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The customer pays the sales tax for every transaction with a business, and since no one is required to enter into commerce, isn't the sales tax technically voluntary?

asked Apr 12 '15 at 16:59

user890's gravatar image

user890
2491033

I'm not sure why the answers below say that sales tax is charged to the seller, and not the buyer. In every US jurisdiction I'm aware of, sales tax is charged to the buyer, though it is often (but not always) collected by the seller.

A seller is not allowed (barring some special program) to waive the sales tax. There are certain exceptions where a seller can sell items with "sales tax included," but when this is done a higher rate might have to be paid.

(May 02 '15 at 15:57) anthony anthony's gravatar image

Fair enough, technically the tax is "charged" to the buyer. However, as the seller is the one who is required by law to ultimatly pay the taxes to the government, and it is the seller who has to account for all such taxes at the end of the year, and it is the seller who has to pay fines or face other pentalties if they do not pay the required amount, it starts to look a lot like the sellers are the ones being taxed here, despite the fact that the tax is "charged" to the buyer. Regardless, the substance of the question and the answer thereto does not depend upon this.

(May 05 '15 at 11:05) ericmaughan43 ♦ ericmaughan43's gravatar image

Yeah, it was a minor point (at least so far as it relates to this question; it matters quite a bit when say a New York retailer sells mail order merchandise to a buyer in Delaware), and I only commented because two people said the same thing.

(May 05 '15 at 16:48) anthony anthony's gravatar image
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To my knowledge, a sales tax normally is a tax on the seller, not on the buyer. It is the seller who is most directly required by the government to make sales tax payments to the government, and there is nothing voluntary about the requirement for the seller to make such payments. There is no governmental requirement, however, for a seller to collect sales tax fees from buyers, and, indeed, sellers will sometimes waive the sales tax fees temporarily for the buyers as a means of conducting a de facto sale to induce more buyer purchases, even though the seller still must make sales tax payments to the government. The government normally leaves it entirely up to the seller to decide whether or not to impose sales tax collections on buyers, and the sales tax fees become a condition of the transaction (if the seller so chooses), leaving buyers free to accept or reject the transaction.

Some states may also try to impose sales tax mandates directly on buyers residing in the same state but making purchases from other states. California refers to this as a "use tax."

For reference, a brief Objectivist discussion of taxation and government financing can be found in The Ayn Rand Lexicon under the topic of "Taxation."

answered Apr 14 '15 at 22:12

Ideas%20for%20Life's gravatar image

Ideas for Life ♦
467718

No, sales tax is not an example of “voluntary taxation”, and it is certainly not Just.

Ideas is correct to point out that it is actually the seller that is charged the tax, not the consumer. However, this fact does not necessarily dispose of the question. The rationale put forward in the question for why the sales tax is supposedly voluntary is that it is a tax on a commercial transaction, and it is a voluntary decision to enter into commerce. An unspoken assumption of this rationale is that if a tax is tied to a voluntary action, then the tax is an example of “voluntary taxation.” This same rationale, if it were correct, would apply just as much to the case in which the seller has to pay the tax as to the case in which the consumer has to pay the tax (since both are entering the transaction voluntarily), and therefore the rationale itself still needs to be addressed squarely.

The rationale put forward by the question is flawed. In particular, the rationale wrongly assumes that “voluntary taxation” refers to any tax that is tied to the performance of some voluntary activity. This is incorrect. Moreover, by focusing only on whether the activity that triggers the taxation is engaged in voluntarily, the questioner ignores important facts, such as whether the government has any right to impose the tax in the first place. These points will be elaborated on below.

(1) What is Meant by “Voluntary Taxation”

As noted, the questioner appears to misunderstand what objectivists mean when they discuss “voluntary taxation”. A system of “voluntary taxation” is a system of raising government revenue that does not initiate force against innocent citizens in order to get them to agree to pay money to the government, but instead offers services for purchase to the citizens that the citizens are free to purchase or not purchase. Thus, when objectivists refer to “voluntary taxation”, the “voluntary” portion of the term refers to whether the citizen’s choice to purchase a service from the government is voluntary, not whether other extraneous actions of the citizen are voluntary—the focus here is on the interaction between the citizen and the government, not the interaction between the citizen and some other citizen.

A hypothetical example of voluntarily taxation discussed by Ayn Rand is the government offering to legally enforce a contract (a service) in exchange for a payment. In this case, what makes this “voluntary taxation” is that the citizen can voluntarily choose whether or not to purchase this government service; the government cannot force anyone to purchase this service. Whether or not the contract itself (which does not involve the government) reflects a voluntary transaction is irrelevant.

(2) What Makes a “Tax” Just or Unjust?

