Saturday, June 25, 2005

Why Taxation Is Not Theft

Right-wingers are rather fond of claiming that taxation is a form of theft (for some recent examples, see here and here). This objection presupposes that individuals are entitled to their holdings, and that the state has no right to some portion of those holdings. In this post, I want to explore (and challenge) those assumptions.

The main problem is that the objection rests on the inadequate foundation of libertarian entitlement theory. This political philosophy is badly misguided, for the many reasons outlined here and here. In particular, I argue here that there is no way that one could justly acquire an absolute property right over any natural resource. This then provides a libertarian justification for redistributive taxation towards a universal basic income:
it is the 'ground rent' or compensation that is owed to each human being for the land and natural resources that have been deprived them by others' illicit appropriations. All property derives from these ill-gotten gains, and compensation must be paid accordingly.

The second justification for taxation is to remedy market failures with regard to "externalities". To adapt an argument made in a recent post (though in a somewhat different context):
It highlights two major trends of the modern economy: (1) the "spread of significant environmental externalities"; and (2) the development of wealth "held in the form of information rather than material goods". What these trends have in common is that "they greatly enhance the importance of property rights which are extremely difficult to define and enforce." Van Parijs continues: "[I]t seems safe to predict that these trends will persist, and hence that it will become increasingly difficult to make sure that whoever is responsible for wealth destruction/creation actually pays/is paid for the damage/benefit caused."

Redistributive taxation is a fairly blunt instrument in this case, though its egalitarian nature might help to smooth out some of the arbitrary disparities caused by the malfunctioning market. But a better argument would highlight the need for specific taxes which target externalities. This justifies extra taxes on petrol, carbon emissions, garbage, and all other pollutants. Such taxation is manifestly just, for it ensures that people are responsible for the damage they inflict, rather than offloading the costly consequences of their actions on to others (including future generations).

A third justification for taxation is communitarian in nature. Wealth is not created in isolation, it is as much a product of society as it is the individual. After all, society provides the enabling conditions for the individual to flourish -- your success would not be possible were it not for the opportune conditions of the society one works within, and the actions of your fellow citizens. Thus the community might rightfully claim "dues" on wealth that is created within the safety of its confines. Wealth is a social product -- a fact which the atomistic view (common to liberalism and libertarianism) leads us to overlook.

(I think there are actually two arguments here which I am in danger of conflating. First, society is a precondition for individual flourishing -- so even if you create wealth yourself, you couldn't have done it without the prior benefits bestowed upon you by society. Secondly, wealth is a social product: you don't just create wealth yourself, it is a product of your interactions with other social agents, etc.)

These latter arguments take us beyond the theoretical apparatus of libertarianism, but, given the inadequacy of the theory, that's not a bad thing. Indeed, I think the libertarian has framed the debate in a very misleading fashion. They treat property as if it were a natural (pre-political) right, emerging from the 'state of nature', with which government may not interfere. But natural rights are a political fiction -- "nonsense on stilts", as Bentham put it. We have no reason to think that such bizarre entities exist. (We can ground morality just fine without them -- see my recent post on constructivist non-cognitivism.)

We should instead understand rights - including (conditional) property rights - as emerging out of a social/political context (and justified on indirect utilitarian grounds). On this more holistic view, you cannot see pre-tax income as your "natural" or "deserved" earnings. 'Pre-tax' is a misnomer: tax is not an imposition on some prior economic system, it is a fundamental part of the system. A sales tax is simply part of the price of what you buy. Income tax is just a factor that determines your earnings. "Ownership" is not a natural relation between you and an object, but a social relation between fellow citizens: it is an agreement to refrain from interfering with the socially-recognized (i.e. "post-tax") holdings of each other.

Some libertarians even go so far as to claim that taxation is equivalent to "forced labour". This absurd claim is a result of their atomistic (mis-)conception of the issue. They see labour as natural and prior, and taxation as a subsequent imposition on this natural order. But in reality, work is embedded within (and not prior to) the social context. We know in advance what the tax-rate is. When we agree to work, we agree to a taxed wage -- like I said above, the tax is simply part of the cost, it's something one consents to as part of the social transaction. There is no "force" involved, and no "theft". Of course, if you later refuse to pay the agreed cost, then the tax collectors will come knocking at your door. But try reneging on your debts to anyone else and see how they react!

