The Taxation Libertarians Ignore
When it comes to having the kookiest ideas about how government should be run, no large ideological movement in the US can quite hold a candle to libertarians. And there’s lots of words spent on all their ludicrous ideas.
But one of the most steadfast arguments at the core of their philosophy is their opposition to taxation. “Taxation is theft”, you will hear any libertarian shout if you get within twenty feet. This phrase is a compulsion for them, in much the same way a vegan just has to let you know about it. Prod them a little further and they’ll expound that nobody has the right to take from the fruits of another person’s labor.
Oh really?
The part they don’t say out loud is that nobody can use government to take from the fruits of another person’s labor. But, implicit in this is that a company absolutely can. In libertarian theology, companies are not merely people as codified by Citizens United, but demigods. Companies are super-people with extra rights that supercede those of individuals.
The next time you engage in the pastime of banging your head into the stone surface that is libertarian orthodoxy, here’s something to try(well, you may get more satisfaction from banging your head into a literal stone surface, but I digress). Ask the consequences should your neighbor train their dog to do their duty exclusively along the property line and never clean it up.
You’ll get interesting responses, ranging from “that is their freedom, and you have to respect it” to “you can always move” or “they’re violating the sacred non-aggression principle, so you are justified in using retaliatory force against them”. The most common consensus, after letting gears grind for a minute, is to establish an HOA.
It’s an interesting contortion, that the libertarian approach to property disputes is to establish a microgovernment, which collects fees, and operates with limited ability to use force. “But it’s not a government”, says the HOA libertarian, “it’s a community organization”. And besides, you always have the option of moving-provided of course that you are financially able. (Strangely, this option is often dismissed when it comes to moving to a country that will not tax you)
But libertarian hypocrisy is not just limited to home life. That hypocrisy also exists in the temples of libertarian dogma-the workplace. You see, without work and barring a *very good excuse* like being completely incapable of work, or having somehow acquired enough wealth to never need to work, everyone must justify their right to exist through labor. That’s why it’s so important that nobody (from the government) can steal that.
Except for the company, of course-which as we’ve already established is more of a benevolent demigod than a person. After all, there are no gods, no kings-only companies and executives.
So, let’s get this right out of the way. Yes, when you sign on to work for a company, you agree to contract out your service for an agreed upon wage and all the conditions of payment. I get it. I also get that you’re free to negotiate your wage or leave the company. And you may be able to negotiate better options, and you may be able to quit and look for a better employer who treats you what you think is more on par with your value and provides free coffee in the breakroom. Or you could stick with this job because you need to provide food, shelter, education and medicine(because you sure as heck aren’t letting the state cover those expenses) for your family and nobody else is hiring right now.
You know what else you’re free to do? Find a new job, just like if your neighbor builds a 6' wall of dog crap along the border of your property. You’re also free to starve and die, which is an answer libertarians frequently cite as a response to not working. Just because you have freedom to choose from a myriad of options to resolve a conflict doesn’t mean they are good options or that the other party isn’t exploiting your lack of options for their own private benefit.
So, now that we’ve established that you have to work, and you’ve agreed to work voluntarily(if you assume starving to death as the alternative makes it a voluntary decision), let’s talk about taxes. Right, here’s where the libertarian eyes turn red and they’re ready to channel their Super Sayan Rand powers. Hold on there, chief. We’re not talking about the state imposing taxes.
Wait, what?
Yes, just like a homeowners association, other entities can levy fees and fines. We just call them dues or, in this case-dividends.
Ok, let’s take a quick aside-we’re not talking about a mom and pop business. Only about a third of all US non-farm, non-government employment is for companies under 100 people. Basically, if you don’t work for a sole proprietorship this doesn’t mean you. It also doesn’t mean the vast majority of people who work.
Ok, so where were we? Dividends.
In every corporation, there are bosses and there are workers. I’m not talking about your manager-I’m not even talking about the CEO, the chairperson or the founder. I’m talking about shareholders. Yes, I know that anyone can be a shareholder. But the majority of shareholders are largely unaware of what shares they hold.
Don’t believe me? Check out your 401k. Tell me what companies make up your portfolio. I have a 401k, and my provider just gives me the vaguest indication of what companies are part of it, using generalities like “high risk tech” or “medium risk” or “low risk commodities”. Those are comprised of companies. Those companies are comprised of workers.
If I sell my 401k, the company(the manager of the 401k, that is) is legally obligated to compensate me for that value. And for what? What have I contributed to the companies that make up that portfolio? I bought(in the most abstract way) the stocks that make up that portfolio for pennies, and now I’m being paid dollars for my share. As an “owner”, what have I done? More importantly, who pays for the rise in value of those shares?