A tax is unjust when it demands a payment from someone that the government has no right to demand. The government has no right to demand payment from anyone unless that person has incurred a valid obligation to pay the government (for example, by purchasing a service from the government). The mere fact that a person has engaged in some voluntary action does not give rise to any obligation to the government, and thus any tax that imposes an obligation to pay merely because some activity was engaged in is unjust.

Just because you engage in some activity voluntarily does not automatically mean that you owe some person a payment, much less justify the person in demanding such payment under threat of force. Some actions you engage in might result in you owning someone payment (e.g., you contract to purchase a good/service, in which case you owe the seller payment for the purchased good/service), but most actions you engage in give rise to no such obligation (e.g., peaceably using your own property). However, it is the substance of the action that determines whether an obligation arises and to whom it is owed, not the mere fact that the action is voluntary.

This is true with regard to the government and “taxation” as much as it is true with regard to other people. You have no obligation to pay the government anything unless you create such an obligation (such as by purchasing a service from the government, in which case you are obliged to pay the agreed price for that service), and a proper government has no right to demand any payment from you unless you actually owe that payment. The mere fact that you engaged in some activity voluntarily does not create an obligation for you to pay the government.

For example, imagine you are walking down the sidewalk and you voluntarily decide to start eating an apple (that you own). I then come up to you and say “you now owe me $20 because you started eating that apple.” The correct response to this would be “no I do not”. So what that you voluntarily chose to eat the apple—that action has no morally relevant relationship to my demand for $20. The fact that you voluntarily chose to eat the apple clearly does not give rise to any obligation on you part to me (or to anyone else for that matter).

If I called my demand for $20 a “tax”, that would not make it any better. Adding a different label to the action does not change the nature of the action. Further, if we assume that I am a government employee and that the $20 would be going into the government coffers, that does not make it any better either. A proper government is not free to do whatever it wants, but rather is restricted to respecting and protecting its citizens’ rights; moreover, there is nothing special about the government or its employees that would give rise to any obligation on you part that is any different than if I were not a government employee. Further, even if a governing body had previously passed a law saying that anyone who eats an apple owes the government $20 and I knew about this law, that would still not make it any better. Merely because a law is passed does not make the law morally right (just) or give rise to any rightful obligations. The government had no right in the first place to create such a law, and thus its existence does not justify my demand for $20 in the least.

On the other hand, if I own the apple and am offering it for sale, and you agree to purchase it from me, this does give rise to an obligation for you to make payment. However, the reason that you now owe me payment is not the mere fact that you took some voluntary action, but rather because of the specific action you took—you entered into a sales contract with me to purchase something I owned. The voluntariness of the action is relevant only insofar as it pertains to the validity of the contract, but, setting validity aside for a moment, it is the fact of entering into the contract that gives rise to the obligation of payment, not the fact of voluntariness.

Another way to consider this issue is to consider scope of consent. We often consent to things, both explicitly and also implicitly by taking certain actions. However, just because you have consented to one thing, does not mean that you have consented to everything. Your consent has a certain scope, which limits what you are consenting to, who you are consenting to, and when the consent may be valid. For example, if you consent for a doctor to perform an operation to remove your appendix, that does not give the doctor a right to perform any old procedure that the doctor choses (e.g., amputate your leg). It also does not give someone other than the particular doctor a right to cut on you (e.g., your neighbor cannot come over and start cutting you up). It also does not give anyone (whether the doctor or someone else) the right to cut on you at any time that they chose (e.g., the doctor cannot show up at your house in the middle of the night and start cutting into you).

Similarly, when you voluntarily enter into a commercial transaction, you are consenting to certain things, including being bound to make the agreed payment. However, such consent has a scope: you have consented to pay this particular seller and to pay them this particular amount, but not to pay anyone and everyone any amount they ask of you. It would be ludicrous to assume that the act of purchasing something somehow gave rise to an obligation to pay completely unrelated parties any amount they desire merely because you made the purchase voluntarily. Your consent in entering the commercial transaction does not include consent to pay the government anything—the government is extraneous to the transaction, and no express or implied consent exists with regard to the government.

answered May 01 '15 at 11:31

ericmaughan43's gravatar image

ericmaughan43 ♦
944619

I don't get how an individual can choose to purchase a government service. One such service is the police--and I certainly can't choose whether I want to be under police jurisdiction, not without entering into an obviously silly Anarchist competing-governments situation or abandoning the whole concept of government. If I can't opt out of the service, how can I opt out of the payment? And if I can opt out of neither, in what way does the term "voluntary" add value to the term "taxation"?

