was not economical to produce steel there and distribute it. It's a very competitive world with steel. But that's just one example. They built an airplane called the Arrow.

26:09After the war, it was a jet fighter plane. And to this day, they moan and groan about the fact that it was a flop. The Federal Reserve, fiat money, fractional reserve banking, Human Action, Man Economy and State, The Theory of Money and Credit

26:46Choo-choo-choo as the train came in but nobody was in it. Finally they shut it down and again that's Canadian government doing things but the Canadians are kind of socialist people they don't have a great love for capitalism and they think the government should do everything we have a wonderful system of medicine the important thing is don't get sick and don't try to use it but it's all free you know really you'd be surprised at the thought The throwbacks we got up there, I remember years ago, I was in government medicine in the Cayman Islands, because that was government medicine, and I had a sore shoulder, and they kept sticking with cortisone, and finally one day when I was changing planes in Jamaica, I got the taxi to take me down to anybody, because I had this chronic pain in my shoulder, and I got a black doctor down there who was educated in the state, And he asked me if I'd change my habits at all, athletic habits, and I said, well, yeah, I haven't played golf.

27:54He says, that's your problem. It's your left shoulder. You swing the golf club. He says you just build up a lot of rust in there, to use a word. But he said, that's your problem. If you just exercise that shoulder, it'll go away. And he said, don't let anybody stick cortisone in it. and so there's a good example of a government medicine guy and I was going in there all the time and I was getting worse and worse and all I needed to do was move my shelter and I think you know I kind of give medicine a bad time but I think in Canada we have government medicine and I don't know I don't think I'd want to be too sick and go in to see those guys I think that the quality is really bad Well, there's one advantage to your medicine. It keeps the hospitals in Detroit and Mayo Clinic full, so they can't get the surgery in campus.

29:09That's right. In fact, I was on a plane once flying from Washington to, I guess it was Detroit, and then it went on, or maybe it was Erie, and then it went on, and I sat next to a doctor, and he was the doctor that was dealing with admitting children with these terrible heart problems, and that needed these terrible operations, and I say terrible, it was lifesaving operations, and he said The hardest thing he has to do is when Canadians come down with their children, with their little children and have these heart problems, and I have to tell them whether or not they should pay and do it now or wait for their turn up in Canada because they may wait too long.

30:02And he said, that's the hardest thing I have to do. Yes, it is because he had the way to turn up there in order to get an operation. So, and that's true with the medicine, but see, Britain has a little better system. They have a dual system. They have the public medical system and then they have the private. So you can go to one or the other. The problem with Canada is that they made it illegal for doctors to get out of the system. So, you're stuck with them. I could tell you someone in the medical profession, and one of them told me he had cancer and needed an operation, and another one said, yeah, you've got to have an operation, and so I was told that the best place to go was down in Buffalo, the Roswell Park, and the guy went down there and he said, no, he doesn't have cancer, he said, you just have an infection, he said, come back a couple of months and he'll be gone. And when I talked to the druggists, they knew, he says, you were lucky, they were going to put you under the

31:00There's a faction here that's going to be clamoring desperately over the next few months to switch to that very system. One thing that kind of killed it was when Thatcher sent her husband to Texas to get a heart operation. Say again? When Hillary was warning us to copy the English system, Thatcher sent her husband to Texas to get a heart operation.

31:47Oh, yeah. In fact, in Canada, a number of the big shots in the government that have had medical problems, where do they go? They go south. They go to the United States. That's where the best doctors are and the best... And also, I think there's a compassion that's totally missing in government medicine. And that's really interesting. When I had this problem, when I called up a specialist in America, he never knew me from anybody. And he only knew one of his patients, and he spent 15 minutes on the phone talking to me about what we might do, you know, if not what. I couldn't call up a Canadian specialist and talk to him on the phone. He wouldn't even think about it. The first thing is I couldn't even see him without getting a reference from a general doctor, so I hope you guys don't throw in the towel on your medical system.