The company does, but where does that money come from? They’re surely not selling off their assets to make sure I get my value back. The answer is that those profits I’ve realized at the point of sale were set aside for me with every dollar earned by the company, because let’s face it-the value of these stocks sold by the company(and bought back by new “owners”) are built on the backs of labor.
I know this is a critique of libertarianism, who are notoriously bad at math so I’m going to use simple friendly numbers for this hypothetical.
Let’s talk about Bob’s Burgers-no not that one. This is a fictional company with an owner operator-Bob Burper. He needs money, so he decides to sell 1000 shares of stock at $10 each.
One year ago, I purchased $10 in stock at Bob’s Burgers Inc. In that time, the value of the stock rose 10% and I sell it at $11. The $10 is obviously money I spent on the company, and it’s only fair that I get that back. The other $1 has to come from somewhere. But where?
Bob’s Burgers stock was valued at $10000 when I and 999 others bought shares. Now it’s valued at $11000. Bob’s Burgers has just one employee-Bob. Bob gets paid $1000 over the course of a year. Bob makes and sells burgers, and after the cost of doing business, each burger generates $1 in profit. Out of that profit, $.50 is used to cover Bob’s wages.
So, Bob is the only employee, and therefore is responsible for doing all the work, but he’s only keeping half of the profit. Meanwhile, for every two burgers he produces, he’s paid my interest accrual for the year. For another two burgers, he’s paid for a similar investor’s interest. Assuming Bob has produced 2000 burgers in the year, he has paid for his work to be compensated, but also for one thousand shareholders interest, and only on burger 2001 does the money go back into the company.
In other words, the fruit of Bob’s labor is being taken by investors who have contributed nothing. But this is all ok, because Bob needed that money and agreed to sell part of his share of the company, right? Sure.
But, let’s take this same company and extrapolate. What if Bob didn’t actually need the money when he took part of his company public-he just sold it so he could buy a new house. And Bob doesn’t work anymore-he just has his workers-Louie, Gina and Tony. They make less money per burger produced, and more of that money gets passed on to company profitability and shareholder value.
You can make an argument that Bob has earned the right to make hearty profit from his business at the expense of his workers, and you’d have a case. But what about his investors? What have they earned? As they are investors, they have no interest in what goes on with the workers, and only care about making higher return on investment, they are going to dictate policy that fires Louie, and slashes the wage of Tony and Gina. And now, for every dollar in profit they create for the company, only a dime goes to their pay, while the rest increases shareholder value.
That’s a long-winded example. But this is how modern regressive taxation works. Walmart employs 2.2 million serfs. Amazon employs another 1 million. Together, they have more employees than the 20 smallest states in the union have population and revenue that would be 8th highest GDP among states.
It’s worth pointing out that wringing value out of the workers is not the only way to feed the investor class. The older, more traditional approach is to wring value out of your consumers. This is a much harder thing to achieve these days, since consumers tend to have actual choices about where they can buy-at least in most industries.
But that’s not always the case. For example, if you’re an American and reading this, chances are you’re using a phone or your home internet. When you signed up for either of these services, you most likely had one or two choices in your area, and neither of them were good. And if you’re an American, you probably at some point have health insurance that you need to tamp down on healthcare costs, a perfect example of how a captive market has no choice in who the provider is. (Short of, you know, quitting your job and starving as we’ve already gone over.)
The key difference between the regressive upward taxation of serfs to a modern corporate government and the progressive taxation of a public government is that the corporate government has no mandate to attempt to spend this money on public good, or even for the good of it’s subjects.
So, let’s summarize. In libertarian theology
1. You must work or perish, unless you are in the ownership class.
2. The government taking a cut of your labor is immoral, because you have no control of it.
3. An HOA using fees and fines is not immoral because you can move. (This is somehow not a contradiction of #2)
4. A company taking a cut of your labor is totally moral because you agreed to it and you are free to quit(or perish)
Libertarian propaganda mythologizes the evils of taxation-which certainly has much to critique, and overlooks the evils of the blatant corporate exploitation, never questioning just why companies pay 5.6 million dollars to air a 30 second ad during the SuperBowl. If your town spent that much money on something so frivolous, a savvy investor would purchase pitchfork and torches futures. Corporate waste is staggering and opaque when contrasted with the relatively minimal waste of taxation-yes, even for the most ridiculous boondoggles.