38 comments:

  1. "When we agree to work, we agree to a taxed wage."

    This is not so. While we agree to work, we have no meaningful choice about whether our wage will be taxed. We could only "agree" to a taxed wage if we could also choose an untaxed wage.

    The question, then, becomes how we may justify this taking even though it is nonconsensual. I do think that such methods exist, even in libertarian theory, and I would recommend to you Randy Barnett's Restoring the Lost Constitution for a discussion of nonconsensual but still proper government.

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  2. "We could only 'agree' to a taxed wage if we could also choose an untaxed wage."

    Suppose that wearing a company uniform is a non-negotiable part of my work contract. Does it follow that I am being coerced? Could I only agree to the uniformed job if I "could also choose" a non-uniformed version of that job? That seems a rather silly claim. When I consent to the job, I consent to the conditions of that job: the working hours, the compulsory uniform, the taxed wage. It's all part of what one consents to as part of the social exchange.

    You are "forced" to pay tax in exactly the same way that you are "forced" to take a job -- there just aren't any reasonable alternatives open to those of us who lack capital. (If we avoid all such transactions, then we starve.) If you nevertheless think we labour voluntarily, then you should hold the same of the tax payments that are part of that very same transaction.

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    1. If I - in my basement - create an incredible new product that everyone wants and I offer it to people for a price, then the socialists claim they deserve a large percentage of the money people choose to give me for my product - even though they had no involvement in the process. How can you possibly say that this is not theft?

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    2. You wouldn't have other people to sell to, or police to protect you from theft in your basement, or patent laws protecting your new product, or roads to drive on to deliver your new product, or electricity infrastructure providing power to your basement, or a fire department to come put out the fire if you accidentally set your basement on fire, or schools to educate your customers so they can get jobs so they can have money to buy your product, without government and the social contract, and without taxes. The greatest failing of libertarian ideology is that it desperately wants to view each person as an island, created ex nihilo, with absolutely no interaction with other people except for simple individual mechanical transactions exchanging goods or services.

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    3. I would voluntarily pay for private roads or airplanes to deliver my goods , pay for private electrical infrastructure to provide power, I would pay insurance so that if a fire breaks out in my basement, a private fire department can put that fire out. People want money, so they will pay for the internet to learn all they can in order to get a good job. So no, I don't view everyone as an Island. In fact, I want everyone who is involved with my product to benefit from the services they provided to make that product a reality. I would voluntarily pay them for the services they provide. Society can get a piece of the action because I will pay them what they deserve at market price.

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  3. (For the record, that isn't my position. I think we are unfree if we lack reasonable alternatives, as market agents often do. But obviously the libertarian cannot grant that, and I am trying to present an argument from their perspective, so...)

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  4. 'Suppose that wearing a company uniform is a non-negotiable part of my work contract. Does it follow that I am being coerced?"

    Of course not--you could presumably work somewhere else, or not work at all and starve, which is a choice of a different order entirely, as it arises out of nature, rather than out of politics. You are most certainly not "forced" to take a job in the same way as you are "forced" to pay taxes. Or is losing money to a credit card bill something of the same moral order as losing money to a natural disaster?

    Again, let me just reiterate that I consider myself a moderate libertarian, and I find that some taxation is appropriate, given that voluntary government financing seems impossible given any presently known system of social ordering.

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  5. "You are most certainly not "forced" to take a job in the same way as you are "forced" to pay taxes."

    You seem to have missed my argument. My point is that in making a market transaction, you consent to the conditions of that transaction -- one of which is taxation. Presumably one could avoid taxation altogether by refraining from participation in the market economy, never acquiring possessions, and so forth. This is a "choice" on the order of "choosing" to starve rather than work. If you believe the latter to be an uncoerced choice, I'm not sure on what basis you deny the same status to the former.