32:41Adam Smith said, Princes, however, have frequently engaged in many mercantile projects and have been willing, like private persons, to mend their fortunes by becoming adventurers in the common branches of trade. They have scarce ever succeeded. The next point on the Enlightenment that I have here is that liberty carries the seeds of its own destruction. Why do you think that is so? You wouldn't think so, would you?

33:28Why would it carry the seeds of its own destruction? The Enlightenment people, they studied things, and they said that liberty produces excessive taxation. You're nice and free, you have low taxes, so let's have high taxes. And when you produce high taxes, then of course you end up, and they said, here's the way they put it. Abuse of Liberty, which is in Montesquieu, he said, Men living in a state of liberty tend to let their guard down and tolerate great taxes, but once granted, they discover that they cannot take a backward step. Isn't that what we've done? You know, on the income tax rates, we thought they were great, Liberty Produces Excessive Taxes and Excessive Taxes Lead to Slavery

34:51Do you see that he has given a proportion at least of your working life to someone else? Yeah, you are on the right track. He felt that we are talking here about, I think, tax slavery. And tax slavery is what you guys are struggling with when you find that you work for the government up until May of every year, and for the first four or five months you are a slave to the tax system. I think that is all he is talking about. Men living in a state of liberty full-heartedly grant their government the right to heavy taxes, and this in turn fosters evasion, and this in turn requires great punitive measures, and this is the consequences of these punitive measures that the country is wrong.

35:36See, here's what they're saying. They're saying, okay, you're living with a liberty, you have low taxes, things are great, so you grant the government the right to tax and you get the heavy taxes. Then you want to back off. And then that's when the government has to come in with the police powers to force the collection and force your obedience. Somewhere in my files at home, I have one sheet of paper, and it would say, I'm not sure if it was Roosevelt or one of his cabinet people or treasurer or something, Well, didn't McGovern propose that way back in the days of Nixon? McGovern, wasn't that one of his principles, 100% tax at a certain level? Yeah, it was. I'm pretty sure it was.

36:37I think it was at ninety, I don't know about when the government reached ninety at one time. It was 91 when I was in law school and then Kennedy brought it down to 70 and then it went down to 50 and then to 28. It was in the over 90 percent in the late 1930s. The reason I remember that is that it was in Pennsylvania, because at that time, I think the state of Pennsylvania had income tax of about 60%. And for the first time, they added an income tax to the state of Philadelphia. And when they tried to add that, it went to over 100% if you had to readjust.

37:26Yeah, so if they had to readjust some of it, it would not go above 100%. Actually, Sweden had 102% at one time, and not too long ago. Because they had, on top of the normal tax, then they had this tax which was like unemployment insurance, that kind of stuff. This wonderful Swedish writer who wrote these books for children, she wrote to the government in a public letter that this is ridiculous and that the Swedes are becoming alcoholics because they got so much stress over taxes that they're drinking themselves to death and a few things like that.

38:15What was the level of income to be taxed at 90% and up? Maybe not many people earn that much money anyway.

38:45and the Convert Ordinary Income to Capital Gains. Capital Gains had a maximum of 25 percent, so this became the gain and they started creating more and more capital gain structures within the economy so that you could make a lot of money, but you would have to switch in the capital gains, but you could do it in many ways. I get the most interesting one was L.B. Mayer, the metragolden mayor. He wanted to retire, and he wanted to get this huge lump sum, and he lobbied through Congress an amendment to the code that a retirement income distribution was capital gain.

39:30And, sure enough, then he got his thing, and then that particular law disappeared. But that's all I can tell you, is that the name of the game was to convert ordinary income into capital gain. That was kind of fun, actually. I thought you could do all kinds of interesting things. Very few people paint that name. Yeah, yeah. Well, just like Ronald Reagan, you know, he started playing golf, you know, and a lot of people did that. And in Canada, even recently, I have known, because our rates are so much higher than American rates, that a lot of physicians come August, September, they quit. They quit. They quit. They don't pay, and then next January they can start, maybe you know, because you're in the business.

