|
L: Doug, the Taxman
cometh, at least for most US citizens who file their annual tax papers on
April 15. We get a lot of letters from readers who know about your
international lifestyle and wonder about the tax advantages they assume it
confers. Is this something you care to talk about?
Doug: Yes; something wicked this way comes,
indeed. But first, I have to say that as much as I can understand the guy who
flew his airplane into an IRS building, as we once discussed, I do not encourage anyone to break
the law. That's not for ethical reasons – far from it – but strictly
on practical grounds. The Taxman can and will come for you, no matter how
great or small the amount of tax he expects to extract from you. The IRS can
impound your assets, take your computers, freeze your accounts, and make life
just about impossible for you, while you struggle to defend yourself against
their claims and keep the rest of your life going. The number of IRS horror
stories is beyond counting. As the state goes deeper into insolvency, its
enforcement of tax laws will necessarily become more draconian. So you absolutely
don't want to become a target.
L: So… just bow down and lick the
boots of our masters?
Doug: Of course not. People can and should
do everything they can to pay as little in taxes as possible. This is an
ethical imperative; we must starve the beast. It could even be seen as a
patriotic duty – if one believes in such things – to deny revenue
to the state any way possible, short of endangering yourself. Starving the
beast may be the only way to force it back into its cage – we certainly
can't count on politicians to make the right choices – they're minions
of the state. They inevitably act to make it bigger and more powerful. It's
sad to see well-intentioned people supporting someone like Mitt Romney
because they naïvely think he'll reduce the size of the state and its
taxes. The man has absolutely no ethical center; he'll just try to change the
government to suit his whims.
L: Can you expand on the ethical
imperative aspect?
Doug: Yes. The first thing is to get a grip
on who owns the moral high ground. The state, the media, teachers, pundits,
corporations – the entire establishment, really – all emphasize
the moral correctness of paying taxes. They call someone who doesn't do so a
"tax cheat." As usual, they have things upside down.
Let's start with a definition
of "theft," something I hold is immoral and destructive. Theft is
to take someone's property against his will, i.e., by force or fraud. There
isn't a clause in the definition that says, "unless the king or the
state takes the property; then it's no longer theft." You have a right
to defend yourself from theft, regardless of who the thief is or why he is
stealing.
It's much as if a mugger grabs
you on the street. You have no moral obligation to give him your money. On
the contrary, you have a moral obligation to deny him that money. Does it
matter if the thief says he's going to use it to feed himself? No. Does it
matter if he says he's going to feed a starving person he knows? No. Does it
matter if he's talked to other people in the neighborhood, and 51% of them
think he should rob you to feed the starving guy? No. Does it matter if the
thief sets himself up as the government? No. Now of course, this gets us into
a discussion of the nature of government
as an institution, which we've talked about before.
But my point here is that you
can't give the tax authorities the moral high ground. That's important
because decent people want to do the morally right thing. This is why
sociopaths try to convince people that the wrong thing is the right thing.
If an armed mugger or a gang
of muggers wanted my wallet on the street, would I give it to them? Yes, most
likely, because I can't stop them from taking it, and I don't want them to
kill me. But do they have a right to it? No. And every taxpayer should keep
that analogy at the top of his mind.
L: I also believe that the initiation of the use of force (or fraud, which is a sort of
indirect, disguised, form of force) is unethical. It doesn't matter what
the reason for it might be nor how many people might approve of the action.
But some people claim that taxation is really voluntary – the price one
pays for living in society… and if I'm not mistaken, the US government
says the federal income tax is voluntary.
Doug: [Snorts] That is a widely promoted
lie. It's propaganda to help statists claim the moral high ground, confuse the
argument, and intimidate people who aren't critical thinkers. Just try not
volunteering to pay it and see what happens. Taxation is force alloyed with
fraud – a nasty combination. It's theft, pure and simple. Most people
basically admit this when they call taxation a "necessary evil,"
somehow mentally evading confrontation with the fact that they are giving
sanction to evil. But I question whether there can be such a thing as a
"necessary evil." Can anything evil really be necessary? Can
anything necessary really be evil?
Entirely apart from that, if
people really wanted anything the state uses its taxes for, they would,
should, and could pay for it in the marketplace. Services the state now
provides would be offered by entrepreneurs making a profit. I understand, and
am somewhat sympathetic, to the argument that a "night-watchman"
state is acceptable; but since the state always has a monopoly of force, it
inevitably grows like a cancer, to the extent that the parasite overwhelms
and kills the host. That's where we are today.
