April 14, 2005 -- As we rush to meet the April 15 deadline to file our tax returns, many fail to realize that those 1040 forms do more than just make us all personally poorer. The tax code is a principal instrument that creates and sustains the politicized, partisan, uncivil, contentious conflict society that so many bemoan.
Why can't we all just get along? Here's why.
Taxes are meant to pay for the legitimate functions of government, and America's Founders were clear that those functions were to protect the lives, liberty, and property of the citizens and otherwise to let us live as we see fit. This view implied certain moral principles.
First, each individual deserves liberty because our survival and happiness depend on our own actions. Personal autonomy means we must each be free to exercise our capacity to think rationally to judge what is best for us.
Second, as autonomous individuals, we each take pride in our achievements, in creating the material means for our prosperity and the moral character necessary for our happiness.
Third, we do not desire to gain what we haven't earned from others—we have no desire to steal from our neighbors, nor will we allow others to steal from us. Thus our legitimate interests would never conflict with our neighbors'. We would deal with each other by mutual consent. In America at its best, government's one purpose would be to protect our liberties.
With this ethos in our economic activities, the coin of the realm would be rational self-interest. To secure what we want from others, we offer them the goods and services they desire. Similarly, others offer us in trade what we want. As we buy and sell, we learn which products are beneficial to us and which are not. We learn to discriminate. Competition for our business sharpens our judgment and weeds out the fraudulent and substandard. If we cannot come to terms with others on a voluntary exchange, we go our separate ways.
Of course, today the functions of government—manifest in the tax code—are very different from that vision. Paternalists of all parties see the purpose of government as passing out unearned benefits and special favors to various groups.
Such aid, by definition, is at the expense of others. Look at how the federal government spends the taxes it takes from us. The Agriculture Department passes out subsidies to farmers, paying many not to grow crops; taxpayers thus have less money to spend on food. The Commerce Department subsidizes the research labs of businesses and pays to promote their exports; taxpayers thus have less money to spend on consumer products. The Departments of Health and Human Services and of Housing and Urban Development provide a plethora of welfare handouts; taxpayers thus have less money for buying healthcare and houses.
Politicians pick our neighbors' pockets to help us and pick our pockets to help our neighbors, driving up the tax burden and reducing our personal autonomy. The particulars of the tax code reflect this rapacious principle.
Citizens seek relief from this high tax burden through special deductions—for purchasing homes, saving for retirement, paying for their kids' college, and the like. Anti-business ideologues continue supporting special taxes on businesses, which are then passed along to consumers. Those motivated by envy continue backing higher taxes on people who create more wealth and thus become wealthier than others.
The millions of words in the tax code reflect hundreds of political battles, a war of all against all in which our interests conflict with each another, in which one individual's gain is another's loss. The coin of the realm in this system is force. Those who can wield political power can simply take from others, with politicians performing the dirty work.
No wonder this is a contentious society. No wonder society is so nasty. What should we expect from a system in which we each treat our neighbors as cash cows to whom we, via the Internal Revenue Service, offer not exchanges based on mutual consent but threats from government agents who can throw in jail people who don't turn over the loot?
The tax code is a monstrous mess that sets individuals against each another. Those hated 1040 forms are instruments of social conflict. Abolition of the current tax code and its replacement with a flat tax or national sales tax would be a small but significant step in the right direction.
Ultimately, we must reject the immoral premise behind that code. Only then can social discord be replaced by social concord and civility, and the harmony of interest produce the beautiful music of freedom.