40:16In fact, you know, they aren't, well, they could continue, but they can't pay anything through the provincial ceiling. So once you get that ceiling, you paid your employees on it. Yeah, so that's it. And that's the thing about it. One of the other principles is that heavy taxation is such an impediment to the economy and to the growth. It's just a sad situation. Direct Taxation or a Badge of Slavery and Indirect Taxes or a Badge of Liberty

41:15And the reason is, here's Montesquieu's words are, capitation as direct taxes on the individual is more natural to slavery, a duty on merchandise is more natural to liberty because it has no direct relationship to the person. In other words, if you tax a thing and not a person, then that's an indirect tax and they seem to think that was a good deal. The other thing that I thought was quite interesting among the three great minds that wrote on this subject is that tax evasion was not a criminal act. It kind of bothered them that they made a crime out of tax evasion.

42:02Montesquieu wrote about it, Adam Smith wrote about it, and Locke wrote about it. seems a little interesting because we really made tax evasion bad, you know, you made your taxes and you're a bad guy, you know, this is a real lot of, but with these great minds what they say is just a positive offense and they express it in rather strong words. He says, this is Blackstone, the great four volumes of English Liberty that everybody read in those days. He said, recourse must therefore be had to extraordinary punishments for tax evaders to prevent it and perhaps even capital ones, which destroy all proportion of punishment and puts murderers upon an equal footing with such as are only guilty of a positive offense.

43:03and yes it's kind of interesting because I've seen the evolution in the bar association if you're convicted detective agent and that's deemed to be a moral thing and you can be disbarred and all that kind of stuff but it wasn't that way years and years ago it's only been recently and I think the government In any socialist system, the ability to evade taxes is viewed as immoral, an enemy to the state, an enemy to the common good. And I just, one of the earliest things I can remember of the Soviet Union, a guy who was killed, was he was a manager, they were making these meat pies, and apparently they were taking a bit of the fat out and selling it on the side, and he was probably, and they killed him for it.

44:04So, I think the more socialism you get, the more you see this happening. I had another example, I guess, of liberty, but I think that attitude toward tax evasion now is quite different because it's becoming increasingly a control dependent.

44:34such as those inflicted for capital crimes. All proportion then of punishment ceases. People that cannot really be considered as bad men are punished as villains, which of all the things in the world is most contrary to the spirit of moderate government. But we do it. It's always fascinated me that we don't know, when we make laws, don't these guys know what these guys said? This is always wondering, how come they're so dumb? How come our taxpayers are unaware of what these great men wrote and said? And all three of them said that. And Adam Smith defines a tax evader, he said, In every respect is an excellent citizen, had it not been for the laws of the country that made that a crime which nature never meant to be.

45:46And then some of the analysis you can have is like Henry VIII, he manufactured over 200 felonies as regulatory matters, punishable by death. One was begging. He didn't like to see beggars around, so he made it a felony and you could go to the gallows for begging. It was part of that zeal on government to create crimes that nature never meant to be. The next point among the Enlightenment, and this is an interesting one. I had some trouble with this. In that trouble I had some fun with it. The liberty most dangerous enemy is arbitrary taxation. Now, what is arbitrary taxation? We read Hamilton wrote about it.

46:36And he mentions it as, as Hans-Leo Hamilton said, he's one of our better boys, he wrote this in 1782 in New York, wherever a discretionary power is lodged in any set of men over the property of their neighbors, they will abuse it. Their passions, prejudices, personalities, delights and dislikes will have the principal lead in measuring the ability of those to be taxed. be taxed. So we do that today. You know, the rich, you know, the filthy rich, you know, they should be taxed more than anybody else does. And arbitrary taxation seems to mean a lack of standards. It's arbitrary. And the tax making is in the hands of people who make it. They decide what it should be and who should be taxed and who shouldn't. And we We do that. Our tax code is full of all kinds of goodies for some people and abuses for others.

