Chapter 5: Taxation
5.1 Taxation in a Free America
We have now laid out the
fundamental shape of decentralized government as it ought to be. The county
should be fundamental, and people should have to deal with no government
official other that their county officials, with perhaps limited exceptions for
State elections, etc. This is nowhere more true than with that most hated of
all ancient evils—taxation.
What we have been trying to
demonstrate—based on biblical and historically Christian ideas, as well as
their implementation in much of western history—is the power that true
federalism has for restoring and protecting freedom. In theory, in a truly
federal system, the National government should only govern States, State
governments should only govern counties, and county governments only should
govern the people (and where there are smaller units below counties, such as townships,
towns, cities, etc., then the principle of federalism should extend that much
further).
In regard to taxation, true
federalism means the National government should have no power to tax
individuals. The only agency—if any—that should have any authority to tax
individuals is the smallest, most local, nearest jurisdiction to that
individual. No jurisdiction above that should be able to touch the individual
directly unless through that individual’s consent. Instead, if higher
governments desired to raise revenue through taxation, they should be forced to
deal only with the next level of government below them. In other words, the
Feds could only tax States, States could only tax counties, and counties only
could tax citizen (or municipalities where applicable).
None of this, however, is to
justify taxation in general. Ideally, there would be none, and public services
would be much more like private services, if not in fact private services.
Police and fire services are essentially insurance services for the protection
of property, and could be paid for in a very similar way, privately. Public
water and sewer services are often already paid in this way, so are some
ambulance and EMT services (at least in part); there is no reason police and
fire could not be as well. Even the court system could be improved through
greater proliferation and even dominance of private courts. There is very
little reason that most currently public services should require taxation in
order to exist and function effectively.1 We can discuss this in more detail later.
But if taxes must exist, they
should be as decentralized as possible. Only the most local municipality should
have power to tax the individual. Counties must do the duty of protecting their
people from the reach of State taxes. They should act in concert, represented
at the State level as counties, to create a government and tax barrier
between individuals and the State. Then, if the State absolutely needs revenue,
it must work with the counties in concert in order to arrive at an acceptable
level. Thus, county representative will be negotiating how much of their
budgets they shall agree to provide to the State for its services. To the
degree that local citizens have control in their counties and are adequately
represented in the State assembly, you can be sure that they will not want much
of their county’s budget at all to be handed over to the State—nothing beyond
necessity. This will mean a strictly limited State power.
The same delicate negotiating
balance should also occur between the National government and the States
represented in concert (this is one reason the 17th Amendment should be
repealed, as I discussed recently). States, being squeezed by
the local interests and bargaining power of their counties, will naturally (and
rightly) wish to guard their scarce revenue for themselves. This will create
strong pressure against the taxing desires of the National government, and will
thus keep its powers limited to that degree—preferably funding only the bare
necessities of government, whatever those should be.
Constitutionally speaking—and I
will discuss in the next installment why the Constitution is way more
tyrannical on taxation than we should want—the States have an added bargaining
chip. The Feds are allowed—and the States forbidden—to collect duties on
exports and imports. Thus the National government already has a unique and
exclusive source of revenue, and should not need much if any taxation upon
member States. States can point to this as one more reason to deny further
taxation upon them by the Feds.
Taxation in the Bible
What type of tax is best? There
is no biblical law regarding any taxation for civil government. This leads me
to believe there should be none. Nevertheless, we are given the ecclesiastical
precedents of the tithes as a model for which type of taxation is best
in the event that a sinful society demands one. There were only two types
specified by law: a tithe on increase of produce, and a small flat head tax.
The particular flat tax, however, specified in Exodus 30:11–16, was explicitly priestly in
nature, and was only paid by males over 20 years old who were numbered in the
army. It was specifically called “ransom money” to protect the lives of God’s
holy soldiers. It was specifically for atonement. It was only collected when a
army was raised for a battle. It was thus not meant to be pattern for a general
stream of revenue. It should thus not be looked to as a good measure for civil
revenue either.2
The other type seems more
suited for the purpose of general revenue: this was the general tithe on
increase of produce. The tithe was ten percent and was payable after harvest at
a central location during the appropriate semi-annual festival. It could be
paid in produce itself or in monetary form, depending on the taxpayer’s
convenience (Lev. 27:30–33; Deut. 14:22–29). In a modern monetary economy,
we would simply call this an income tax. In Deuteronomy, the ten percent was
God’s requirement for the ecclesiastical institution—not the civil State. The
funds were to be used for feasting and making merry, as well as taking care of
the widows and fatherless, and the priests and Levites. (Thus, welfare was an
ecclesiastical function as well).