I think a spade should be
called a spade, theft should be recognized for what it is, and evil should be
opposed, regardless of the excuses and justifications given for it. Ends do
not justify means – and evil means lead to evil ends, as we see in the
bloated, corrupt, dangerous governments we have all over the world.
L: That runs counter to the conventional
wisdom, Doug. Evil or not, most people think taxation is part of the natural
order of things, like rain or day and night. Death and taxes are seen as the
two inevitable things in life, and you are a silly idealist – if not a
dangerous madman – if you believe otherwise.
Doug: That saying about death and taxes is
both evil and stupid; it's a soul-destroying and mind-destroying perversion
of reality. It's evil, because it makes people reflexively accept the worst
things in the world as permanent and inevitable. As for death, technology is
actively advancing to vanquish it. Who knows how far medicine, biotech, and
nanotech can delay the onset of death? And taxes are, at best, an artifact of
a primitive feudal world; they're actually no longer necessary in an
advanced, free-market civilization.
People also once thought the
world was flat, that bathing was unhealthy, and that there was such a thing
as the divine right of kings. Many things "everyone knows" just
aren't so, and this is one of those. A government – for those
"practical" people who think they need one – that stuck to
the basic core functions of police and courts to defend people against force
and fraud and a military to defend against invasion, would cost a tiny, tiny
fraction of what today's government costs, and that could be funded in any
number of ways that essentially boil down to charging for services.
As it is now, the average US
taxpayer probably works half of the year just to pay direct and indirect
taxes. That doesn't even count the cost of businesses destroyed by regulation
and lives lost to slow approval of new treatments by regulators, or a million
other ways governments burden, obstruct, and harass people.
L: I just looked, and Tax
Freedom Day this year is April 17.
Doug: That means that all the work the
average guy does until April 17 goes to pay for the government that failed to
protect him on September 11, 2001, failed to protect him from the crash of
2008, and continues failing him every day. We pay for an organization bent on
doing not just the wrong things, but the exact opposite of the right things
in economics, foreign policy, and everything else we've talked about in all
our conversations. It's rather perverse that Emancipation Day – the day the first slaves in the
US were freed in the District of Columbia in 1862 – is April 16. But
what is a slave? He's someone who is deprived by force of the fruits of his
labor. Sound familiar? I disapprove of slavery, in any form – including
its current form.
However, Tax Freedom Day is an incomplete way of looking at
things. What's the cost to business forced to install equipment to meet
government regulations? That's not paid as a tax, but it's a serious burden.
There's something called Cost
of Government Day that's a somewhat more inclusive estimate of the burden
the state imposes on the average guy…
L: I just looked for that too and don't
see that a date for 2012 has been announced yet; but Cost of Government Day
for 2011 was August 12. According to that estimate, the average US taxpayer
slaved away for about two-thirds of the year to pay for the state and got to
keep only a third of the fruit of his labor for his own benefit and improvement.
Doug: That may be a more accurate way of
looking at the burden of government the average guy has to bear, but it still
doesn't even begin to address what economists call "opportunity cost." Basically, I don't just look at
what the state we have costs us in cash, but in terms of the innovation and
growth we don't have because of government policies, laws, and regulations.
This covers everything from new medicines to all sorts of new technologies to
different forms of social and business organizations to the cleaner
intellectual atmosphere I think we'd have without government propaganda
machines cluttering it up.
I don't believe in utopia, but
I do believe our world could be far freer, healthier, and happier than it is
today – without any divine intervention, magic, or changes in the laws
of physics. Just a different path, every bit as possible as the one we've
taken to where we are today.
L: As in the alternative reality L. Neil
Smith wrote about in his book The Probability Broach?
Doug: At least as far as the humans in that
story go, yes, it's a good illustration of how much more advanced the world
might be, based on a different turn of events.
Back in this world, I think
that without any major differences in technological development and without
assuming that people would spontaneously become angels, the average standard
of living worldwide would be much higher if… Well, there are lots of
turning points, some of which we've discussed. Just in the 20th
century, things would be very different if America had stayed out of WWI, or
had not ratified the 16th Amendment to the Constitution, or had
not elected FDR.
L: Okay, but those things did happen,
and we live in the world we have today – the one you call a prison
planet. How should people try to do what's right in such a world without
ending up in jail?
Doug: First, it's important to think about
what's actually possible, because people will not even try to reach for what
they are sure is impossible. The world needs idealists to challenge us all to
aim higher… including idealists willing to go to jail for what they
believe in, like Thoreau.
But even he said that while he encouraged all people to disobey unjust laws,
he wouldn't ask those who support families to get themselves locked up and
leave their families destitute.