47:37Another principle, of course, at this period was taxation by consent, and the American Revolution was certainly founded on that. In the Declaration of Independence, they wrote that talking about King George, he taxed them without their consent. But consent had to be real and genuine, and that's another thing, going back into the Middle Ages, even the consent of the realm in Magna Carta was a real, honest, and goodness consent. It wasn't that you get together and you get outvoted, so I'm not quite sure just how that applies, but I know that one of the principles of arbitrary taxation, one is it lacks consent, And the other thing of arbitrary taxation is that taxes should be apportioned among the people by some definite standard.

48:31Because once you abandon the rule of apportionment, then there's no amount of injustice you can do. Because if you don't have a definite standard, which government has to follow. Is that what you were saying about courts have lost the notion of even handing this uniform across? Yes, same thing. That's really what these guys are talking about. One is when the tax agents can agree to bring down, for example, if you remember Muhammad Ali owned $2 million or something like that, and they let him offer a couple thousand.

49:19Muhammad Ali? The fighter? Yes. The tax matter? Yes, that was a tax matter and they arbitrarily reduced that to two thousand five hundred I believe. Yeah, you remember that. That's interesting. You remember Joe Lewis had nothing to do with tax problems too. I don't think it was a war back but I was, yeah but he, I don't think he got off so good but he had tax problems and I don't know the answer to all these things and they I know that there's some people or some firms that advertise they can solve your tax problems by, you know, they have the wherewithal to do it, and I'm not sure how they do it, and I'm not even sure that they do do it.

50:08But one of the writers of this period was, he was one of the early scholars at the University of Michigan Law School, his name was Cooley, and he wrote a wonderful book on constitutional law. And he says, and here's the way he designs this problem, he says, Taxes are distinguished from arbitrary levies in that they are laid according to some rule which apportioned the burden between the subjects thereof. An exaction which is made without regard to any rule of apportionment is therefore not a tax. So it's a form of stealing, you know, it's a form of stealing. This is kind of on the side, but you may have, in your practice, this would be of interest.

50:56On one of the news magazines on TV, it was about the case of this millionaire. He made a dot-com, several million, and he was encouraged by either his attorneys or like Merrill Lynch, let's say, They were selling these tax shelters where they'd go to Europe and the guy would put up $100 million and he would buy the sewer system and the city would lease it back from him. Well, it turned out to be bogus, and now he was suing his tax people. and the people that conceived it, and what's your comment on, of course, you have to come up with these schemes because of the stupid system that's in place.

52:40I had one of my clients call me up and he told me he was going to get in this scheme and he had to put up this and that and as it came into the company there was all this rigmarole and he asked me what I thought and I told him no, don't do it and I checked with some lawyers about it, besides myself, went back to him and told him no, don't do it. I didn't hear from him, and then about six, eight months later, he said that confession is good for the soul. He says, I went against your advice and I did it. And now the IRS is on my ass, is his answer.

53:26The thing was so silly, I mean the structure, it had a technical logic to it, but the result It lacked no economic substance and one of the simple rules for these tax shelter deals and has been on the books, you know, a law for a long time, is that it must have an economic substance to it. It must have a chance to make you some money or, you know, it has to have that and of course this didn't have any economic substance to it. But surely they had some other opinions. Don't forget that every one of those partnerships was approved by SCC in advance.

54:28So that still has a good argument that they were legal because he took the plans to the SEC.

