According to Glenn Reynolds: "Liberty Dog is a minarchist libertarian with Objectivist tendencies, but I can't even get my dog to crap outside."

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Friday, April 22, 2005

Conversations With Carl

I will be starting a new feature here at this blog. As you can see from the title of this post, it will be called "Conversations With Carl." The "Carl" in question is Dr. Carl Milsted, Jr., the co-founder of Libertarian Reform Caucus (of which I am a member).

We are currently engaged in an ongoing email exchange concerning certain ideas that he has put forth. Those of you familiar with Dr. Milsted will know that he falls on the left side of the libertarian spectrum, whereas I fall considerably further to the right. I am not an activist like Dr. Milsted, but rather just an average guy looking for the best means with which to increase the liberty in the US. The purpose of this exchange was originally for my own personal edification, but I decided that it would be a good idea for others to see this exchange as well.

This series is neither an endorsement of the ideas of Dr. Milsted, nor a refutation. It is simply meant to be an exchange of ideas between two guys that think the LP as it now stands, is in need of reform. I do not know where this will lead, but my hope is that it will help serve as a bridge between factions within the "reform" wing of the LP (of which I am not currently a dues paying member).

The first post in this series stems from questions I had about a comment Dr. Milsted made on this post over at QandO, whose Neolibertarian Network I am considering joining.

Dr. Milsted (from QandO comment): At the federal level, I would tax things protected by the feds:

1. Corporations. A corporate VALUE tax (based on market cap) instead of a corporate income tax. No more withholding of dividends in order to avoid taxes! No more conglomerate mania. No more penalty for stock traders.

Liberty Dog (via email): How would you go about implementing such a plan? Valuations can fluctuate greatly over the course of the year. Would you use the average over the course of the year?

DM: I think averaging over the course of the year would work. Given that this would take a trivial amount of automated computer time processing public data, the effort of doing this daily is no biggie.

Note that this choice of taxing value is based on both lefty concerns and pure natural rights libertarian concerns. Suppose we did away with government and had private corporations providing arbitration and protection services. I strongly suspect that insurance would be based far more on the value of property protected than it would be on income generated by that property. A value tax as a replacement for an income tax is a step closer to anarchic conditions.

LD: What would you do about non-public businesses?

DM: This is tricky, since there is no market price for a private corporation. One approach is that given in Robert Heinlein's The Number of the Beast. In that novel [not one of Heinlein's best!] there is a parallel universe of Fundamentalist Christian Libertarian Nudists [typical Heinlein]. In that universe the only tax was a property tax [or was it a land tax? I forget]. But interestingly, the government did not assess land values. Instead, landowners assessed their own values. The values assessed were binding. If anyone found the assessed value to be low, they could legally buy the property at that value.

In other words, in Heinlein's story, property was assessed at the "ask" price vs. the "bid" price. You set you value at what you would happily sell the land at. You could do the same thing for private corporations: the owners could set the ask price for the entire corporation. If they undervalue the corporation, the risk getting bought out at less than would make them happy.

This does pose a problem for startups, which may have a great deal of value in terms of intellectual property but no income with which to pay the tax. A reasonable solution would be allowing the corporation to pay its tax in kind; that is, in non-voting shares of the company. Then, when the company makes income, the government gets dividends in proportion to its non-voting shares. Should the company buy back stock from its shareholders, it should have to buy back an equal amount from the government until the government owns none. Conversely, if it wants to buy back shares, it needs to find private owners willing to sell back to the company at the same price that the company is buying from the government.

LD: Do you believe corporations (as creations of the State) should continue to exist in their current forms, or would you support the ability for businesses to form by whatever guidelines they see fit?

DM: I do think corporations should be allowed to exist, but I also support the corporate value tax -- which could be on top of what every state property taxes the corporation may pay. There is a libertarian reason for this: a corporation is a more complicated legal entity. Thus, if we have fee-for-service government, then complicated legal arrangements should pay more than simple sole proprietorships for their protection. Dave Hollist runs for president every year pushing this principle, which he got from Ayn Rand. Government is in the business of enforcing contracts, so that is where it should get its revenues. A corporation is a complicated contractual arrangement.

LD: Would you make this tax flat for all businesses, or would it be progressive?

DM: Flat. But there would be double taxation of corporations that own corporations (subsidiaries), due to the extra layer of protection they get. The incentive would be to spawn off side businesses instead of conglomerating.

LD: What sort of tax do you envision for individuals?

DM: Property taxes on publicly detectable property would be paid by individuals who owned property.

LD: What is your view on progressive taxes in general?

DM: I think a homestead deductible for the amount needed to own a trailer on a subsidence farm is appropriate. Otherwise, flat rate. Flat rate property taxes are actually more progressive than our current income tax system. Property taxes hit old money as well as new money. It becomes easier to get rich, but you don't get paid some much for being rich.

DM (from QandO comment): The penalty for non-payment would be non-service. No pay tax; no get federal property protection. No jails needed.

LD: What services in particular?

DM: If you don't pay for a copyright (on an older work) it goes into the public domain. Ditto for a patent. Ditto for a deed of land (though in this case we might give the owner the amount from the auction minus taxes owed.)

If a corporation doesn't pay value tax, its charter ceases to be a legal contract. Whatever it owned is now in the public domain.

Note: My questions were based solely on his original comments. You will see my questions regarding Dr. Milsted's answers in the next post in this series.

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