Free-Market Economics is the only Moral Economic System

Usually, when we talk about ‘markets’, we are referring to ‘free markets’.

If someone is referencing economic exchange, then we can use the term ‘free-market economics’.

Think about an open-air market where merchants are selling their goods. You walk by a merchant whose product you want, and if you agree on a price, you buy it. If not, you don’t. No one can make you buy anything. And no one can stop you from being a merchant.

(Although the government may require health and safety regulations).

This is a good example of free-market economics.

In the United States and most other developed countries, free-market economics is the norm. You can buy cars from whomever you wish if you agree upon a price. You can buy coffee from McDonald’s or Starbucks.

Here is something I consider essential: Free economic markets are the only moral basis for an economy. Why? Because if you can’t choose with whom to do business, or if you can’t open up your own business, then someone else (e.g. the government) is deciding for you.

What right does anyone have, even the government, to tell you what goods and services you can have? Or what business you may start?

The United States’ Declaration of Independence has what might be the most profound words written in the English language:

“We hold these truths to be self-evident: that all men are created equal; that they are endowed by their Creator with certain unalienable rights; that among these are life, liberty, and the pursuit of happiness.”

Because it is our God-given right to be free, no one has the legal right to infringe on our freedom.

(If a person infringes on another’s life or liberty, it is appropriate for the government to prosecute that person).

It’s interesting to see that a free-market economic system is not an economic system at all. It just allows people to freely trade with one another.

Some people mistakenly call this Capitalism, but that is a misnomer. It is a word used my Karl Marx pejoratively, and we know how well Communism has turned out wherever it has been tried.

If we use the term ‘markets’ more broadly, it can refer to the freedom we have in all of the aspects of life. For example, we have a free market in friendship: You can be friends with anyone who wants to be friends with you.

We even have a free market in our food choices: eat whatever you wish.

The only sustainable society is one that allows free markets.

This is why there are so few Communist countries left. Even China, which is a Communist country, has started to prosper because they are allowing more and more free economic markets.

Freedom is essential to any good society. 

But in order to have an enlightened civilization, most people must use their freedom to improve themselves, and make the world a better place.

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Tim Farage is a Professor and Graduate Advisor in the Computer Science Department at The University of Texas at Dallas. He writes about mathematics, computer science, physics, the reconciliation between science and spirituality, Intelligent Design, and the application of Natural Law to our various systems such as education, government and economics.

Are companies such as Amazon, Apple, and Google morally bankrupt because of their attempts to minimize their income tax?

Absolutely not. 
 

There is a deep underlying problem here. And that problem is called ‘The Income Tax’. Taxing income is the worst sort of tax that there is. First, it is impossible to define ‘income’ consistently because it is typically considered to be 'gross income minus expenses'. But what is an expense? In the United States a Realtor can subtract the cost of car travel from his income. But someone who drives to work and back home cannot. What’s fair

It’s so difficult to determine what’s fair that the income tax code in the US is more than 2,000,000 words long. There’s not a single person in the world who understands it. 

The worst thing about it is that it gives almost everyone the idea that just because a person or company earns lots of money, they owe you, me, the country, or the world, money. And why is that? There is no moral reason that they should be taxed just because they earned money. 

One could more easily argue the opposite: those individuals and companies that earn money do so because they are providing a product or service that people want. 

Rather than tax them on their profits, we should be thankful for such companies, because of the jobs and services that they provide. But an income tax punishes them.

Rather than be envious (a sin) that an honest person or company is prosperous, we should be happy that they were rewarded for their efforts to provide us with their service. And then we might be motivated to work harder, earn more money, and enjoy the fruits of our labor. 

I'm glad Apple has a presence in Ireland to try to minimize their income tax. When the income tax rate is 0% for all, I’ll be happy.

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You might ask, “But we need taxes, so what’s a good alternative?” We do need taxes, but they need to be moral taxes. 

And what taxes are moral? Taxes are moral if they are essentially ‘user fees’ for the use of some government provided service. 