The Bible gives no such
ten-percent requirement for the civil government. It in fact gives no
percentage at all for civil government. Yet when Samuel warns the Israelites
against the adoption of a king “like other nations” (1 Sam. 8), he spells out the tyranny that
would follow. Among the list of confiscations and enslavements to come, Samuel
warns that such a king will “take the tenth of your grain and of your vineyards
. . . the tenth of your flocks, and you shall be his slaves” (1 Sam. 8:15–17). In other words, when the
civil government assumed the right to a ten percent income tax, it was
absolute, unimaginable tyranny equivalent to outright slavery. For when the
civil ruler assumes the right to extract as much as God Himself demands, then
the civil government is exalting itself above God. The civil ruler is then
essentially saying that his work is more important than the work of God
Himself. Thus, while there is no explicit number in Scripture for civil taxes,
Samuel certainly indicates that 10% has far exceeded the maximum for a free
society. At this point, don’t call it taxation, call it slavery to the State.
Hardly any western nation on
earth today has a total tax burden below 30% (a couple are slightly below,
several are over 40%).3 This means that nearly every western nation
today needs to slash its tax burden by at least 66% in order to return to
Samuel’s standard of tyrannical slavery.
One problem with allowing an
income tax, however, is the need for accurately reporting income. This is not
an issue with the ecclesiastical tithe, for God allowed no legal enforcement of
the tithe. Thus the Church must depend on the free giving and honesty of her
members.4 The State, however, will use legal coercion
to extract its duties. Thus, if taxation is based on a percentage of income, it
will require reporting of income to make sure it’s getting its demanded
percentage accurately. To eliminate this requirement, several measures could be
taken—all of them undesirable to someone. First, the State could rely on
honesty and non-reporting like the Church does. In this case, revenues would
certainly plummet, just as the Church sees nowhere near the ten percent it is
due today. Voluntary reporting or only payer-reporting would have similar
results. Fraud would be rampant. The civil government could require an accurate
income statement as qualification to vote. This would disenfranchise many
people, especially those who are generally honest and upstanding, but place a
high value on person privacy. (It’s also unconstitutional at this point.) There
seems to be no good way around this problem, if an income tax is desired.
A property tax is not only
problematic, but is not permitted in Scripture, and should in fact be considered
unbiblical. Only God has absolute ownership of property; He delegated this to
individuals, and gave us a commandment against property theft in all forms (Ex. 20:15; Lev. 19:11, 13; Deut. 19:14; 27:17; Prov. 22:28; 23:10). God did not give the civil State any
claim of ownership in individuals’ land. It has none, and for it to claim such
a right is to defy God. And what is a property tax except a claim of partial
ownership in the land? It is a system of feudal tenure in which the State
claims a percentage of the value of your property, yearly, for the sole
privilege of living on land under the particular jurisdiction. While this type
of tax has deep historical roots, it is also deeply unbiblical. And though this
tax has historically been collected and spent at the county level—thus
demonstrating how the County historically was the fundamental unit of
governmental authority in this country—it is nevertheless an unbiblical form
of taxation and should be replaced with a better form in every place in which
it is practiced.
A sales tax seems to be the
least intrusive on the surface of it. It is enacted not on ownership or income,
but only on exchange. Thus it is extracted piecemeal. This means there is never
a large tax surprise at the end of the year. As a tax only on voluntary purchases,
it gives people an incentive to save as much of their money as possible if they
wish to avoid taxation. One problem, however, is that to the extent we have to
buy a certain amount of basic necessities, a sales tax places a greater
necessary burden on lower classes than upper. Of course, it is assumes that
wealthier people will indeed spend more and thus pay more in sales tax; but
they are not required to do so by the basic needs of life. If it is a
valid consideration that there is a basic set of human needs most people must
purchase of necessity, then a sales tax does indeed hit the poor harder.
For this reason, many States and municipalities do not assess sales tax on
basic food stuffs and certain other groceries. Secondly, while it seems fairly
unobtrusive from the shopper’s perspective, the sales tax requires the business
to keep records of all sales and submit accurate reports along with the
collective sales tax payment. This additional bookkeeping and reporting creates
the same problems for businesses that an income tax creates for individuals. It
is also additional and unnecessary expense added to the cost of doing business.
There seems to be no good form
of taxation compatible with preserving the privacy of person, income, or
property. Taxation seems to be an inherent compromise of life, liberty,
property, and the pursuit of happiness. This is why, I believe, the Bible
prescribed no method for civil taxation: because taxation for support of civil
government is inherently at odds with the type of freedom God desires us to
attain. The very idea of empowering the coercive arm of society to fund itself
by means of its own coercive arm seems at best a recipe for corruption, if not
enslavement. If it is fundamental folly to put the power of the purse and the
power of the sword in the same hands, then our means of funding the
administration of justice in society needs to be radically rethought.