    Indeed, they might even come down to the very same choice. Let us imagine a man with no possessions, and two broad choices:
    (1) work at a taxed wage
    or (2) starve.

    Let us suppose he ends up doing #1. Is it an uncoerced choice? If so, he chose to be taxed. If not, he was forced to work. Take your pick.

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  6. I believe that starving rather than working is an uncoerced choice. Coercion is something that humans do to one another; it is not something that nature does to us.

    The man who chooses to work at a taxed wage rather than starve may, if given only these two alternatives, prefer to work at a taxed wage, but this in no way means that the taxes--apart from the wage itself--were at all a voluntary contribution on his part.

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    1. Yes, the "Starving rather than working" choice is a red herring for the reason you illustrate.

      The actual argument here, to get back on topic, is the "choice" between "working without taxation vs. working with taxation"

      And THAT, is clearly done by coercion and no other method. Those who promote the contrary theory are inadvertently presuming that the individual has no right to live -- patently false, since individuals live all the time by virtue of their metabolism.

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  7. I'm still not convinced you're being consistent here. Compare:

    The man who chooses to work at a taxed wage rather than starve may, if given only these two alternatives, prefer to work at a taxed wage, but this in no way means that the work -- apart from the wage itself -- was at all a voluntary contribution on his part.

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  8. Merely because someone would rather work at a taxed wage than starve to death does not mean that he consented to the taxation.

    While I do not believe that "taxation is theft," there is still a useful analogy here. Suppose someone came up to you with a gun and said "your wallet or your life." You hand over your wallet.

    Would I, as an outside observer, be justified in saying that you had consented? Certainly not.

    But this does not make taxation theft. It makes taxation a coerced activity, yet one that may still be legitimate. Given that coercion is ethically suspect, if some voluntary method were found to finance government, I would think it imperative to adopt that method. Faute de mieux, we have taxation.

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  9. I agree jason. Taxation is just a l;esser of evils coercive activity.

    the only real alternative to taxation however would seem to be state ownership of a large amount of assets (where they could charge for services) such as land (like the royal family) or business (like NZ post). The govt could use its natural advantages to keep these profitable. (thus taxation could become an entirely market activity).

    However, the same people who dont like taxation also dont like that solution.

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  10. Jason, like I said before, I personally agree with the "reasonable alternatives" view of freedom, according to which we are indeed coerced into working and paying tax. My point is simply that you cannot pick and choose. If you say labour is voluntary but tax is not, then you're being inconsistent, for the reasons I have shown. The two rise or fall together.

    Now, you're right that the status of "theft" doesn't follow from "coercion", and that's probably more important to my central argument. The crucial question there is whether the coercion is justified, and my main post set out several reasons to think that it is indeed.

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  11. Do you not need to consider what the tax is used for? It is not quite as simple as just paying tax but also what do (I) recieve in exchange? So, for example if I want mutual security and know this has to be a co-operative venture which therefore requires mutual contribution, I consent/support that part of the tax. Few if any citizens who are taxed recieve nothing in exchange, and largely if they think about it, want the things they or others receive, security, power network, road networks, health services educational services, beauracracy etc.

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  12. Yes, I'm assuming that the tax is spent appropriately. If it's used to build palaces for the tyrant then obviously that is theft, no matter the arguments in my post above. Conversely, taxation for the purpose of developing essential public goods and infrastructure is relatively uncontroversial -- only the most hardline anarcho-libertarians would call that "theft". But the middle ground of redistributive taxation (e.g. for welfare programs or a universal basic income) is more controversial. So it's that sort of taxation that I was meaning to address.

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  13. You may be making presumptions on some of this. If you believe your tyrant is a god, and/or needs appeasing to keep benevolent, you may be very happy for your money to be spent on palaces. Before you write this of as frivolous, I live in the UK. Recently we've been told our Royal Family "only" costs some 45 million £ (sterling) in tax. Personally I find this appalling, but apparently the majority of my fellow citizens think it is money well spent. Just about anything may be or may not be acceptable. Look at the attitudes of some extreme right wing Americans compared to some extreme left scandinaveans. State of mind is more important than the physical.