For example, a road tax, that charges per mile traveled per weight of a vehicle, is a fair tax. It is a tax that pays for the amount of road used up by a vehicle.

A land tax charged for the private use of land is also a fair tax. Because the owner of land did not create the land, it is appropriate to charge a monthly or yearly land tax, so that the land owner compensates the rest of us for the fact that the owner is given control over that land. 

One last example is a natural resource tax on those companies that extract scarce natural resources from the ground. For example, a company might gain the right to extract bauxite, an ore of aluminum, so that they can refine it and sell the aluminum. This is good because aluminum is a metal we need. And it is appropriate to charge a tax per ton of aluminum extracted, because the company did not create the aluminum. So again, the tax compensates the rest of us for the right to extract a natural resource.

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Let's get rid of the immoral and unworkable income tax, and replace it with taxes that are moral, and that do not discourage the creation of a product or service.

Tim Farage is a Senior Lecturer in the Computer Science Department at The University of Texas at Dallas, and a former Professor of Mathematics. The views expressed herein are those of the author. Some of his main interests are in online education, and the reconciliation between science and spirituality. You are welcome to comment upon this blog entry and/or to contact him at tfarage@hotmail.com.

Government based upon Natural Law - (Part 4) - The Advantages of a Natural Resource Tax

Introduction 

In a previous post, "Government based upon Natural Law - (Part 3) - The Income Tax is Bad", the many and various disadvantages to having an income tax were discussed.  In this post, fair, just, and efficient alternatives to the income tax are given. 

What kinds of taxes are just?

What kinds of taxes are fair and just? Fair and just taxes are those that pay for the use of a government-provided service; these are frequently called "user fees".

Actually, many of our current taxes are just.  The gasoline tax is a good example.  The government (federal, state or local) builds and maintains the majority of the roads.  It is fair and just that those who use the roads the most should pay the most for them.   A semi-truck that travels 100,000 miles a year should clearly pay more for the roads than Aunt Pearl who drives to church on Sunday in her Ford Taurus.  Since the amount of gasoline a vehicle uses is proportional to the weight of that vehicle and the distance it travels, gasoline taxes are a relatively fairer way to pay for the roads, (although a road tax based upon the weight of the vehicle and the miles driven would even be better).

The FAA (Federal Aviation Administration) provides another good example of a just tax.  The FAA exists mainly to monitor air traffic and ensure the safety of aircraft. Clearly, the people who fly are the ones who should pay for this.  And this is currently the case, because each airline ticket has attached a small federal tax on it to pay for the FAA.

How about taxing human-caused pollution? By definition, human-caused pollution consists of substances that harm either people or plants or animals. Thus, it would be fair and just to tax a polluter in proportion to the harm caused by the pollutant for which they are responsible. This also results in the beneficial side effect of encouraging less pollution, since creating less pollution means paying less pollution tax. And it so happens that those who are rich usually pollute more for the simple reason that they own more cars, homes, boats, jets, etc. Thus a pollution tax would naturally cost more for those who can most afford to pay it.

(As an aside, the EPA has recently defined carbon dioxide as a pollutant so that they can regulate its emissions.  This was a mistake, since carbon dioxide is essential to life, and is not harmful to humans, plants, or animals.  On the contrary, plants breathe in carbon dioxide, and would die without it, and we would shortly follow suit.  Many think that it is a major contributor to global warming, but that is not a reason to label it  pollutant. Having a CO2 tax will do nothing to prevent global warming, but it will harm the poor here and abroad, because it will increase the price of gasoline and electricity. (But this is the subject for a another post).

Each of the taxes mentioned above, I believe, would fit the definition of fairness of any five-year-old. 

Reasons for Having a Natural-Resource Tax

However, there are some legitimate and constitutional functions of the government for which it is more difficult to assess how we can be fairly taxed to pay for them.  The military, foreign affairs, FBI, police, and fire departments fit into this category.  How can we fairly pay for them?  One way to think about this is to ask, "Who gets more protection from the military or the police or fire departments, Bill Gates or Aunt Pearl?"  While Aunt Pearl only has, say, a small apartment that benefits from military or police protection, Bill Gates gets quite a bit more protection because he owns many vehicles, buildings, and acres of land.  And he would suffer much more loss if we were to be successfully invaded by a foreign power.  The general principle is that those individuals or companies that own the most land or other natural resources should pay the most for these kinds of government services.  Thus, a natural-resource tax (NRT) would be a fair and just tax to be placed upon us.  Such natural resources include land, as well as coal, oil, aluminum and other minerals, etc. 