Taxation will always require
some degree of servitude. To the extent that it does—and it will vary from time
to time, place to place—it means we are not free people, not a free society. To
the extent that we must tolerate taxation as Christians—as our inspired writers
have told us to (Rom. 13:7; 1 Pet. 2:13–17)—it is an admission that sin
has a grip on society, both among the people and the officials. We must strive
to reach a society in which the protections of person and property and ensured
through voluntary means. I believe the silence of the Bible on the method and
form of civil taxation was deliberate because no method could be prescribed in
accordance with God’s design for society—even in a sinful world—which would not
itself involve some amount of sin.
What principles, then, can we
glean from Scripture in order best to rein-in taxation? First, it should
be based on a fixed percentage. The tithe was ten percent for everyone. A
graduated percentage is unbiblical and thus unjust—the rich should not pay a
greater percentage than the poor as they are forced to do now. Second,
the fixed percentage should be nowhere near as much as ten percent total. Ten
percent should be an indicator to us all that we are squarely in the midst of
tyranny. Social repentance and a return to individual responsibility are in
order. Third, the only biblical model for a method of taxation is on income.
Other forms of taxation either have no biblical precedent at all, or run
against biblical principles of property.
The Right Form of
Taxation
Based on these criteria and
what else we have said above: if we are to suffer the evil of taxation for
civil government, it should take only the following form: 1) local governments
and local governments only should tax individuals, 2) only on net income, and
3) well under a total of ten percent, and 4) only for bare necessities of the
administration of justice. The same principles should apply at each level in
the federal system: the taxes collected by counties should be viewed as income,
and taxed well under ten percent by States. The fullness of revenue collected
this way from all counties by the State should be considered the State’s
income. The Federal government should tax the income of the States for its
services, but only well under ten percent.
This system would mean: 1) no
individual would ever suffer greater taxation than what occurred at their local
county level, and 2) at least ninety percent of your tax dollars would stay in
your local community (only a maximum of nine percent would stay at the State
level, and one percent to the National level).
For example, average household
income in the U.S. is about $45,000 annually. In today’s mad system of
taxation, a couple filing jointly will pay roughly 13% in federal income tax
(25% if not married), and (in my state of Georgia) 6% in state income tax. They
will also pay their half of Social Security and Medicare (the employer pays the
other half), 6.2% for social security and 1.45% for Medicare. (If the earner is
self-employed, he or she is liable to both halves, and thus 12.4% and
2.9% respectively.) When the order of taxes and all the brackets are
considered, the total tax burden here is 22.13%.
This does not include the sales
taxes we pay, taxes on imported items, increased prices due to government
regulations, the hidden tax of inflation, so-called “sin taxes” on tobacco and
alcohol, and possible luxury taxes. Plus, an average American pays roughly 1%
to 2% of assessed property value in property taxes. With average home prices around
$175,000 in the U.S., just a low 1% property tax rate would mean an additional
bill of $1,750. That an additional 3.88% of yearly income. Including this
conservative property tax number raises our former total to 26.01%—a loss of
$11,700 in income annually to the average couple.
Consider, in contrast, my
proposed “biblical” federal model. Let’s assume an almost worse-case of
9%—almost to the 10% tyranny threshold— at each level of government. In such a
case, the same household would surrender 9% of its earnings to the local
government—that’s $4,050. He would pay nothing else in taxes. The State would
then extract 9% from the county level—$364.50 from this case. The Feds,
extracting 9% of State revenue, would get only $32.81 of this one person’s
contribution.
In the current scenario, people
are taxed directly by every level of government, and the money is often spent
in ways they disagree with, for purposes that conflict with their values, and
in ways in which they are not truly represented. In a free society, people are
accountable to only one agency, only at the local level where they can be most
accurately represented (or can move), and their money is spent mostly in that
particular public square. And even in the worst-case scenario, it costs
them way less than half of what the current scheme does.
Taxes in Colonial
America
Decentralization and low taxes
are not only good theory, they’re more originally American, too. It’s closer to
the way America used to be. In colonial days, before the Constitution, there
was no taxation from a central National government. When the central government
(Britain) attempted to impose centralized taxation, it set in motion a series
of tax revolts that culminated in the Declaration of Independence—a document
which condemned King George III and Parliament among many other grievances “For
imposing Taxes on us without our Consent.”
This is a very general truth,
however. This is not to say that the colonies were a tax haven, although taxes
were generally lower than anywhere else throughout the British Empire at the
time. Nevertheless, there were very many taxes of various types, and they were
implemented variously in every colony throughout the period from colonization
to the Declaration. There were poll taxes, land taxes, “collective mass of
property” taxes, all-livestock taxes, specific taxes on horses and cattle,
taxes on stocks, taxes on cash investments, house taxes, slave taxes, and
carriage taxes.5 Only one colony, North Carolina, implemented
as few as three of these ten types during this time; most used between four and
six. So the colonies were not shy about implementing taxes.
