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By Ludwig Von Mises Institute (Reporter)
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Taxation Is Theft and Cannot Be Justified Even for Charitable Causes

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In her article “Multinationals Make Obscene Profits Out of Global Crises—Tax Them to Defend Human Rights,” Magdalena Sepúlveda called for more taxation of multinational corporations and the rich as a means to finance policies that are aimed at protecting the most vulnerable from what she calls “the cost of living crisis.” In this piece, I would like to respond to Sepúlveda by saying that taxation is theft and any attempt at justifying taxation, especially for charity, will lead to irrational conclusions.

From my understanding of Sepúlveda’s piece, it appears that she adopts the philosophy of social democracy. Such a philosophy is a subcategory of socialism and distinguishes itself by advocating for relatively stronger private property rights when compared to Marxism and Leninism, both of which reject private property rights entirely.

Furthermore, social democracy advocates (SDA) believe that some of the income earned from property owners belongs to society, hence their continued calls for either more taxation, a new wealth tax, or any other tax aimed at achieving egalitarian purposes (which include but are not limited to either “reducing inequality” or “more equitable wealth distribution”). Those interested in knowing more on the origins of social democracy can read Hans-Hermann Hoppe’s book titled Social Democracy. In Sepúlveda’s piece, there is one instance where she, in my opinion, displays her affiliations with social democracy. She states, “Pandemics, wars and recessions do not exempt states from meeting their human rights commitments. They must tax multinationals and the richest more to finance targeted policies protecting the most vulnerable against the cost-of-living crisis.”

Taxation is theft and SDAs like Sepúlveda face a moral problem when advocating for taxation irrespective of the purposes of the proposed taxation. The reason is derived from the natural law theory of property, which was popularized by Murray Rothbard, Walter Block, and Hoppe. Natural law provides four simple and logically connected rules for private property:

  1. A person is the owner of his/her own body.
  2. A person owns every scarce nature-given good that he/she has put to use by means of his/her own body before anyone else. Such is known as the concept of original appropriation.
  3. A person owns all new products that he/she has created by means of his/her own originally appropriated goods and his/her own body, provided that the property of others was not damaged during the production process.
  4. Ownership of goods that have either been originally appropriated or produced can only be transferred from the previous owner to the later owner by means of a voluntary contractual agreement.

Taxation is theft because it violates the fourth rule which requires that property be transferred by means of a voluntary contractual agreement. Taxation requires no contractual agreement to be in place for the transfer of property from the taxpayer to the state. Effectively, taxation is a claim on citizens’ portion of property by the state, and failure by citizens to adhere to such a claim can result in imprisonment, which is a threat of violence. This is no different from being robbed by a thief who uses a gun to elicit cooperation.

The SDAs might rebut by stating that the proceeds obtained by means of taxation are used to fund the justice system and other state functions that are meant to assist with social order and charity, which from here are referred to as “social causes.” However, such a rebuttal does not address the violation of natural rights brought on by taxation. If such a rebuttal were to be accepted, then it follows that common thieves, including those who use the threat of violence to coerce cooperation, are justified in forcibly taking property from their victims as long as the proceeds of such a crime are used for social causes.

Given the problem of the “social causes” rebuttal, the SDAs will have to use another argument which is that taxation does not violate natural law because there exist “implicit” or “conceptual” contracts between property owners and the state that account for taxation. Such a rebuttal fails in justifying taxation because these “implicit” or “conceptual” contracts do not exist. For a contract to exist, there must be at least two agreeing parties and, more fundamentally, the parties must be aware of the contract that is being agreed upon.

However, if such contracts do exist then the SDAs will have to also prove how citizens agree to such contracts. In other words, the SDAs will have to show how a citizen agrees to a nonterminable agreement with the state where the state is granted sweeping powers over a citizen’s private property. In my opinion, proving that “conceptual” or “implicit” agreements between the citizen and the state exist and that citizens enter into such agreements by means of expressed or tacit consent is an almost impossible task.

Hoppe, in chapter fifteen of his book titled The Economics and Ethics of Private Property, further justifies my point on one entering into such an agreement.

It is inconceivable how anyone could ever agree to a contract that allowed someone else to determine permanently what he may or may not do with his property, for in so doing this person would have effectively rendered himself defenseless vis-à-vis such an ultimate decision maker. Likewise, is it inconceivable that anyone would ever agree to a contract that allowed one’s protector to determine unilaterally, without consent of the protected, the sum that the protected must pay for his protection.

Given the above quote and my above objections, arguing that taxation does not violate natural law because of “implicit” or “conceptual” agreements between the state and property owners should be abandoned because property owners’ agreeing to such contracts is inconceivable.

With regard to Sepúlveda’s article and her call to increase taxation on multinational corporations and the rich, it must be noted that taxation violates natural rights despite the intentions of taxation because it effectively allows for the state to forcibly take a portion of one’s property without one’s consent. Natural law requires that property be transferred by means of voluntary contractual agreements.

Furthermore, the provided reasons used in an attempt at justifying taxation—whether it be for social causes or that taxation is accounted for in “implicit” or “conceptual” agreements between the state and property owners—should be rejected because the former effectively justifies theft in general while the latter is inconceivable.

[A version of this article was originally published at ManPatria.]


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