Another principle concerning natural resources is that they are a product of nature (i.e. our Creator and His Helpers) and thus are not produced by man.  Therefore, the only just way to deal with natural resources is to treat them as the property of the people as a whole.  So, if government wishes to sell or lease land or sell the rights to a company so that it can extract a natural resource, it is appropriate to tax that resource as compensation to the people for allowing the use or extraction of that resource from the commonwealth.

For example, in Alaska, private companies are permitted to extract oil from the ground.  To compensate the people of Alaska for this, Alaska taxes each barrel of oil removed, and that money goes into Alaska's Permanent-Fund Dividend.  These funds are paid to the residents of Alaska each year.  In 2008, the dividend was over $1,000 per person.

For consumable natural resources, the fairest way to apply the NRT is to tax it once—paid for by the company that extracts the resource. Thus, you would not pay a NRT on the aluminum can of Diet Coke you bought. But the company that extracted bauxite (an aluminum ore) would pay a tax to the federal government on each ton of aluminum it extracted. Of course, the cost of this tax would be passed onto the ultimate consumer, so in this sense those who use the most natural resources are those that pay for them.

In the case of land, only the land owner would be taxed, as a monthly land-tax fee. Note that there would be no NRT on the home or buildings on this land, because the NRT would have been paid previously by the companies that extracted the resources needed to build these structures. 

The legitimacy of this tax is based on the fact that no one has created the land. Thus, if a person or company 'owns' land, they have the right to control who is allowed on it. Therefore, they should pay for this right as a land-tax, which is one part of the NRT. 

Why the Natural-Resource Tax is Efficient

On the practical side, all local governments and some state governments have already established such taxes, usually called property taxes.  Thus, it would be fairly easy to have such a federal property/natural-resource tax as a replacement for the income tax (and Social Security/Medicare taxes, as well).  Ownership of property and natural resources such as land, oil wells, coal mines, etc. are already publicly recorded, so there would be no additional intrusion into our lives as a result of this tax.  It would take no tax attorneys, accountants, tax software, or tax forms to do our taxes.  Individuals that own land and companies that own land or extracts natural resources would be taxed regularly, preferably monthly.  Furthermore, property valuations that have already been done at the state or local level could be used at the federal level, thus avoiding another bureaucracy. 

Other Benefits to having a Natural-Resource Tax

There are many other benefits to a natural-resource tax.  For instance, today some of those who are wealthy can often live off tax-sheltered investments and pay virtually no tax.  With an NRT, those who are well-to-do would naturally pay more taxes than those who are not, because they would use more natural resources.  Own five homes?  No problem, but you'll be paying taxes on each lot that the homes are built upon, and would be indirectly paying for the natural resources used to build the homes.

It is important to reiterate that home owners (as well as owners of other buildings) would pay an NRT only on the land that their home sits upon and not upon the building itself.  Thus, in a given subdivision, all lots that are substantially the same would have the same taxable value and the tax assessors would not have to be concerned with the value of the home itself.  This would encourage people to build and maintain nice homes, since they don't have to worry about their taxes going up because of improvements they make.

Also, it would be fair to tax farm land, residential lots, and commercial lots at different rates, given their various uses.

Life would be easier on farmers as well.  They would only be taxed on their land and not on their profit.  Thus they would be encouraged to make the best use of the land they have.  There would be no incentive to not grow crops as there is now in some cases.

Because people naturally want to minimize their taxes, a wonderful side effect of an NRT is that if people want to save on taxes, they only need to consume fewer natural resources. This then encourages the use of more energy-efficient cars, homes, and buildings, and encourages recycling as well. 