So my take is as we started
out saying: It is both ethically and practically imperative to starve the
beast. The less cooperation of any sort we give the state – but
especially the less money we give it – the less mischief it can get
into. We're unlikely to get politicians to vote for getting the state off our
backs, out of our pocketbooks, out of our bedrooms, and out of other people's
countries as a matter of principle, but we could see the state get out of
places it doesn't belong simply for lack of funds. And if everybody treated
minions of the state with the contempt they deserve, most of them would quit
and be forced to find productive work. As Gandhi showed us, civil disobedience can not only be an ethical choice, but
a very powerful force for change.
L: Any specific advice?
Doug: Get a good accountant, take every
deduction you can, and look for ways to legally reduce your tax burden. For
example, our readers should know that charitable contributions in the US get
deducted after
the alternative minimum tax wipes out your other deductions. That means that
a substantial fraction of every dollar you give a registered 501(c)(3)
nonprofit does not
go to the federal government.
Now, as you know, I
don't believe in charity, at least not in the institutional sense, but
wasting money on charities is far, far better than giving it to the
government to use bombing innocents and creating enemies for generations to
come. And if that charity happens to be something like the Institute for Justice, the Fully Informed Jury Association,
or any of the other libertarian think tanks dedicated to reducing the size
and scope of government, you get to help fight the beast and starve it at the
same time.
L: I do my economics and
entrepreneurship camps in Eastern Europe under the auspices of the International Society for
Individual Liberty – of which I should disclose that I am a
director. I have to admit that it pleases me greatly to see funds that would
have gone into making bombs to drop on foreigners and hiring more goons in
uniform to oppress people at home redirected to something I consider
constructive.
But what about the
international diversification question: can that help reduce your tax burden
back home?
Doug: It's different for different
countries, and each individual should consult a tax specialist with the
details of his or her own case, or proposed case. However, there is an exclusion
for Americans who live abroad for a whole tax year – it was around
$100,000 the last I looked. So there are very good tax reasons for Americans
to live abroad. There are even better reasons for Canadians, Europeans, and
almost everyone else to leave their native country – many can live 100%
tax-free. I guess it's just a sad testimony to the medieval-serf mentality
that most people suffer from that few people take advantage of this. They're
born someplace, and they stay rooted there, like a plant. Oh well, everybody
basically makes his own bed, reaps what he sows, and gets what he
deserves…
However, as appealing as the "permanent tourist" idea is, I recommend international
living first and foremost as a way to protect your assets. As we've
discussed before, real estate in foreign countries cannot be repatriated or
confiscated by the government that thinks of you as its milk cow. There is
nothing illegal or nefarious about buying real estate abroad, and it could
come in very handy if things get really chaotic back home, wherever that
happens to be.
[Editor's note: There's nothing
wrong with internationalizing your assets either; learn
the five highly effective ways to do it.]
L: Okay… any investment
implications to discuss?
Doug: Sure, but nothing new to our readers.
Starving the state-beast is the right thing to do, ethically and practically,
but I believe the state's days are numbered anyway. The thing to be aware of
is that the beast won't go quietly, and in its death throes it can do a lot
of harm. Still, like Nietzsche said, "That which is about to fall
deserves to be pushed."
In the meantime, much higher
taxes are on the way. More and more currency controls are coming. You may
have heard that the US is contemplating a law denying issue or canceling the
passport of anyone accused of owing more than $50,000 in taxes. I expect the
transformation of what was once America into a police state to continue, and
I expect other "developed" nations – especially Europe,
Canada, and Australia – to follow suit. And this will happen whether or
not the global economy exits the eye of the storm as I expect it to.
So you want to rig for stormy
weather and invest for continuing crisis. Own gold for prudence, speculate on
related stocks and others that may benefit from government profligacy, and as
we've just been saying, diversify your assets and personal living
arrangements internationally.
The day is coming when your
local government may stop seeing you as a milk cow and start seeing you as a
beef cow, and you want to have options before that day.
L: The Casey mantra. Any chance you're
wrong?
Doug: Anything's possible. But we just
asked ourselves that question in our conversation on the illusion of recovery, and I just
don't see a way out for the old economic order.
L: Okay, Doug. I hope our readers don't
tune us out for sounding like a broken record – I believe it's vital
that they do take action, preparing for more volatility in the markets ahead.
And hedging one's bets against social chaos may sound a bit extreme, but as
an option, it sure is something that can help one sleep better at night.
Doug: I didn't formulate the rules for this
crazy game; I'm just trying to play it competently.
L: Right then. Until next week.
Doug: Next time.
|
