The fine folks over at Reason want you to know that they’re super concerned that the GOP tax plan making its way through Congress might… brace yourselves everyone… raise the deficit!
Oh no! Not the deficit! That sounds really bad! Surely all proper libertarians can therefore agree that this is terrible legislation which must be opposed!
…But just for fun, let’s stop and think about this for a second. What is the deficit exactly? It represents the amount the government must borrow to finance operations when the revenues produced from taxation are less than the expenses required for various spending programs. The equation then, would be: Spending – Taxes = Deficit. Since there are two variables, there are then two ways the deficit could be increased, by raising spending, or by lowering taxes. Everyone onboard so far?
Libertarians believe taxes are bad . But they do not, necessarily, believe that spending is inherently bad. Spending is bad because the source of the spending is typically taxation, which is theft. If Bill Gates voluntarily donated a billion dollars to a centralized agency to spend funding various social programs, there is no valid libertarian criticism. It would be a voluntary act of charity which harms no one. In fact, this sort of logic is the very foundation of much of libertarian theory as to how society wouldn’t collapse without the state. It’s the non-voluntary aspect of taxation which makes the system immoral, not the spending aspect.
So, if taxation (theft) decreases, this is a morally good outcome. Even if spending remains constant. Because taxes are inherently immoral in a way that spending is not. There is no libertarian reason to complain about lower taxes resulting in a higher deficit.
But wait! If the government lowers taxes without cutting spending (or receiving voluntary donations from billionaires), they’ll just inflate the money supply! We’ll still have to pay the inflation tax!
Now we get into a slightly more coherent and nuanced criticism – often made elsewhere, but notably absent from the Reason piece linked above. It is correct that if governments cannot raise the funds needed to finance their spending via taxation or donation, they will end up monetizing the debt and printing money, leading to inflation. Which results in a simple question – would you rather pay a straight up income tax now, or pay the inflation tax later?
And the obvious answer is that you’d much rather pay the inflation tax later.
This is not just a matter of opinion; one option is clearly superior to the other. Even putting aside the time value of money (income tax is stolen from you immediately, before you even receive the money, while debt monetization is a process that typically takes several years to fully materialize – and money today is more valuable than money in the future), there’s a pretty major and obvious way that inflation is a better outcome than income taxes: Inflation is reasonably easy to avoid.
If you’re anyone who earns an income, it’s virtually impossible to legally avoid the income tax (and difficult to avoid it illegally). But there are a whole lot of ways to avoid inflation! I’ll bet libertarians have even heard of some of them! For example, did you know that it’s possible to exchange your federal reserve notes for various inflation-resistant assets such as:
- A private, decentralized, impossible-to-inflate online currency entirely consistent with libertarian principles
- Precious metals with practical uses that have been a consistent store of value for thousands of years
- Real estate, and other physical assets useful for life that tend to maintain their value throughout periods of inflation
- Ownership of the companies who own the means of production necessary to produce goods and services that people enjoy and who will be able to charge higher prices as the dollar loses its purchasing power
What’s that? Reason is aware of all of these things and has written about them before? Well that’s weird. Given that they acknowledge that there are several different types of assets one can own to immunize themselves against government money-printing, they should be far less concerned about inflation than about the unavoidable income tax, should they not?
And yet here they are, pitching a fit over an increased deficit, even though it means the total amount of theft in society is going to go down. One is hard-pressed to think of any logical reason to take this particular position other than the same tired anti-Trump virtue signaling we’ve come to expect from the official arbiters of approved opinion. Any organization that is unwilling to celebrate lower taxes is, quite simply, undeserving of the label “libertarian.”