The Natural-Resource Tax Dividend

And finally, but importantly, just as with Alaska's Permanent-Fund Dividend that is given to the people of Alaska from oil companies, the federal government could give all citizens and legal residents an NRT Dividend to compensate them for others' use of natural resources.  This would be a fair and just thing to do, and it would be an equitable way to assist the poor (and everyone else).  If done right, this NRT Dividend could replace all subsidies that the government gives out (except for the Health-Care Subsidy and Education Subsidy to be discussed in other posts), saving the taxpayer money from the reduced bureaucracy of administering hundreds of different subsidies.  The amount of this subsidy can be debated, but I'd like for it to be around $1000 per month per adult citizen or permanent resident of the U.S., adjusted each year for inflation.  We could encourage the more prosperous among us to refuse this subsidy, which would help keep the price down. (In order to keep the budget balanced, this amount of this natural resources dividend could be defined as 10% of the Gross Domestic Product - GDP).


Another Benefit of the Natural-Resource Tax Dividend

As time goes on, fewer and fewer low-skilled workers will be needed due to automation. The NRT Dividend will assist those by providing a base income to all. And no matter how much extra money they earn, this Dividend will never be taken away.

Conclusion

In summary, let's replace the income tax and FICA taxes with user fees, taxes on pollution, and a natural-resource tax.  It is the fair and just thing to do, and will create a cleaner environment and a more prosperous nation.

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Tim Farage is a Senior Lecturer in the Computer Science Department at The University of Texas at Dallas. The opinions expressed herein are those of the author. You are welcome to comment upon this blog entry and/or to contact him at tfarage@hotmail.com.
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Government Based Upon Natural Law - (Part 3) - The Income Tax is Bad Idea

Unintended Consequences of the Income Tax 

Ever since the IRS was established, people have complained about its abuses. Many bills have been passed in Congress in the hope they will correct some of these abuses. Unfortunately, any fix is doomed to fail.

It is not the IRS but Congress that has established a tax on income. (At least they even did it the right way – we passed a Constitutional Amendment that allowed Congress to tax income. Sadly, this was the one of the worst amendments ever passed). It was Congress that has modified a tax code that initially levied a 1% tax on those with above-average income to a tax code that is over a million words in length and that literally no one understands. The IRS is authorized by Congress to enforce this code and to collect such taxes. Since some people will try to hide income in order to avoid paying income tax, the IRS naturally tries to find these people. Is it a surprise that the IRS has a computer database that stores information about us? Or that they can use this database to check to see if someone's purchases correspond to his or her reported income? Or that they monitor cash deposits over $10,000? Most of us don't like this, and we shouldn't. But it's not the fault of the IRS. The problem is the income tax itself.

Taxing income is bad for a large variety of reasons. It has been estimated that it costs the American people between $200 - $600 billion dollars each year for the tax attorneys, accountants, record keeping, books, software, etc., just to comply with the tax code and minimize their taxes. This does not include the millions of hours we waste each year in tax related activities.

The income tax is arbitrary and frequently counterproductive as far as what deductions are allowed. For instance, you can deduct day care expenses from your income tax, but if a mother chooses to not work outside the home, no deduction is available. Congress uses deductions as a way to encumber us to them and they are loathe to make major changes. There are so many deductions we think we depend on, that we'll vote for whoever will maintain or increase them. Woe is he who runs for office and who wants to eliminate popular deductions. Furthermore, many prosperous individuals pay very little income taxes.

Another issue is that having to report income to the government is an invasion of privacy. Should it really be the government's business how much money we earn, where we earn it, or how far we drive while earning it?

Because of the complexity of the tax code, taxpayers must concern themselves with taxable events, such as selling stock or property. The economy is distorted and less efficient when we make decisions based upon whether or not a taxable event will occur rather than what we think would be a good use for our money.

