The debate over income-tax cuts between George W. Bush and Al Gore reflects how far Americans have plunged in their understanding of what it means to be free. If elected president, Bush proposes to cut income taxes by $1.3 trillion. Gore is calling the plan “a tax cut for the rich” and has proposed his own $500 million tax cut that purports to target the American middle class. The squabble over the details obscures the real issue that the American people should be reflecting upon-the meaning of human freedom.
When the Constitution called the federal government into existence in 1787, it failed to provide it with the power to levy taxes on income. This was not an oversight. It was commonly understood that freedom entailed the absolute right to keep everything you earned. If government had the power to take the fruits of your earnings, Americans once believed, then your position was no different than that of a slave.
That notion had been implicitly expressed 11 years before in the Declaration of Independence when Thomas Jefferson wrote that people were endowed by their Creator with certain unalienable rights and that among these rights were life, liberty, and the pursuit of happiness.
Each individual is born with certain talents, qualities, characteristics, and handicaps. In order to sustain his life, he uses his own personal abilities to either produce the necessities of life himself or acquire them by entering into mutually beneficial exchanges with others. The product of these exchanges constitutes income to the people engaging in them. Thus, income rightfully belongs to the person who has earned it because it is a direct result of the value that others place on the abilities that he brings to market.
For example, consider an opera singer who doesn’t know anything about growing food. She offers her particular talents in the marketplace-singing in operas-and people pay to listen to her. That money rightfully belongs to her because her voice belongs to her. She takes that money-her income-and enters into exchanges with those whose talents lie in producing and selling food, clothing, and the like.
What’s important to note is the revolutionary nature of American society that lived and prospered without income taxation for more than 125 years. Throughout history, governments had claimed the authority to tax or confiscate any and all of a person’s income. Historically, people didn’t question this power because the common belief among the citizenry was that government was supreme and the citizen was subordinate.
The Declaration of Independence and the Constitution inverted that historical relationship between government and citizen. For the first time in history, people restrained the power of government to seize any or all of their income. Thus, for more than 125 years, the American people, unlike all other people in history, were free to accumulate unlimited amounts of wealth and there was nothing their government could do about it.
Therefore, it is impossible to overstate the revolutionary significance of the Sixteenth Amendment, which was enacted in 1913 and which granted the federal government the power to levy taxes on income. From that point on, the relationship between government and citizen was inverted back to the age-old model of government as sovereign and citizen as servant. Because what mattered was not whether the particular percentage of the tax was high or low but rather that government had the power to set the percentage.
For example, let’s assume that I have the power to force you to work for me and that I exercise that power by requiring you to work 24 hours a day, 365 days a year, for me. You would acknowledge that our relationship would be one of master and slave.
But suppose I decide to be nice and force you to work only two hours a day for me, four months a year. Has our relationship been changed? Not in the least. You are still my slave because I have the authority to determine the amount of time you are required to serve me.
And this is the situation in which the American people are now mired. By having the power to set the percentage of tax to be levied on income, the federal government is now in the position of master and the American people are in the position of servant. Everyone’s income is now effectively owned by the government and, because the government has the power to adjust the percentage of tax to be paid, what people are permitted to retain is actually just an allowance that the master provides the servants.
The tragedy is compounded by misconceptions about the nature of freedom. As the great German thinker Johann Goethe once pointed out, no person is more enslaved than one who falsely believes he is free.
The Future of Freedom Foundation (www.fff.org.) in Fairfax, Va. is publisher of Your Money or Your Life: Why We Must Abolish the Income Tax by Sheldon Richman.