(May 05 '15 at 17:19) James James's gravatar image

One example has already been noted---if you want to have a contract be legally enforcable, you can pay a fee. Another example, if you want to file a lawsuit (and thus receive the services of the government employees who's time and effort are required to dispose of your case), you have to pay a fee. Another example, if you want to obtain a patent, you have to pay a fee to pay for the Patent Examiner's time in considering the application. From these examples, it should be clear how an individual can purchase a government service.

(May 06 '15 at 09:15) ericmaughan43 ♦ ericmaughan43's gravatar image

Of course, Ayn Rand did not argue that every government service had to be offered for sale. Some services, such as general police protection, should be done regardless of whether or not a person paid for them. The reason for this is that it is in everyone's interest for crime to be prevented, not just the person who is the current victim of a criminal. Thus, suppose that I pay to support the government but you don't, and a group of thugs attempts to extort money from you---it is in my interest just as much as yours to have those thugs arrested, because I could be their next target.

(May 06 '15 at 09:18) ericmaughan43 ♦ ericmaughan43's gravatar image

Furthermore, offering government services for sale is not the only way to raise government funds without initiating force against innocent persons. For example, the government could ask for people to voluntarily donate money to the government. People scoff at such an idea, asking who in their right mind would pay money to the govenrment if they were not forced to do so. However, these people are looking at this from the perspective of our current culture. Such a plan would not work in our current culture. However, things would likely be quite different in a more rational society.

(May 06 '15 at 09:22) ericmaughan43 ♦ ericmaughan43's gravatar image

And a government that does not use coercive taxation is not going to come into existance untill our society first becomes much more rational. Rational people understand the value of government, and will be willing to pay for that value. Moreover, there are myriad ways in which society could incentivise donating to the gov and disincentivise not donating to the gov (none of these incentives and disincentives invoving the use of phyiscal force in any way). For example, it could be made publicly known who has donated and who is a freeloader, and social pressure would incentivise donation.

(May 06 '15 at 09:26) ericmaughan43 ♦ ericmaughan43's gravatar image

For example, decals could be issued by the government to those who have donated. These decals would be highly valued by, for example, businesses who would want to garner good will with their customers by displaying the decal (incentivizing donation). Moreover, many people would refuse to shop at a business that does not support the government (strongly disincentivizing freeloading). This is just one example and its particular details are not important--what is important is the fact that you can incentive donation and disincentivize freeloading without initiating force against people.

(May 06 '15 at 09:32) ericmaughan43 ♦ ericmaughan43's gravatar image

Moroever, we have seen success of such models on a smaller scale. For example, many events, organizations, and projects are succesfully bankrolled by soliciting donations from wealthy businesses or individuals in exchange for providing some measure of notariety to the donor (for example, the conferences bankrolled by businesses in exchange for listing the business' names as donors, or parks, monuments, hospital wings, etc., that are funded in exchange for naming the project after the donor, etc.). These are just examples--the point is that notoriety can be an effective incentive to donate.

(May 06 '15 at 09:50) ericmaughan43 ♦ ericmaughan43's gravatar image

"If I can't opt out of the service, how can I opt out of the payment?"

What exactly are you asking there? Clearly it is possible to use a service which you don't pay for. I sometimes listen to NPR, but I haven't ever paid them.

Whether that's morally right or wrong, I don't really know, but I shouldn't go to jail because of it.

(May 06 '15 at 14:34) anthony anthony's gravatar image

That's not really the same thing though. You can opt to not pay the fee, and not have a contract be legally enforcable. Police forces are by nature something that cannot be opted out of-even if you don't accept their help, them being there prevents crime (which is why some places give them discounts if they come in uniform).

Similarly, the military by its nature will protect all within the country. You can't say "I won't pay for it, so let Russia bomb me". So as a citizen of the country you MUST have that service. These are not, by their nature, optional.

(May 12 '15 at 17:50) James James's gravatar image

It's not the same thing because the payment for NPR truly is voluntary.

With regard to the police, it's true that, if a crime is being committed on your property, it is not optional to let the police come onto to your property to stop the crime.

I don't see how that's relevant to whether or not you should be legally required to pay for the police, though. If anything the police should be paying you for use of your property (assuming it wasn't your own negligence or willful misconduct which caused the crime in the first place). (But I probably wouldn't go that far.)

(May 13 '15 at 09:24) anthony anthony's gravatar image

With regard to the military, you can say "I won't pay for it, so let Russia bomb me." And if everyone says that, then the military shouldn't have that service.

Of course, it'd be idiotic for everyone to say that. But if everyone in the country is an idiot, no amount of taxation is going to solve that problem.

There's nothing in the nature of military which says that everyone has to pay for it. (In fact, not everyone does pay for the military. 10% of the country currently pays 68% of federal taxes, and military spending makes up for maybe around 20% of federal spending.)