Income tax law is even at fault for abridging freedom of speech. How can that be? Section 501(c)(3) of the IRS code grants certain not-for-profit organizations, including churches, a status that allows them not to pay income tax. However, it also prohibits such organizations from making political endorsements, and it stipulates that nonprofits should spend no substantial part of their activities in carrying on propaganda, or otherwise attempting to influence legislation. Such organizations may not participate in, or intervene in any political campaign on behalf of or in opposition to any candidate for public office. The IRS has investigated and is still investing churches who they think might be violating 501(c)(3) code. This is frightening to those of us who believe in free speech. The point here is that if there was no income tax, there would be no such IRS code controlling the free speech of non-profit organizations.

Unjustness of the Income Tax

But the biggest reason against a tax on income is that it is unjust.

An income tax is unjust because it has nothing to do with fees charged for services provided by the government. What government service does a person use just because he or she is earning money? To clarify this point, imagine two people who have the same job and earn the same salary during the day. At night, one of them watches TV and the other does marriage counseling out of his home. Is there any rational reason that the second person should pay more taxes that the first? No, because the counselor is certainly not benefiting any more than the TV watcher from government services. Taxing the counselor more than the TV watcher is tantamount to discouraging him or her from counseling. As a matter of fact, the income tax is unjust for the same reasons that the tax on polluters is just. We should tax polluters because of the harm they cause; and this tax discourages them from polluting. We should not tax people for working, since people who work are clearly benefiting our country. Taxing their productivity is precisely the wrong thing to do for such taxes discourage work! 

So let's replace the income tax (and FICA taxes, too). No more tax on wages and salary, no more wasting time, money and human intelligence trying to minimize or avoid paying income taxes and complying with an impossible-to-understand tax code. No more intrusion into our personal lives. No more taxing productivity. No more tax forms to fill out or tax audits to go to.

Of course, the government has many legitimate needs, and there will have to be some kinds of taxes to pay for them. What taxes are fair and just?

You can find out in my next blog entry, "Government based upon Natural Law - (Part 4) -The Natural Resource Tax".

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Tim Farage is a Senior Lecturer in the Computer Science Department at The University of Texas at Dallas. The views expressed here are those of the author. You are welcome to comment upon this blog entry and/or to contact him at tfarage@hotmail.com.
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Government Based Upon Natural Law - (Part 1) - Philosophy of Government

This is the first part of a series of posts dealing with government based upon Natural Law.

“No government has the right to decide on the truth of scientific principles, nor to prescribe in any way the character of the questions investigated.  Neither may a government determine the aesthetic values of artistic creations, nor limit the forms of literary or artistic expression.  Nor should it pronounce on the validity of economic, historic, religious or philosophical doctrines.  Instead it has a duty to its citizens to maintain their freedom, to let those citizens contribute to the further adventure and the development of the human race.”

Richard P. Feynman, Nobel Prize winning physicist

Introduction

The purpose of this series of documents is to present how I believe a government should function so that it is consistent with what is called Natural Law, sometimes called Universal or Divine Law. Natural Law is here defined as those laws determined by our Creator, that when followed in universally consistent ways, facilitate the spiritual and moral evolution of mankind.

The policies advocated here are consistent with my core beliefs, which can be found here. I then state my philosophy of government, which I believe to be consistent with these core beliefs. This is followed by a list of the particular topics that will be covered in the series on good government. 

My intention is to present a philosophy of government that, if adopted, will lead to peace and prosperity for all people of good will as well as to provide an environment conducive to spiritual growth, for those who so desire. If done properly, a government following these principles could be the first sustainable government.

Philosophy of Government 

A philosophy of government concerns the role of government in the affairs of its citizens. One’s governmental philosophy must be consistent with one’s core philosophical beliefs.

As freedom and peace are so important to our material, physical and spiritual growth, the core tenant of my philosophy of government is that the main purpose of government is to help to protect each individual’s right to live and grow in peace.

Because the philosophy of government presented here contends that the primary purpose of government is to keep the peace, many atheists and agnostics will find that they substantially agree with this governmental philosophy, even though they might disagree with some of my core philosophical beliefs. 

In a country such as the United States, which properly operates by the rule of law, the manner in which government protects our rights is through our laws. Hence, our laws should be centered upon the protection of the people’s right to live life as they see fit, as long as this is done in peace.

