Myth: Taxes are theft.

Fact: Taxes are payments for the public goods and services you consume.


Taxes are part of an agreement that voters make with government, a contract in which citizens agree to exchange their money for the government's goods and services. To consume these goods and services without paying for them is itself theft, and is rightly punished as breach of contract. Some may object that they have not agreed to the contract, but if so, then they must not consume the government's goods and services. Furthermore, contract by majority rule is better than by minority rule, one-person rule or anarchy (which results in kill-or-be-killed). Opponents of taxation under democracy are therefore challenged to find an improvement on democracy.


Many conservatives and libertarians make the following populist argument:

"If you don't pay your taxes, men with guns will come to your house, arrest you, and seize your property."

The implication here is that you are being extorted to pay taxes, and this theft amounts to a violation of your rights. Although the events described are technically correct -- you should expect such a response from any crime you commit -- the implication that the government is aggressing against you is false, and not a little demagogic.

Taxes are part of a social contract, an agreement between voters and government to exchange money for the government's goods and services. Even libertarians agree that breach of contract legitimates a police response. So the real question is not whether a crime should be met with "men with guns," but whether or not the social contract is valid, especially to those who don't agree with it or devote their allegiance to it.

Liberals have two lines of argument against those who reject the idea of the social contract. The first is that if they reject it, they should not consume the government's goods and services. How they can avoid this when the very dollar bills that the economy runs on are printed by the government is a good question. Try to imagine participating in the economy without using public roads, publicly funded communication infrastructure, publicly educated employees, publicly funded electricity, water, gas, and other utilities, publicly funded information, technology, research and development -- it's absolutely impossible. The only way to avoid public goods and services is to move out of the country entirely, or at least become such a hermit, living off the fruits of your own labor, that you reduce your consumption of public goods and services to as little as possible. Although these alternatives may seem unpalatable, they are the only consistent ones in a person who truly wishes to reject the social contract. Any consumption of public goods, no matter how begrudgingly, is implicit agreement of the social contract, just as any consumption of food in a restaurant is implicit agreement to pay the bill.

Many conservatives and libertarians concede the logic of this argument, but point out that taxes do not go exclusively to public goods and services. They also go for welfare payments to the poor who are allegedly doing nothing and getting a free ride from the system. That, they claim, is theft.

But this argument fails too. Welfare is a form of social insurance. In the private sector we freely accept the validity of life and property insurance. Obviously, the same validity goes for social insurance like unemployment and welfare. The tax money that goes to social insurance buys each one of us a private good: namely, the comfort of being protected in times of adversity. And it buys us a public good as well (although tax critics are loathe to admit this). If workers were allowed to unnecessarily starve or die in otherwise temporary setbacks, then our economy would be frequently disrupted. Social insurance allows workers to tide over the rough times, and this establishes a smooth-running economy that benefits us all.

We should also note that the program most popularly known as "welfare" -- Aid to Families with Dependent Children -- takes up less than 1 percent of the combined federal and state budgets. (1) That tax critics would raise such a big stink over such a paltry sum begs an explanation. Their typical response to this is to expand the definition of welfare. But suppose we include all programs that involve one-way transfers of wealth with no expectation of immediate repayment or return services. According to the Library of Congress, in 1992 such expenditures at the federal, state and local level came to $289.9 billion, or 12 percent of their combined budgets of $2,487 billion. (2) It still seems incredible that such fiery anti-tax rhetoric is reserved for 12 percent of a person's taxes. But keep in mind that this 12 percent includes such popular middle class programs as Medicaid, student grants, school lunches, pensions for needy veterans, etc. Voters have ultimately agreed that these programs provide not just social insurance, but social investment. Certainly our society benefits by enabling more young people to attend college. Some may dispute the need for such social insurance and investment, but the majority of voters have (ultimately) agreed to put it in our social contract.

And this brings us to the second line of liberal argument: the best form of social contract is majority rule. It's not perfect, but its better than minority rule and still better than one-person rule. Government by unanimous consent is impractical, since it almost never happens, and society by anarchy results in "kill or be killed." So what do libertarians and conservatives propose in democracy's stead?

Of course, nearly all democracies have constraints on majority rule, designed to protect the rights of individuals and minorities. In the U.S., these are embodied in our constitution. But to be legitimate, a constitution must be a document of the people; hence it must be approved by the majority. (In the U.S., a supermajority.) And the constitution of the United States clearly allows taxation. Article I, Section 8, states: And the 16th Amendment states: But should the constitution allow taxation? If conservatives and libertarians feel that it should not, then it is up to them to describe a constitutional or political system that would work better than majority rule. Do they prefer minority rule? Or dictator rule? The only alternative to these historical atrocities is self-rule -- but again, that's anarchy, kill-or-be-killed.

Of course, some may wish to keep the current political structure, and simply convince the majority of voters to pass an anti-tax amendment. But if they do, then they are legitimizing the social contract… which hardly puts them in a position to call taxation "theft."

Understanding the above points allows you to see through common anti-tax arguments. Here is a real example taken from the Internet:

This argument is based on a faulty premise of ownership. Suppose the gang of ten men had helped you buy the car, pitching in with a loan that covered 29 percent of the sticker price (which is about the percentage of the GDP devoted in the United States to taxes). And suppose they simply wanted return payment. By not returning the favor, it is you who become the thief. If you want a car that is 100 percent yours, simply pay the full price of one. Of course, by accepting the loan from the gang of ten men, you were able to buy a better car than you could afford in the first place…

Arguments like "taxation is theft" are extremely egoistic. It's the equivalent of saying "Everything I make is by my own effort" -- a patently false statement in an interdependent, specialized economy where the free market is supported by public goods and services. People who make arguments like this are big on taking these goods but short on seeing why they need to pay for them. It doesn't matter that they believe these public services should be privatized -- the point is that the government is nonetheless producing them, and they need to be paid for. It doesn't matter that any given individual doesn't agree with how the government is spending their money -- many people don't agree with how corporations pollute the environment, but they still pay for their merchandise. It doesn't matter that any given individual thinks some government programs are wasteful and inefficient -- so are many private bureaucracies, but their goods still demand payment. If tax opponents argue that a person doesn't have to patronize a company he disagrees with, then liberals can argue that a person doesn't have to vote for a public official he disagrees with.

Ultimately, any argument against paying taxes should be compared to its private sector equivalent, and the fallacy will become evident.

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1. Library of Congress, Congressional Research Service, "Cash and Noncash Benefits for Persons with Limited Income: Eligibility Rules, Recipient and Expenditure Data, FY 1990-92," Report 93-832 EPW, and earlier reports; U.S. Bureau of the Census, Government Finances, series GF, No. 5, 1992.

2. Ibid.

3. Glen Raphael, A Non-Non-Libertarian FAQ: Responses to Mike Huben.