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  14. Parsifal,
    The royal family may well have a a pretty good return on investment at 45 million pounds due to economic benefits of royal watching and colecting ans so forth, and in a utilitarian manner the secion of the public that like to have someone to look upto in that way.

    Spending some money even in ways that seem stupid may well still result in net gains.

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  15. While I have profound disagreements with this position, which space does not permit me to go into, there are a couple of difficulties I can bring out even if I stipulate most of this for the sake of argument. How can a tax be levied legitimately on, say, land if it was released free and clear by the same taxing authority before it changed the rules? And, what's so special about "the government" or "the community", that these abstractions have any better claim to take than I have to keep?

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  16. The government is "special" only insofar as it promotes the common good, or -- as in the 'compensation' argument for the UBI -- ensures that those who lack resources are not unfairly harmed by those who do (e.g. by depriving them fair access to natural resources).

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  17. That's begging the question, making the special relationship and standing of the government rest on the "community". But what of those that don't want to be part of the community? This comes out in the way Islam treated dhimmis (permitted non-muslims) in a muslim state. The argument only really works within a consensual arrangement - it doesn't provide a general justification. It has merely moved the test over to "what's so special about the community?"

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  18. I don't understand your objection. I did not even mention the word "community" in my previous comment.

    The simplest argument is the compensation one. The institution of private property, though generally beneficial, means that poor people might unjustly be deprived access to natural resources which others have (at some point in the past) unilaterally claimed as their own. See my post on original appropriation. To rectify this injustice, people with holdings owe compensation to those without, to make up for barring them access to those natural resources which they would otherwise have access to. Redistributive taxation in the form of an unconditional basic income would be one way to ensure that this compensation was paid.

    This particular argument is libertarian to the core. It makes no mention of the "community". It is about giving people what they are due, and not harming others without their consent (and compensating them if you do).

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  19. I was using "community" to refer back to my earlier objection, instead of your own word "common". But I see I am going to have to prepare a longer answer off line. This sort of blog presents my platform with problems posting long replies (they get truncated at http://mutualist.blogspot.com), so if I can't paste it all in I will email it to you. Maybe tomorrow? Essentially, I have been trying to bring out some unexamined assumptions in your own line of thinking, just there by broadening a particular anarchist objection to Georgism that various people have come up with independently, e.g. Benjamin Tucker.

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  20. This idea that no individual can aquire a property right over a natural resource therefore justifying a "ground rent" that must be paid to the rest of humanity is completely flawed. If you invest, take risk, and explore and find a natural resource, have the know-how to extract it, transform it, add value to it: and at the time of your discovery had not yet been explicitly claimed by any other individual, that resource is rightfully yours and there is not a damned thing any other individual in society could or should do about it. here's why: No one else found it. No one else had the knowhow, the ability, no one else took the risk... The finder of the resource deserves the rewards that comes with his find. Before Iron was discovered, individuals in society would not have known the difference between any other rock and a piece of Iron Ore. But some individual did, and he found an iron ore deposit and made use of it. To all the other people that did not see what that individual saw, why should they care if he owns it? In your example, if an individual in a foodless society discovers a food source he is well within his rights to claim it for himself. No one else found it. No one else is worse off then they were before. Finders keepers.
    Your second justification collapses in its first sentence. There is no such thing as a market failure. The only failure is the socialist idea that property can be commonly owned. If an individual's person or property is affected by the actions of another individual then let him seek compensation in the courts.
    This third argument is the most laughable. "Wealth is...as much a product of society as it is the individual" ..WRONG!!!! Wealth is ABSOLUTELY the product of an individual's ability to think. (If I may quote Rand). If an individual was isolated on an island, he may apply thought and become very wealthy. He could farm, build himself a shelter do whatever. No need for society's help here. Of course, in isolation is not how one normally becomes wealthy. Yes an individual becomes wealthy because of interactions with other individuals: through trade. But trade in a free market only takes place if both the buyer and seller GAIN from the trade. Just because trading with other individuals in society enables an individual to get wealthy is by no means a justification to forcibly take some of his wealth: all of the individuals he traded with have gained as well.