Thus a good law is one which says that if a person is convicted of violating the life, liberty, or property of another, then a penalty may be imposed, which penalty itself will remove either the life, liberty or property of the violator.

The most common such laws prohibit murder, rape, child abuse, theft, assault, fraud, and coercion. In addition, since pollution can have a detrimental effect on a person’s life or property, laws that regulate harmful pollution in a rational way are also good laws.

Conversely, bad laws are those that prohibit a belief, or that prohibit any action or behavior that does not interfere with the right of others to their life, liberty or property. For example, the world’s great religions and great civilizations all have prohibitions against such acts as adultery, homosexual sex, greed, and even gluttony. However, legislation making these illegal would be inappropriate, because these acts do not interfere with the rights of others.  Similarly, laws against adults privately using the various forms of drugs would not be appropriate laws.

Another way to look at this is to realize that if a person is convicted of violating a law, the penalty always entails the loss of life, liberty and/or property of that person. Hence, the only good laws are those that penalize only persons who violate the life, liberty and/or property of another.

Christ said that the greatest commandments are to love God and to love your neighbor as yourself, and even to love our enemies. If each of us did this, the world would be immediately transformed. Yet, it is not the place of government to require us to obey these commandments; the government ought not to legislate what beliefs we should follow, or even how we are to lead our lives, as long as our actions do not cause harm to another.

This governmental platform therefore contains only legislation that I believe is in alignment with these criteria; it is not a list of all good things that we should do, nor is it list of prohibitions of all the bad things we ought not to do. Rather, it only deals with legislation that prohibits a person or group of persons from causing harm to another.

Additionally, because the natural resources belong to the people as a whole, legislation with respect to our natural resources is also a responsibility of government.

Jefferson said, “The natural progress of things is for liberty to yield and government to gain ground.” Therefore, I believe it important to limit the role of government so as to protect our liberties. In this vein, the US Constitution specifically enumerates what may be legislated by Congress (called the ‘enumerated powers’). Furthermore, the 10th Amendment stipulates that the powers not delegated to the Federal Government by the Constitution be reserved to the States or to the people. Accordingly, another criterion for being a good federal law is that the law can be justified under one of its Constitutionally-enumerated powers. Furthermore, any current federal laws or programs or expenditures that cannot be justified under one of the enumerated powers should be phased out, or, alternatively, the Constitution could be amended to add such a program to one of its enumerated powers.

The intention therefore, is to provide a governmental platform that protects each person’s right to live in peace, as well as to prevent the encroachment of government on those rights. To say this in a different way, we believe that government serves us best when it protects all free markets – meaning those interactions that are voluntary and informed - free markets to trade goods and services; free markets of ideas, science, art, and music; free markets of religion, education, association, and friendship. Good government ought to protect all of these freedoms, and more.

The type of government described in the following series is the only one that is sustainable - one the could last indefinitely.  And that is because it not only allows its citizens to lead their lives as they see fit, but protects the right to do so.

Government Based on Natural Law Topics

For the convenience of the reader, below is an alphabetical list of the government-related items discussed in detail in the remaining parts of this series.

Appointment of Justices

Abortion

Businesses and Prosperity

Border and Port Security
Children

Defense and Military Policy

Drug Policy

Economic Policy

Educational Benefit Subsidy

Energy Policy and Nuclear Power

English as the official language of the United States

Environmental Policy

Foreign Aid

Foreign Trade

Global Warming

Government Control of Private Organizations

Government Sponsored Gambling

Hate-Crime Laws

Immigration Policy

Marriage and Society

Medical Benefit Subsidy

Monetary Policy

Natural Resource Tax Subsidy

Protection from Criminals

Social Security and Retirement

Taxes and Spending

The Right to Own and Bear Arms

Women in Combat

Voting System Reform

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Tim Farage is a Senior Lecturer and Graduate Adviser in the Computer Science Department at The University of Texas at Dallas. The views expressed herein are those of the author.  You are welcome to comment upon this blog entry and/or to contact him at tfarage@hotmail.com.

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