Ludwig von Mises Institute of Canada

In early August, Senate Majority leader Harry Reid made the unseemly, but totally befitting for a politician, accusation that the father of presidential candidate Mitt Romney would be embarrassed of his son’s supposed lack of paying taxes for ten years.  According to Reid, an insider from Bain Capital, the private equity firm Romney founded, had spilled the beans to him on the tax dodging.  Reid has since demanded the former Massachusetts Governor release his tax returns for the past ten years.  The Obama campaign has jumped on board and is demanding that Romney release at least 5 years of returns.  This latest request comes on the heels of the presumptive GOP nominee telling supporters at a campaign stop in North Carolina that he never paid less than a 13% rate for taxes for the past decade.

The 13% rate, which is lower than the 15%-25% the typical middle class pays, has predictably lead to outcry among Romney’s critics.  John Hudson of The Atlantic calls the rate “embarrassing.”  Steven Benen over at MSNBC’s Maddow Blog calls the rate “woefully unacceptable” and not “worth bragging about.”

In the course of political campaigns, it is necessary for candidates to portray themselves as devotees of the central state.  It looks bad if someone seeking political office was doing all they could to undermine the very institution they wish to become a part of.  That means paying taxes, unquestioningly supporting the military and the growing, heavily armed police state, defending the creativity-stifling and propagandizing public school system, and evoking patriotism as a means to distort individualism.  If there is any semblance of thwarting the money snatchers of government, political rivals will latch on and use it to their advantage.  For Mitt Romney, the rumor of not paying any taxes has done just that.  It has provided fodder for his detractors who besides denouncing his low rate of taxation have also castigated him for having foreign bank accounts and skirting the I.R.S. by keeping funds stashed in the Cayman Islands.

The goal of these political attacks is to enrage tax-paying Americans into casting their ballot for Obama this November.  The underlying objective is to dupe the middle and lower class into demanding their Congressional representatives raise taxes on the rich.  It is a deceitful attempt to portray big government as the ally of the downtrodden when in the end it is only a friend of scoundrels.

For those not in a position to take advantage of all the legal (and illegal) ways in which the wealthy are better able to keep more of their income, the various loopholes and tax breaks that have been implanted into the U.S. tax code are not the enemy.  It is through these loopholes that individuals are able to avoid the grubby hands of a class of men who survive through pure theft.  If anything, tax exemptions should be extended to more of the public not just for moral reasons but also economical.

Why private individuals are better at spending their own income than bureaucrats and politicians who receive money through force is self-evident.  In a world defined by scarcity, economization becomes a habitual act.  It is often performed with little notice as the human mind is in a constant state of rearranging ordinal preferences.  Limited means makes it necessary to allocate resources more proficiently.  In the marketplace, the only thing certain is uncertainty.  Mass production and rising living standards aren’t the only things capitalism is responsible for; it has allowed for the majority of consumers to become fickle in what they purchase.  In other words, the ability to earn an income through the market process is never a sure thing since consumers are free to choose.

Lawmakers on the other hand are not constrained by satisfying the needs of indecisive buyers.  They acquire money through forceful extraction and combat resistance by locking objectors in cages.  The guarantee of income creates little incentive to spend prudently.  Profit and loss accounting gets little notice in the face of winning reelection and receiving kickbacks.  The entirety of the budget for any level of government amounts to wasteful pork barrel spending in a sense.

To ensure fore a more rational and efficient allocation of goods, tax collectors must be denied of funds to the greatest extent possible.  The state acts as a parasitical drain on society rather than a driver of material progress.  Private entrepreneurship is better capable of economizing and coordinates on an ongoing basis.  The best example of this rule was demonstrated during the communist days of the former Soviet Union.  It is now widely acknowledged that dictatorial rule and central planning would have devastated the Soviet Union at a much higher degree if not for the illegal black markets that developed.  As Arnold Kling notes

Under Communism, the Russians developed black markets which were highly efficient. These markets enabled people to exchange goods and help to alleviate chronic shortages. In a Communist society black markets serve an economic function and improve efficiency.

For these reasons, Mitt Romney should not be lambasted for paying such a low rate of taxation.  Americans, as well as everyone around the world, should strive to lighten their tax load to the smallest amount possible.  Taxation is a noose that chokes the life out of any productive economy.  It prevents capital from coming to market and being invested for improvements in production.  From a moral perspective, taxation is no better than organized robbery.  No government law, no matter how popular with the voting majority or how acquiesced people have become to it, is legitimate when violence is imposed on the innocent.

Taking advantage of loopholes, tax breaks, and tax exemptions are further methods to undermine the state.  Those who do so should be congratulated and imitated.  That isn’t to say Romney himself is a great stalwart of limiting the scope of government.  Like anyone of strives for political office, his intentions are not at all based on returning the United States to a free society.  He is a supporter of the socially eroding welfare state, the morally corrupt warfare state, the legal Ponzi scheme known as the entitlement state, of crony capitalism, and of Wall Street and banker-enriching Federal Reserve System.  His election over Obama will change nothing; not even the pace at which Washington seems dead set on spending itself into oblivion.

Still, Romney’s low rate of taxation is not something to detest but allow everyone to enjoy.  Just as half of all Americans currently pay no federal income tax, the other half of America should strive to rid themselves of their tax burden completely.  As Murray Rothbard wrote:

It is clear that if a certain burden is unjust, blame should be levied, not on the man who escapes the burden, but on the man or men who impose it in the first place. If a tax is in fact unjust, and some are exempt from it, the hue and cry should not be to extend the tax to everyone, but on the contrary to extend the exemption to everyone.

James E. Miller is editor-in-chief of the Ludwig von Mises Institute of Canada. Send him mail

Tags: 13%, Romney, taxes