    Tax is absolutely without a doubt theft, and there is no justification for it. Tax removes wealth from the individuals who have earnt it, and places it in the hands of people who have not earnt it.

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  21. David, you appear not to have read my arguments. It very clearly is possible, in principle, for others to be made worse off by another's acquisition of previously unowned resources. Simply imagine that a starving man happens across the fruit trees a day later than your "keeping finder". The first person's exclusionary "property rights" might cause the second to starve to death when he otherwise would have lived.

    On the second point, there clearly *are* market failures in practice, since there are public goods (e.g. air) that cannot be owned.

    Your third point neglects the fact that competent adults don't just spring into existence ex nihilo. We are raised in a society, and wouldn't be who we are today without it (especially those of us who have benefited from a publicly funded education).

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  22. I think the issue is only a problem in practice because there is an overhead cost in moving to tax-free countries. That's why libertarians complain about the unethical nature of taxation so much; because they don't want to move (and in the case of the U.S., renounce citizenship, because of the U.S.'s policy of taxing worldwide income). I'm a person of action, so rather than complaining, I'd instead consider moving and renouncing citizenship.

    I'm not at all convinced by your arguments that taxation is not theft; that taxation is ethical. In particular, libertarian rights can be "natural" and "prior" if you're willing to move to a country where you have such rights. So whether taxation is ethical or not relative to other ethical concerns can be demonstrated by individuals' preferences in their actions, and I think it's fine to leave it at that.

    As far as utilitarian vs natural rights ethics, I don't consider either adequate. They're based on abstractions that aren't powerful enough to capture the actual dynamics of ethics.

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  23. The reason I think that ethics should be demonstrated by actions is that many peoples' words contradict their actions; hence it's easier just to use their actions as a reference for their ethics.

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  24. Screw libertarianism. Misguided to some degree, but who can argue with the claim that initiating violence is wrong? Othweise...

    Taxation, in general, is theft. Anytime you have to point the gun at someone to make them pay for something, you're robbing from them. Here, here is Spooner's take on it:

    But this theory of our government is wholly different from the practical fact. The fact is that the government, like a highwayman, says to a man: ‘Your money, or your life.’ And many, if not most, taxes are paid under the compulsion of that threat. The government does not, indeed, waylay a man in a lonely place, spring upon him from the roadside, and, holding a pistol to his head, proceed to rifle his pockets.
    But the robbery is none the less a robbery on that account; and it is far more dastardly and shameful. The highwayman takes solely upon himself the responsibility, danger, and crime of his own act.
    He does not pretend that he has any rightful claim to your money, or that he intends to use it for your own benefit. He does not pretend to be anything but a robber. He has not acquired impudence enough to profess to be merely a ‘protector,’ and that he takes men’s money against their will, merely to enable him to ‘protect’ those infatuated travellers, who feel perfectly able to protect themselves, or do not appreciate his peculiar system of protection. He is too sensible a man to make such professions as these.
    Furthermore, having taken your money, he leaves you, as you wish him to do. He does not persist in following you on the road, against your will; assuming to be your rightful ‘sovereign,’ on account of the ‘protection’ he affords you. He does not keep ‘protecting’ you, by commanding you to bow down and serve him; by requiring you to do this, and forbidding you to do that; by robbing you of more money as often as he finds it for his interest or pleasure to do so; and by branding you as a rebel, a traitor, and an enemy to your country, and shooting you down without mercy, if you dispute his authority, or resist his demands.
    He is too much of a gentleman to be guilty of such impostures, and insults, and villanies as these. In short, he does not, in addition to robbing you, attempt to make you either his dupe or his slave.

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  25. This was an excellent post. I think the only weakness was with regard to folks "electing to be taxed," evidenced in the initial comments.

    But I think that this is a bit weak only because it implies deprecated, legacy libertarian (the metaphysical kind) notions of free choice. This libertarian transcendence is as incoherent as the notions of property that you properly critique.

