End of the Republic

The American Republic is in decline. The decline is self-inflicted, a sort of suicide by choice. Why are people deciding to follow the "Road to Serfdom" over the "Road to Freedom"?

Location: Chesapeake Beach, MARYLAND, United States

Thursday, January 20, 2005

Von Mises Institute Conference Part I

I decided to take advantage of a rare opportunity this past weekend. Just a few hours from my house the Von Mises Institute was holding a conference entitled The Trouble with Taxation. Von Mises was an economist belonging to the Austrian School and a student of F.A. Hayek (whose books like “The Road to Serfdom” and “Constitution of Liberty” have greatly influenced me). My research in Hayek led me to Von Mises and I have enjoyed the Institute’s free distribution of copies of his works. He was a brilliant economist who is conveniently overlooked. During my readings of the Von Mises blog I discovered the conference and decided to attend. After all, I would be able to meet people who had studied political philosophy. In addition, I figured that this was a far more convenient method of discovering what sort of people and studies the institute attracts (as opposed to traveling to their headquarters in Auburn to the dismay of my ‘Bama fan brother).

Let me start by saying that, overall, I was disappointed by the presentations of the conference. I can only wonder at what may have been has the original speaker not been forced to miss the conference due to an injured back. The Von Mises Institute replaced him with presentations by Thomas DiLorenzo (author of “The Real Lincoln”), Mark Thornton, Paul Cantor, James W. Fogal, CFP, and Llewellyn Rockwell. I do not know if they were attempting to patronize to a decidedly southern crowd (the conference was located in Charlottesville, Virginia) and perhaps to the Jeffersonians (the conference was sponsored by SEI, Inc. and the Thomas Jefferson Institute and held only a few miles from Monticello) or maybe they have all been heavily influenced by the Institutes home of Alabama. DiLorenzo was a larger-than-life Southern Apologist. He continually referred to the Civil War as the “War to prevent Southern Secession” and one of his lectures was actually titled “Lincoln’s Tariff War”, which I guess is another way for him to avoid using the term "civil war". I will detail my lecture notes and his errors in reasoning in the next post. The audience was a mix of older gentlemen (who seemed to be pro-south/anti-Lincoln and anti-tax but little else) and college students from the University of Virginia or other nearby institutions. The main theme of the conference was tax rebellion. The conference started by reminding us of the fact that the Revolutionary War was a tax rebellion. The next thing they did was to attempt to convince us that the Civil War was also (centrally) a tax rebellion. One of the final lectures warned us of the dangers of the tax reform proposals of the second Bush administration (the text of which has since appeared on Lew Rockwell’s web-page). Let me say that I did not see anyone in the audience who openly supported the government’s current (or past) tax policy. Indeed many were angry (and rightfully so). The biggest disappointment (even above the Southern rhetoric) was the fact that the speakers did not propose a single method of channeling that anger into political action. In fact, Rockwell’s speech was entirely depressing. He painted a grim picture of Bush’s proposal but did not suggest any alternatives other than eliminating the income tax which, based solely on his word and the groups outrage, does not seem a likely solution. To sum up, the speakers were merely “preaching to the choir” and detailed the “Trouble with Taxation” but did little to suggest how we may find a solution to the trouble without living in a fantasy world. If you are interested, the Von Mises Institute has placed some audio/video of the conference on the web.

Mr. DiLorenzo made the first presentation titled “Taxes in American History”. He discussed three major tax revolts in the history of the United States (1776, 1861, & 1913). He described the American Revolution in terms of a revolt against the oppressive taxes of the English Empire. He listed the Molasses Act of 1733, the Navigation Acts, the Sugar Act of 1764, the 1765 Stamp Act, the 1767 Townshend Acts, and the 1773 Tea Act as taxes that led directly to the war for independence. I doubt any serious scholars would deny these facts. In fact, the Constitution of the United States and the Articles of Confederation each had clauses that addressed some of these issues directly (i.e. The Second and Third Amendments are a reaction to the Townshend Acts).
He then discussed the Whisky Rebellion and described it as one of the first challenges to the new Constitutional Federal Government. He lamented that modern texts describe the Rebellion as a victory of the central authority over the tax-dodgers when, in reality, Washington and his troops did not collect any new taxes and only a few members of the rebellion were even tried and none found guilty of any crime. He proudly described how Jefferson and his supporters defeated Hamilton and managed to lower tariffs and other excise taxes and (most importantly) government spending (mainly through cuts in military spending).
The second tax revolution (Mr. DiLorenzo’s apparent favorite) was the War to Prevent Southern Secession. He described how Lincoln (as well as our current President) used war as an excuse to engage in tax reform. Despite the fact that it was unconstitutional at the time (the 16th Amendment was came into being in 1913) Lincoln enacted a tax on income. He also started a tax on inheritance and enacted withholding tax and even resurrected many of the requirements of the Stamp Act. DiLorenzo listed the supporters of the income tax as farmers who were disproportionately hurt by the tariffs on farm tools and farm equipment. The lectures did hammer home the concept that each tax has its winners and losers. Farmers were hurt by the tariffs, which, in turn, benefited domestic manufacturing concerns. The agricultural and export dependent South was hurt by the tariffs that benefited the industrial North. He mentioned he had a lot more to say about the tax revolt that followed Lincoln’s taxes in a subsequent lecture. (He seems to have confused cause and effect here. He claimed that the war was used to justify Lincoln’s new taxes (to pay for war expenses), but at the same time the taxes (high tariffs) were the basis for the South’s reason for the war in the first place).
The revolution in 1913 was not the same as the other tax revolutions. In the previous two revolutions, Mr. DiLorenzo talked about how the tax-payers were rebelling against an unjust system of taxes. The 1913 revolution was a result of the Progressive Movement and led to the 16th and 17th Amendments and the unfortunate end of federalism with the creation of a strong central government and weak state governments. The collection and distribution of income taxes by the central government made states dependent on handouts from Washington DC and the direct election of Senators made them less responsible to their own State Legislatures and gave them more leeway to trade their votes to benefit other districts in return for votes to benefit their own pork projects. In effect, the revolution of 1913 and its income tax led to the destruction of “Civil Society” (volunteerism, charity, and family) and replaced it with the “Welfare Society”. The income tax also made war easier to finance, drained resources that could have been used for savings and investment (meaning slower developments in future productivity and wage growth) and established the concept that the government’s claim to an individual’s productive efforts is primary (the government takes its money out of our income first and hopefully will then grant us enough of the spoils to allow us to survive).

Lecture 2 Notes will be posted shortly.

J. Thyme Matz


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