55:28and what they usually do, in this case of my client, they wanted a million bucks up front and he gave them a billion bucks. So after we got rid of the IRS, now he wants his million bucks back. It was Arthur Anderson, you're right, that's who was behind it. Apparently they must have been really manufacturing these things. One of the principles of taxation that Adam Smith came up with in his book on the Wealth of Nations and he talked about what would be a just tax or a proper form of tax and he says that the tax is like a great estate where the country is and you are a person that owns a little piece of it, a third, a fourth, a fifth, a common Ownership among many, many people. Now he's saying the great wealth of the nation is something that everybody owns a little piece of, and the tax would be your little proportionate piece, the same as everybody else. So if you own a

56:59thousandth, then you figure out what's the cost of the government, then your bill would be a thousandth, and if you're a big one, then it would be a larger chunk, and he thought, Adam Smith said, that this is equality in taxation. Good The expense of government to the individuals of a great nation is like the expense of management of a joint tenet of a great estate, and then you simply divide up the expenses. Adam Smith came up with the four signs of a bad tax system.

57:52You'll find this in his Wealth of Nations. The first tax is bad that requires a large bureaucracy to administer. You know how much the bill is for the IRS? It's billions, you know. A tax is bad, number two, which obstructs the industry of the people. In other words, it discourages your enterprise and so forth. Three, a tax is bad that encourages evasion. Once again, we're going back to tax evasion. Evasion is bad, said Smith, because it tends to put an end to the benefits that you can do in society. So if you're engaged in tax evasion of some sort, then you're no longer a productive citizen.

58:42And a tax is bad, and it's the best one of all, fourth, that puts people through odious examinations of the tax gatherer, the audit, you know, which, you know, every word trembles at the IR, at the audit, at the tax side. So those are the four principles of a bad tax system. I'll go over them again. A large bureaucracy. It obstructs, discourages your enterprise. It encourages evasion. Temptation is there. And finally, it puts you through odious examinations of the tax gatherer. And if you measure our system up against that, it looks like we qualify on all four points.

59:27Then there was another fellow that during this time, Lord Cames, and I was able to dig up his little book. And he wrote a book, The Principles of Moral and Political Philosophy. And in it he lists six things about taxation. These are the rules. 1. When the opportunity for evasion exists, taxes must be moderate. It is unjust for the legislature to tempt and then punish for yielding to the temptation. So if you're in a 90% tax bracket, there's a lot of temptation, you know, to beat that in one way or another. And if it's illegal, you do it illegally. Taxes are bad that are expensive to levy, and it costs a lot of money to levy the taxes.

1:00:16Arbitrary taxes are disgustful to all. The amount paid is determined by the vague and conjectured opinions of others. Again, we come back to the term arbitrary. And to remedy the injustice of riches, the poor should be relieved of taxation. There's nothing wrong with that. And then he says, taxes which sap the strength of the nation should be avoided. Such taxes contradict the very nature of government, which is to protect, not oppress. And then, taxes are bad, which require an oath not to be avoided. I remember I mentioned Queen Elizabeth, you know, a good Queen Bess, she got rid of the oath and yet we had a Supreme Court case, I think it was the United States v. Boyd back in the, I think, 1870 or 80 or something and it talked about ordering a person to, it was a custom, you know, a duty to fill out a form on their importation and then force them to make an oath that this was true, because we do it all the time now.

1:01:33But his point was that requiring oaths for taxes is a very corrupting thing. An oath is a very sacred thing, and people who take an oath should take it very serious, because you're swearing to God, and the theory was that if you violate the oath, God will punish you. That was the theory when you took an oath. So the point that they make here is that it's very corrupting the society to start using alts for collection of taxes, because we got it every time you turn it around under penalty of perjury, you see them all the time. So these are what the Enlightenment stood for. I think that since then we've had some interesting concepts that come in, like social justice, Another one, which I love of course, is the communist states like Red China called the Democratic Republic.

1:02:39All these communist countries use the word Democratic Republic and hell, they don't even know what the word democracy means and yet they put it in their titles and the same thing is true with us. We at least don't do that. Do you know if the early tax forms, 1933, whatever year they had to file, do you know if they included them out back in the early days of our tax system?

