Friday, January 07, 2005

Social Security and Taxation

Here I argued that Social Security withholding cannot be described, without obfuscation, as a regressive form of taxation.

Tony Flood responds:

I’m glad you’re against Social Security, but afraid your focus on the form of the governmental expenditure (money rather than, say, roads) skewed your economic reasoning.

If taxes were simply, as you put it, “monies paid for goods and services rendered,” they would be economically identical to voluntary purchases on free markets.

BV: I was pointing out a property of taxes, not attempting to define them. If I say that an airplane is a vehicle, I specify an essential property of airplanes; but that does not amount to a definition of 'airplane.' To define a term is to specify necessary and sufficient conditions for the term's correct application. Definitions have the logical form of biconditionals, the 'if and only if' form. You are entirely right to point out that taxes are not economically identical to voluntary purchases on free markets. There is nothing non-coercively voluntary about the payment of taxes. What I said is consistent with your point.

In fact, taxes are coerced levies. Because they are coerced and not voluntarily parted with, they divert production into paths it would not take in the absence of such coercion. A tax is not a free market price.

BV: You are correct; but I wasn't denying these points. You appear to be committing an ignoratio elenchi against me. My point was simply that, coerced or not, tax monies are paid for certain goods and services, and (here is the main point) are not returned to the payer.

Read Rothbard’s popular article on Social Security here:

His systematic analysis of taxation is here:

Here's Mises’:

Or Sennholz’ analysis of Social Security, with which I think you will largely agree: although he would be surprised to hear someone deny that a coerced levy, be it Social Security or Medicare, is a tax.

BV: Actually, Tony, I don't see that we are disagreeing. We are at crosspurposes. What you are pointing out, rightly, is that taxes are coerced levies, and you apparently want to classify SS and Medicare as taxes for that reason. I don't deny that that the latter are coercive; that would be to deny the obvious. But a coerced levy that is returned to the payer at a later date in whole or in part, or in excess of the amount paid in -- how can that be called a tax if we are concerned to use terms in a nonobfuscatory way?

I hope you are not arguing in this invalid way:

Taxes are coercive levies
SS withholding is a coercive levy
So, SS withholding is taxation.

Of course, if you were merely stipulating what you mean by “tax” regardless of what economists say, that is your prerogative.

BV: A mere stipulation is not of much interest. I would say that an economist who says that X is a tax if and only if X is a coerced levy is operating with a faulty definition of 'tax.' He needs to hire a philosopher to clear up his conceptual muddle. Suppose the government forces me to contribute to an IRA-type account that is my property and can be passed on to my heirs. That would be coercive, but surely not a tax. If you call that a 'tax,' then I say you are using the term in an irresponsibly broad way. What about fines -- would you call those taxes as well? After all, there is coercion there as well.