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# Taxation! Is It theft or a pain in the butt?
- URL: https://www.smdp.com/taxation-is-it-theft-or-a-pain-in-the-butt/
- Published: 2007-08-14T15:00:00.000Z
- Updated: 2026-10-24T02:34:27.000Z
- Author: Guest Author
- Tags: Opinion, Santa Monica, #archive-import

IS TAXATION THEFT? TO ANSWER THIS question, we must look at a few underlying principles. Most fundamentally, I think we can all agree that morality applies equally to all human beings. The ethics of murder do not change when a person gets a government hat. If an official murders innocent persons, it is still murder. The Nuremberg Trials recognized the principle that the laws of a government can be judged by a higher moral standard. By extension, if a government official forcibly takes property that is legitimately owned by a citizen, it is just as much theft as when a gang takes property, even if most of the local residents approve of that action.

To judge the ethics of taxation, we need to distinguish taxes in form from taxes in substance. A tax in form is any required payment to government. A tax in substance is a forced payment not related to any service, benefit, or penalty that compensates for harm.

If a polluter has to pay a charge, that payment could be labeled a “pollution tax,” but in substance it is a penalty for having harmed the environment, for having trespassed on others’ property and causing damage. That would be a tax in form, but not in substance. When a tax is in substance, not merely in form, that is when it becomes theft.

A prime libertarian slogan has been “taxation is theft.” Unfortunately, many free-market advocates have shied away from this resonating saying, considering it too radical and impractical. They fall into the trap of advocating reforms such as a flat-rate income tax or a consumption tax, both of which not only commit theft but whose benefits relative to the status quo are questionable.

A national sales tax, for example, would require greater record-keeping by sellers. They would have to record the identity of each buyer for each good. A combined federal and state sales tax of over 33 percent would create a large underground market for untaxed sales, and government would respond with an army of tax inspectors. Buyers would be required to keep proofs of purchase, which would then be forged. Sting operations by government agents would become common. Government agents might even have the authority to enter your house to compare your goods against government sales data.

Because a sales tax is hard on the poor, rebates would be given to poor households. The incentive would then be to split up households so that they would get more rebates. People would also seek to hide income to qualify as poor. Moreover, if the tax applied to all purchases, buying a house for $300,000 at a 33 percent tax would raise the purchase price to $400,000\. And if an exemption is given for real estate, what about other high-cost items?

Any tax on wages, profits, sales or buildings also has a huge social cost, even aside from tax evasion and enforcement. Making goods more expensive reduces purchases, which will result in reduced production and economic growth. Economists call this a “deadweight loss,” and it is estimated to be over $1.5 trillion of wasted resources each year.

Moreover, it is unnecessary to steal the earnings of individuals or stifle their consumption in order to finance even a big government. Public revenue can be obtained without theft, such as by user fees, pollution charges, and payments for benefits received. Schools, for example, can be paid for with tuition. Pollution levies could replace today’s costly environmental regulation and reduce pollution more efficiently while generating government revenue.

Public works and civic services such as streets, parks, security and fire protection could all be privatized. Private communities such as condominiums and residential association already are providing such services. The benefits are paid for from assessments on the real estate of the members. Given that government provides these services, the most equitable and efficient way to finance them is by copying what private communities do: Levy an assessment on the land value generated by these services. There would be no evasion, because people cannot hide land, and this levy would not add to prices and so it would have no deadweight loss.

Taxation in substance is an abomination incompatible with liberty. Taxation is the unnecessary root of governmental evil. Freedom seekers should demand abolition of taxes, nothing less.

FRED E. FOLDVARY teaches economics at Santa Clara University, where he is also an associate of the Civil Society Institute.

*Originally published in the Santa Monica Daily Press print edition on August 14, 2007.* [Read the original PDF.](https://s3.us-east-1.amazonaws.com/smdp%5Fbackissues/081407.pdf?ref=smdp.com)