1:03:24President Roosevelt hated some of the blue bloods in the East, maybe you know the story of them, and he hated them, and so he was one who was somewhat the author of some of these brutal attacks against the rich, and he went after Andrew Mellon, who had been the Secretary of the Treasury during the 20s, and charged him with tax evasion, and they just went after him. and the FDR. Yeah, this is the FDR. He didn't mind punishing his enemies. That's something that politicians like to do. Well, John F. Kennedy, you know, he went after those people. He had the IRS go after people who complained about his being a Catholic.

1:04:16Many of those who were the Protestants who didn't like the idea of the President of the United States being a Catholic. I read that every president since Hoover, and maybe even including Hoover, was known to have used the IRP to punch him. Yeah, I think that was... He played the current president before he was elected president. Sure enough, he could have seemed... Who knows? See, those things never... They do those things now real subtle, even on the QT. You know, it isn't done in the old days.

1:05:02I remember... was it Ehrlichman who called in the IRS commissioner, and she says, I think Clinton, he had more or less a continuous investigation audit of the NRA, something in excess of a million dollars a year. Yeah, they use it, and it's too bad. The problem, we have a lot of problems that they can get away with these things.

1:05:47And if you go back in the history, one of the principles of Roman law that I liked was the Romans took the position that if you lied in a criminal prosecution, that you would be punished with the same punishment that the defendant would have gotten. So if it was a capital case, you get a death penalty. And today, one of our biggest problems is lying, and particularly by police. It's really a tragedy because when I was a real young attorney, I was a public defender and I had a chance to see, and I was really shocked that cops would lie the way they did. You wouldn't see Roman wouldn't be doing that because they really went after them.

1:06:34And sometimes if we would look back in ancient law, we'd learn some pretty good principles. You want to say something or are you just scratching? Well, I cover the Enlightenment. I think it's a wonderful lesson of thinking. I don't know whether I've read it or whether I've formulated this idea on my own, but from that period of time it seemed like around the world there were different forms of government that took shape, like the American experience you said, and the forms of government in France and England and Austria and Russia and all these other places. Was there an outgrowth of the Enlightenment? Was it purposely set up by these people at that time to try these different experiments in government?

1:07:27It almost appears to me that there was, somehow, somebody that set up that. Well, the big leader was America. You know, this was the leader of government and society was the United States. The United States and the rest of Europe just looked upon them with great amazement and great admiration and one of the writers around 18th century said that the United States was this beacon to the world in terms of government and in which government was cheap, they used the word cheap, believe it or not, taxes were low and people came from Europe But were there other experiments going around and going on in other countries?

1:08:40and said, can it be right in the eyes of God or man? I'm talking about Lincoln's attempt to save the Union to have caused so much evil for such a silly end. They didn't use the word silly, but it's not so important an end. I mean, can you justify all the slaughter on the battlefields of America over just preserving a Union? Does it justify that kind of carnage? And we didn't seem to, I don't know, we had some, not some good thinkers there, but I think that we were the light of the world for a while, and I guess most of us, or many of us, we had immigrants that came here, my ancestors came here after the Civil War because of the opportunities that were here.

1:09:31My grandfather, Adams, for example, when he was 11 years old,

1:10:06and he did well and in England what would have been this in the working in this dumb factory all his life so it was a land of opportunity despite all our political idiocies that we have had. Yes?

1:10:50are going to control our taxation too, but do you have any comments on that?

1:11:20So what you have with a world economy, you've got to be competitive. That's all I can tell you. That's reality. And enemies are putting up trade barriers, and then you really make a mess out of it. So the free trade is an important thing. Although Lincoln didn't believe in it. But the British did, and the British did at the time of the Civil War. One of the great worries that was mentioned up in the North is that the South was going to make a deal with Britain and create a free trade zone between the Britain and the South, so that the South could send off its cotton and tobacco and its products to England and England could bring in all its manufacturing goods and take care of the needs of the South and not pay a dime.

