Deplorable Taxes
Deplorable taxes make people poorer, yet few oppose them.
November 6, 2016
Fred Foldvary, Ph.D.
Economist

Something is “deplorable” if it deserves disapproval and condemnation. Just as the concepts of good and evil should refer to acts rather than persons, the term “deplorable” should be applied to actions, beliefs, and policies, not to persons. A person can do both good acts and bad acts, so to label a person as good or bad, deplorable or commendable, is poetic rather than scientific, and indeed, rather bad poetry.

What policies are morally deplorable? Any law which imposes costs and restrictions on acts which do not coercively harm others deserves to be deplored. Taxes that impose costs include those on wages, goods, enterprise profits, interest, dividends, and the yield of capital goods.

Commendable sources of pubic revenue include voluntary user fees, charges for invasive trespass, and payments for the use of property that belongs to others. A truly voluntary user fee is paid for a service that is not legally required, such as paying a parking meter. An example of invasive trespass is pollution; the levy is, in substance, a compensation for the invasion and damage. A levy on the occupation of  land is a payment of the land rent that properly belongs to the members of the relevant communities.

Those who approve of invasive taxation do not appreciate and honor the concept of a market price. A market price reflects the scarcity of additional supplies, and the desire for extra amounts. The market price balances these and generates the optimum quantity of the good. That price maximizes the social well-being provided by that good, and in general market equilibrium, market prices and quantities maximize the benefit of the economy to society.

Therefore the distortion of market prices is deplorable. All prices and quantities in today’s economies are skewed from what they would be in a pure market economy. Taxes artificially make labor more expensive while wreaking the balance of a worker between his desire for leisure and for goods. Taxes stifle entrepreneurship and the investment that generates growth. Taxes bury labor and enterprise underground.

Other deplorable policies include subsidies, mandates, and restrictions. A minimum wage, for example, is a tax on the employers of low-skilled labor, pushing these employers to replace workers with machines. A free market would provide a higher minimum income by maximizing labor productivity, letting workers keep their higher wage, and providing each person with an equal share of the community’s land rent.

Even some libertarians support deplorable taxes and violations of free trade. Some even say that high taxes on the purchase of goods are voluntary, because one is not forced to buy any particular good. The fact that one cannot live without goods, and that all savings are eventually spent on goods, eludes them. If even libertarians oppose economic freedom, well, that is deplorable.

As, to my knowledge, all the ballot parties favor deplorable policies, I suggest the government stop inscribing “liberty” on US coins. As stated by Henry George, “We honor Liberty in name and in form. We set up her statues and sound her praises. But we have not fully trusted her.... She will have no half service!”

R. H. Tawney, in his book Religion and the Rise of Capitalism, remarks that “the heart of man holds mysteries of contradiction which live in vigorous incompatibility together... In every human soul there is a socialist and an individualist, an authoritarian and a fanatic of liberty” (1926, Chapter IV, “A Godly Discripline”, p. 212).

That is how people support deplorable policies. They favor deplorable supremacism and also commendable egalitarianism, deplorable invasions and also commendable individual sovereignty. Cognitive dissonance rules. As Tawney might say, humans use reason yet refuse to follow the logic to its conclusion. It is futile to deplore such flawed human nature.

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Fred Foldvary, Ph.D.
Economist

FRED E. FOLDVARY, Ph.D., (May 11, 1946 — June 5, 2021) was an economist who wrote weekly editorials for Progress.org since 1997. Foldvary’s commentaries are well respected for their currency, sound logic, wit, and consistent devotion to human freedom. He received his B.A. in economics from the University of California at Berkeley, and his M.A. and Ph.D. in economics from George Mason University. He taught economics at Virginia Tech, John F. Kennedy University, Santa Clara University, and San Jose State University.

Foldvary is the author of The Soul of LibertyPublic Goods and Private Communities, and Dictionary of Free Market Economics. He edited and contributed to Beyond Neoclassical Economics and, with Dan Klein, The Half-Life of Policy Rationales. Foldvary’s areas of research included public finance, governance, ethical philosophy, and land economics.

Foldvary is notably known for going on record in the American Journal of Economics and Sociology in 1997 to predict the exact timing of the 2008 economic depression—eleven years before the event occurred. He was able to do so due to his extensive knowledge of the real-estate cycle.