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  26. A womans sxuality is formed to some extent by her surroundings(culture etc.). Her body is built out of resources and energy which was external to herself and required the labor of others, thus she cannot claim total ownership of her body. Because of this there is a common claim on it. That's why gang rape is infact just and should not be called rape but lovemaking. It's simply a price she has to pay for living inherent to the human condition, it's the collectives claim on the individual.

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  27. Many arguments presented here consists of the fallacy of presuppositiion. Just one example:

    "If you say labour is voluntary but tax is not, then you're being inconsistent, for the reasons I have shown. The two rise or fall together."

    You have presupposed "the two rise or fall together", leaving you incompetent to argue any further.

    The very argument counter to your presupposition, which you must address rather than blindly continue to presuppose, is that taxation has no place in the presence of labor.

    Until you do that you aren't actually arguing your point (or any point for that matter)

    There other instances of this same fallacy all throughout these arguments, and as a result, no one has yet show that taxation is not theft.

    Another example, fromt eh original article:

    "society is a precondition for individual flourishing"

    This is a presupposition, upon which you base additional assertions. Yet, it is unproven, and frankly, hotly debated (and debatable.)

    One could rather cogently argue that, a society which imposes it's taxation schemes is infact an impediment to individual flourishing.

    You are very probably making the mistake of conflating "family" with "society" -- the former views you as it's benefit, it's outcome, it's PURPOSE, and would never (rightly) tax you. The latter views you as an encroacher, "theiving away the lands and sustenance it can't have."

    Furthermore, family is strictly neccessary only up to a point, that being where you can feed yourself by your own hands. "Society" never comes into the picture until such time as they refuse to leave you alone.

    In short, the basis of your worldview(s), is the present world which you (all) defend itself. Until you relinquish your presuppositions, and argue the basis of your detractor's position, you cannot prove your own.

    However: taxation IS, factually, theft -- so when you finally do what I just described, you will realize your error and change your mind. Until then, you merely tread upon your interdictions.

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  28. Show us how to survive without the "agreement", and you will be but a step closer to proving your case.

    Fail to do so, and you profess that "survival" is not a right, but a privilege afforded by society.

    This simply cannot be true. Society is the culmination of the surivival of individuals, not the other way around.

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  29. smalldose: You presuppose he is making a pre-supposition when you have not looked at the reasoning he has written about prior to this that explains why he thinks what you call a "presupposition." Because of your assumption of his pre-supposition, you have rendered yourself incompetent to argue any further until you go back and read where he's coming from.

    Have a nice day :D

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  30. "Thus the community might rightfully claim "dues" on wealth that is created within the safety of its confines."
    Certainly every individual in society receives the benefit of being in a society. So this society (being composed of all these lucky individuals) does not need to be further recompensed; the whole society benefits by virtue of being a society.

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  31. I wonder why enjoying the benefits of living in a community means that I owe tax?

    It seems that by tax you mean that some of my property is taken by the government of the community and then used for the good of the community.

    Why does tax have to be about owing property?

    A separate question is that even though I might owe the community something, should the community collect? If my friend owes me 10 dollars, under what circumstances does it follow that I should collect?

    Isn't this the weird thing about having a government decide when to collect, how much to collect, and how to use what is collected?

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  32. When I consent to a job, I consent to the hours, the uniform/dress code, and the wages. I am also coerced into accepting a level of extortion by a third party who threatens both me and my employer.

    http://v.i4031.net/StatistFallacies/MagicContracts

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  33. The conditions of your society are in existence before you are born. You assume responsibility to either conform, modify or remove yourself if possible. Taxation without representation could be argued as being theft. Taxation with representation -functioning representation- is not theft. It can be considered coercion in the same way you are coerced to not murder your neighbor or run red lights. Some peope are just violently repulsed by the idea that they owe any portion of their income to the society they live in and that when a system is created by democratic process that intends to manage the commons, protect the general welfare and provide defense it is somehow stifling their liberty to answer to no one and nothing. Some people grow out of it, some never do.

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