Tuesday, March 20, 2007

The Poor

Common objection to anarchism is "What about the poor? They can't afford X!"

Actually, they could afford it better without the government, because a massive tax burden has now been lifted off of them.

Consider first the income tax. On paper, without knowing better, one would look at Title 26 subsection 1 and think "The income tax is progressive, the rich pay more than the poor."

This is true to a point. This point is the corporation. The example I normally use to illustrate the problem is this:

Average Joe:
Income - $10,000
Expenses - $8000
Taxable income - $10,000

Richard the Rich:
Forms Corporation
Corporate income - $1,000,000
Corporate expenses - $900,000
Taxable income - $100,000

Notice that despite having 100 times the income, Richard the Rich has only 10 times the taxable income as Average Joe. And this is a simpified version not counting all the other tax benefits corporations get.

Average Joe must pay out of his post-tax reserves of money for his insurance, gasoline, rent, and other things.

Richard the Rich pays out of his pre-tax reserves of money for these things, lists them as corporate expenses, and is taxed on whatever is left.

This is why the income tax, contrary to popular belief, is actually NOT progressive. It is progressive only to a point.

The figure I've read is that 95% of taxes are paid by the richest 50%. On paper, this is true. But taxation increases the effective costs of production which increases the cost to the final consumer, in most cases meaning, the poor. So the poor pay for it one way or another.

If Walmart is taxed on 5% of it's income, these costs are not simply absorbed by Walmart. Walmart has to increase prices (or lower prices not as quickly as they'd like to) in order to make up for it.

This isn't half of it, and this is just the income tax.

Now let's look at "subsidies" and "regulations" and "tariffs".

The price of sugar in the United States is 4 times the price the rest of the world pays for sugar. We're talking one of the basic cooking supplies, which the poor pay a greater portion of their income on than anyone else. Why is this? Because of regulations, taxes, and tariffs.

The United States imposed a tariff on softwood imports. Why? Because Canada refused to impose a tax on it. The tariffs raise the cost of building the kinds of homes that the poor would be moving into as soon as they could to escape the slums and ghettos. But now, they are stuck in high-crime neighborhoods for longer because housing is more expensive.

Food is supposedly "subsidized" in the US, to make it more available to the poor. Who eventually pays those income taxes again in the form of higher prices on everything? Oh right, the poor.

Who spends the greatest portion of their income on rent? The poor. What do property taxes do? They raise the costs of operating apartments and the like, causing the prices to rise, causing the poor to pay more.

If you still believe such a thing as "Progressive taxation" exists, you are tricking yourself.

And what about licensing? It limits not only the number of sellers, allowing prices to rise, but it also limits the ability of the poor to become a seller, build a business, and get out of the hole.

Even the police have this problem. Without prices and choice, allowing the poor to decide for themselves how best to allocate resources to secure the rest of theirs, there is too much spent in the way of police-department-bureaucracy and tools used by police, and too little spent in the way of actually protecting people from harm. The poor are overcharged and underserved. The government has no rational means to calculate how much the poor desire the services over the money they pay in taxes.

On the topic of police, who in his right mind would pay money to have a man come and throw him in a cage for selling weed? Nobody! What makes anyone think this kind of "service" is doing any good for the poor?

No matter what the government does, it has perverse consequences. And the poor always bear the brunt of this, because they have the least influence on politicians, they don't vote, they rarely understand what is going on, and when they do, they don't have the resources to do anything about it.

The best way to help the poor is to get the hell out of their way and let them do something about their own lives.


Blogger The Cynical Libertarian said...

Good stuff :)

4:01 PM  
Anonymous a nihilist said...


i'm curious to hear your refutation to this (i'm sure you will compose one).

reply in a comment, make a post of it, or send it to my email: freek.scene[at]gmail.com

i look forward to your response.

9:21 AM  
Blogger Sontín said...

You talk about a society without a state leading to less taxation ... but what sort of economic system do you imagine to be in place?

4:21 PM  
Blogger Zhwazi said...

It's not a system "in place". It's the absence of a system being "in place". The only thing that could place it there is force.

I'm talking about THE system, the emergent system, the natural system. There is only one natural, emergent system, and mankind has yet to see what it looks like.

Personally I think it would look like 6 billion small businesses.

5:05 PM  

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