Protesting unfair taxation is an American tradition. Onerous taxation was specifically cited in the Declaration of Independence as one of the chief justifications for the colonies’ secession from Great Britain. High taxation, beyond what is required to support the most essential functions of government (securing peace and the rule of law), is abhorred by libertarian scholars. However, while high taxation does inhibit freedom, since the genesis of the lobbying industry in the Gilded Age, the very tax code itself has become a weapon used against economic freedom and equality before the law.
How do we see this? Currently the U.S. tax code is over 75,000 pages long and each part is laden with loopholes installed by lobbyists. These loopholes allow parties represented by the lobbyists to negotiate lower taxes, giving them distinct economic advantage in the marketplace. For instance, in my town in Connecticut, General Electric removed their headquarters after the governor failed to offer them a large enough tax break for staying. Instead, Massachusetts won out and now their smaller businesses will have to compete with a conglomerate capable of negotiating tax policy. Wherever lobbyist-designed rules spring up, economic subjugation follows.
This highlights the importance of creating a permanent, simple tax code, one that can fit on one page, not 75,000 and one that can be reasonably adhered to by all American taxpaying entities. An uneditable simple tax code will also help extricate the lobbying industry and end the corrosive “iron triangle” relationship between legislators, bureaucracy and special interests. Removing the politicians’ supply of “carrots” is the first step in eliminating such government-sponsored monopolies as GE and the exploitation of small taxpayers. In addition, a simpler tax code will also reduce the difficulty for businesses and individuals to pay taxes, allowing them to invest elsewhere, effectively boosting their efficiency.
Another justification for a permanently simple tax code is that the tax system may now be used to coerce U.S. citizens. Clinton’s proposed corporate exit tax from America is such an example. Essentially a duty on all assets sent abroad, an exit tax is not only extremely coercive to a company’s employees, but is also a perversion of free trade. If a company is not competitive in America, they have every justification for seeking a better regulatory/tax/human capital/ natural resource environment in other locations. The same goes for punishing expatriates returning to the states. For the welfare of the global economy, assets, workers and technologies should flow to the areas where they have the best returns.
What Libertarians are stressing this election cycle is to attempt to elect a set of politicians who are willing to reduce the tax code burden. The longer-term goal Libertarians have is to reduce the average level of taxes to begin dismantling the large bureaucracies and returning government to its original purposes.