The position that taxation is a form of theft has floated around libertarian and anarchist circles of thought for quite some time. The reasoning is fairly straightforward. After all, an individual’s consent is disregarded when the state comes to collect money. You either pay up or you go to jail. But this broad denunciation of taxation fails to distinguish the many forms in which taxes are levied. As it so happens, the theft argument is weaker for some forms and stronger for others.
The justification given for property and sales taxes, for example, falls within the social contract theory. Citizens enjoy public services like snow plowing or police protection, and so they should have to pay for it. Therefore, these taxes are transactional. But if we scrutinize the merits of each tax independently, then we find some that fail this test. The most egregious of which are those levied upon the worldly U.S. citizens, or those who travel or live abroad. Specifically, individual import duties and tax on foreign income. These deserve to be singled out because they lack the rationale. Instead of a transaction, they are based on opportunity. Pots of gold that Uncle Sam can raid simply because the peasants cannot resist. We would do well to dissect each and advocate for their repeal.
Individual import duties are the bluntest form of theft. This is a tax that is imposed on goods transported into the United States. Although duties and tariffs are different words for the same thing, people typically think of duties as taxes on individual travelers and tariffs as taxes on corporations. Regardless, the philosophical foundation for this burden is weak.
Juxtapose sales tax with individual duties. On the onset, both appear to be similar: a value-based charge applied to merchandise. But social contract theory only supports the sales tax. The bottle of ketchup that you pulled off the store shelf used U.S. public resources, like ports and roads, to get there in the first place. No such rationale exists for the fine wine that you purchased in France. Its manufacture and sale used French public resources, and you already paid taxes to the government of France when you bought it.
Yet, the U.S. customs officer in the airport is authorized to extort money from you as a percentage of the value of that wine. It doesn’t matter that your merchandise never used U.S. public resources, nor does it matter that you already paid for use of the airport through your plane ticket. Import duties are levied on returning U.S. citizens for no other reason than the fact that they are vulnerable when asking permission to re-enter. Identifying what goods are entering the country can be accomplished by having travelers declare without the threat of duty charges. In fact, the existence of duties encourages travelers to conceal what items they bring in, so this tax actually undermines the purpose of U.S. Customs and Border Protection.
The U.S. tax on foreign income is another example of arbitrary, legal theft. If you are a U.S. citizen living and working in another country, your income in that country is still subject to the Internal Revenue Service, for no apparent reason. This is called a citizenship-based tax system, and the U.S. is the only developed country that uses it. Almost every other country uses a reasonable residency-based tax system, which taxes income only on citizens who reside within the country.
In this context, taxing foreign income is not a situation where a U.S. citizen lives and works domestically, but has moved their income source abroad. That is obviously tax evasion. Rather, the people that are unjustifiably burdened by this are U.S. expats living and working abroad and the so-called “accidental Americans.”
There may be between three and six million U.S. expats living abroad. Some study or work abroad for short periods of time and others have lived abroad for decades. Subjecting all of them to U.S. tax law is bizarre and regressive. Similar to import duties, their activities do not utilize U.S. public resources. The fact that they still hold U.S. citizenship requires no expense on our behalf. So why tax them? The enigma broadens with the “accidental Americans,” who are U.S. citizens who neither live here nor possess any real ties here. They are often a result of having been born to a parent with U.S. citizenship. Most of them have never lived in the U.S. as an adult, but their financial activities in their country of residence are nevertheless considered to be fair game by the IRS. Again, this is taxation by opportunity and lacks just cause.
These taxes are levied without reason. But a fair question to ask is, so what? Why does the government need to justify the taxes that it collects? There are idealistic responses to that. Perhaps it is the consent of the governed. Think Abraham Lincoln’s “government of the people, by the people, for the people,” or the hostility early American colonists showed towards British taxation. But the realistic responses are more compelling. In this age of globalism, U.S. citizens who travel and work abroad are unjustifiably burdened by our tax laws. These people are not drains on this country. They are our business and cultural representatives. A more fluid understanding of what a citizen owes to the state is needed. We don’t owe our bodies, our rights and our wealth to the government. We only chip in for what public services we use. Any other tax is just theft by opportunity.