1:12:08Well, that was just totally unacceptable to the Northerners and to Lincoln and all of Service, in one case, France. I'm sure they all had to be concerned about goods coming in at 10 percent and going up and going up rivers and so forth and rail and not being, because I'm sure it was hard to police once it was inside, I guess that was, did they have measures to try to prevent that?

1:13:03across the border, and that was one of the reasons that the impossibility of dealing with the South, one of the motives for striking the South down is because they had all this potential harm to the Northern economy, and of course they could also put trade barriers on the Mississippi and Ohio and Missouri rivers and so forth, now the South said they wouldn't do it, but you know, what they said doesn't mean that they would not do it, if they hadn't done it they probably would have done it, but yeah, those are all the economic factors I have written about in my Civil War book. I did buy it. Oh, you did? Well, I think you'll enjoy it. One of the interesting things in that book is the Lincoln signed an arrest warrant to arrest the Chief Justice of the United States.

1:13:55And that brought a lot of anger from the Northerners. and when they discovered that one of my references in there was not accurate, I mean a guy who was a very famous professor at Rice, one of the best civil war historians, he corroborates the arrest story, but he made a mistake, I got in touch with him, he said, well I'm 78 and I'm entitled to make a mistake, that's what he told me. The only problem is that then the only source we had to prove that was the private papers of Ward Hill Lyman who was the marshal, the federal marshal that he and Lincoln gave him the rest warrant.

1:14:48And he had been Lincoln's law partner, so he was a pretty responsible guy, although they started to say, well, he was a boozer. and he liked his booze and so therefore he made this up. And since he's the only one, boy they were just so happy to go after me on that. Well that means you've got to do some more research. So I did some more research. And I came across the memoirs of Justice Curtis. And Justice Curtis was a Supreme Court Justice who wrote the descending opinion in Dred Scott. And he got in such an argument with the Chief Justice that he quit the court. But in his memoirs, he talks about this great crime of the attempt and the plan to arrest the Chief Justice of the United States.

1:15:40And he says, even though it never happened, it set the pattern. And then I ran into the memoirs of the Mayor of Baltimore. And he mentions the same thing in his book, that there was this great crime, deciding this warrant to arrest the Chief Justice of the United States, which he said never happened, but he said they planned on it, so I nailed him in research. But you know, sometimes you have to research. I sent him copies that never answered and I said, and they had a great time with that. Did you, I've read about the Justice Curtis who corroborated the story of the, I forget the, the marshal story. Yeah, that was, you got it from me.

1:16:26Yeah, it was, wasn't it on, it was on Lew Rockwell? Yeah, yeah, yeah, that was where it was, yeah. Research is really great when you come up with something. And if you have a great library, you can run into those things. The head librarian at the Huntington Library in California, which is a great library for documents and old stuff, he was very much against the story of Marshall Lehmann, of the arrest, and he said, well, the guy was a drinker, which he wasn't, but I sent the One question that you mentioned this morning that I forgot to ask, when you were talking about the property taxes regarding houses. When I was in France, and I know the same thing is the case in England, the buildings in towns were up one story, and then the second story, they extend outwards.

1:18:02and I thought maybe it was just for architectural reasons, and they said, oh no, said the property taxes there was based on the footprint of the house and the square puts there. So what you did, you put a house on the main floor and then the next story, had you ever been able to confirm that or was it just that? Well, I wouldn't doubt it at all. There's a picture in your books, and it shows a typical house, you can see the street, and then by the second story it goes out again, as so many of them did.

1:18:55In New Orleans, the reason you had no closet is the closet was considered a second home and they just counted the number of homes and if you had a closet then they had a second home.

1:19:25The boardrooms, the piece of furniture there, they didn't get that.

1:19:55Thank you very much.