Taxes, though various in type,
were generally very low. For example, Virginia instituted a poll tax as early
as 1619. The tax was one pound of tobacco per male person over sixteen years
old. This was about one day’s wages for a common laborer.6 (Compare this to the full 26% described above
for today, which means the government gets over three months
worth of the average family’s wages.) In the midst of a financial strain,
Virginia took on debt. In a few years, the tax was 10 pounds of tobacco. By
1644, it was as high as 18 pounds per male head.7 Even at this
extreme point the 18-pound tax represented less that 7% of yearly income for a
common laborer—the lower classes. It would thus have been much less for a
professional of any sort. For a schoolmaster in 1651 making £30 per year, 18
pounds of tobacco would have equaled only 4.5% tax on his income.8
Again, this is only one of
various taxes to which different people at different times were liable. But
these rarely overlapped, and when they did, they still did not amount to a
great collective burden. Overall, the burden to which any person and any given
time was subject was very low, especially by today’s standards. It was also low
in comparison to the tax burdens of the rest of the British Empire at the time.
This is why George III chose the American colonies as the place to raise taxes
to begin with.
And again, when Britain tried
to impose a tax from the central government in addition to these colonial
(State) governments, the colonists resisted and ultimately revolted. The Boston
Tea Party was thrown as a result of Britain’s “Townshend Acts” of 1767 and Tea
Act of 1773 which had levied a tax on several imports, including tea, and
created a government-enforced monopoly on tea. The tax on tea was uncomfortable
but not exorbitant by today’s standards—at 8.33% (3 pence per pound when tea
was selling at 3 shillings (36 pence) per pound). Consider that this was only
on a tax on single product which was used mostly by the upper and upper-middle
classes, and not a universal sales or import tax. Today, several States
allow sales taxes on most goods at rates higher than the 8.33% on only
tea for which our ancestors rebelled and shed their blood. Meanwhile, the total
per capita tax burden in the colonies was significantly less—only two to four
percent—of what was being levied in Britain.9 And the colonists said, “We would rather
die.”
Of course, consider the wisdom
the British bureaucrats—imposing taxes on the most outspoken and able of people
in the colonies. The Stamp Act of 1765 levied taxes on all printed materials,
thereby enraging every minister, lawyer, publisher, and politician in the
hemisphere. Then the Townshend Acts hit their tea—a commodity indulged in
mostly by the wives of the aforesaid classes. Now you’ve got disgruntled lawyers
with the added aggravation of their wives nagging them! Then, to add insult of
intelligence to the original insult, the British imposed a monopoly on the tea
with the Tea Act. So the British succeeded in enraging the classes of people
most self-interested and most able to rouse the masses against the British: the
preachers, the lawyers, and their wives. That would be about as smart as,
today, levying a tax on lobbyists, liquor, and prostitution in Washington, D.C.
You would see an immediate tax revolt from the vast majority before you could
say “Washington Monument”!
Well, enough has been said so
far to demonstrate the point: a biblical view of taxation is greatly
decentralized, based on only a fixed percentage, and only assessed on an
increase in income. Even this is not fully biblical in the sense of God’s ideal
of only voluntary services, and taxation can only be described as a very
questionable, necessary evil. And taxation to pay for civil government should
always be well less than ten percent of net income annually. And it should only
go to local government. Higher levels must wrangle and negotiate with the more
fundamental, local units for their services. Beyond this is to prescribe
tyranny, which is to say we live in a tyranny now.
I say, it’s time for another
tea party. Throw off the taxes. Assert fundamental rights and local
sovereignty. In the next section, I’ll show you how it got so bad.
Next section: Taxation: how freedom was lost
Notes:
1.
See Gary DeMar, “Financing the Responsibilities of the State,”
Chapter 16 of God and Government: A Biblical, Historical, and Constitutional
Perspective (Powder Springs, GA: American Vision, Inc., 2011), 307–329. [
]
]
2.
Gary North, Tools of Dominion: The Case Laws of Exodus
(Tyler, TX: Institute for Christian Economics, 1997), 903–912. []
]
3.
Also, this is generalized as revenues as a percentage of GPD.
Results for individuals can range from around ten percent total to well over 50
in the U.S. []
]
4.
Proof of paying tithes ought to be considered, however, as a
qualification to vote in church elections, especially for financial decisions.
[]
]
5.
Robert M. Kozub, “Antecedents to the Income Tax in Colonial America,”
The Accounting Historians Journal 10/2 (Fall 1983): 101. []
]
6.
Based on stats collected by William B. Weeden, Economic and
Social History of New England, 1620–1789, 2 vol. (New York: Hillary House
Publishers, 1963), 880. []
]
7.
Kozub, 103. []
]
8.
Weeden, 881. []
]
9.
Ben Baack, “The Economics of the American
Revolutionary War,” February 5, 2010, EH.net (accessed Sept. 22,
2011). []
]