(May 13 '15 at 09:26) anthony anthony's gravatar image

In saying all this, I shouldn't fail to acknowledge that there is an important problem which has to be solved. How can we convince enough people (through reason, not force) to voluntarily fund the government?

That's a complicated problem, and Eric (and Rand) have only touched on pieces of the solution. Personally I'm hesitant to even talk about the solution with people until everyone in the conversation is in agreement that taxation is not an acceptable solution. Once that hurdle is cleared I think there are lots of possibilities. On a smaller scale, NPR (and lots of non-profits) do it.

(May 13 '15 at 09:39) anthony anthony's gravatar image

You don't see why we should pay the police to investigate crime and enforce laws? The only other option is sacrifice--doing a duty that is not paid for. Which runs into some pretty obvious issues.

As for the military, they don't protect each of us individually. They protect the nation as a whole. That's how they must operate, by the nature of warfare. Therefore you are necessarily benifiting from their services. Shouldn't you therefore also pay for them?

(May 13 '15 at 11:18) James James's gravatar image

Perhaps criminal prosecutions--fines and the like--can pay for police forces, though there are practical problems with that (it creates an incentive to find people guilty of crimes whether they are or not).

And I'm not disagreeing that taxation is bad. I'm just not sure how to reconcile a non-optional service rendered with an optional payment. It seems too much like asking the police and military to sacrifice themselves for me.

(May 13 '15 at 11:20) James James's gravatar image

You don't see why we should pay the police to investigate crime and enforce laws?

That's not what I said. I do see why we should pay the police to investigate crime and enforce laws, and in a proper government I would do so.

I don't see why we should force others to pay the police to investigate crime and enforce laws. If you want the police to investigate crime and enforce laws, then you should pay for it, not force others to pay for it.

Therefore you are necessarily benifiting from their services. Shouldn't you therefore also pay for them?

Yes, I should. But I shouldn't be forced to.

(May 13 '15 at 12:13) anthony anthony's gravatar image

And I'm not disagreeing that taxation is bad.

Well that's a good start. But if you agree that taxation is bad, then you should accept that it is not the solution.

I'm just not sure how to reconcile a non-optional service rendered with an optional payment.

What is "a non-optional service rendered"?

It seems too much like asking the police and military to sacrifice themselves for me.

The police and military would only work if they were paid. As I said above, if no one voluntarily paid, there would be no police/military. The voluntary part would be the contribution to the government.

(May 13 '15 at 12:18) anthony anthony's gravatar image

Perhaps criminal prosecutions--fines and the like--can pay for police forces, though there are practical problems with that

I agree that that's a partial solution at best. Besides the problem of incentives, which may or may not be resolvable, it's unlikely that criminals would be able to afford to pay for all the costs that they cause us to incur.

But police forces are a much easier problem to solve than military, as their effect is much more local. Homeowners association fees could probably pay for a lot, with deed restrictions mandating participation in the homeowners association.

(May 13 '15 at 12:39) anthony anthony's gravatar image

In fact, many homeowners associations already do pay (technically off-duty, but fully empowered) police to do extra patrols in their neighborhoods. (Many businesses also pay off-duty police to do extra patrols on their property, for instance on Black Friday, see for example http://www.nj.com/business/index.ssf/2011/11/local_stores_hire_off-duty_pol.html .)

(May 13 '15 at 12:51) anthony anthony's gravatar image

James, we have not argued that funds paid to the government can only be used by the government to provide the particular service for which the funds were originally paid and cannot be used to fund other government services. Money is fungible, and any money that is paid to the government can go into one big pot, so to speak, and be used by the government to fund any and all of its functions.

Thus, it is not the case that, if the government does not charge for some services (such as police), those services will be unfunded. Such no-charge government services (like the police)...

(May 13 '15 at 14:12) ericmaughan43 ♦ ericmaughan43's gravatar image

will be funded from surplus funds collected from other paid-government services.

Thus, for example, the fees for contracts, patents, courts, etc., may be set appropriately such that they not only cover those particular services, but also have enough left over collectively to fund the no-charge services (e.g., police, military, etc.). For example, presently the US Patent and Trademark Office actually turns a profit from its fees (and does so without initating force), and the excess funds are syphoned off to fund other agencies.

(May 13 '15 at 14:17) ericmaughan43 ♦ ericmaughan43's gravatar image

Moreover, fees from voluntary purchases of paid-service are not the only possible source of government income. For example, as already noted, voluntary dontations are another source. Such voluntary donations are not tied to a particular service, but rather are a general donation to the government as a whole, which may be used by the government to fund whichever function. The combination of the fees and the general donations (along with other possible funding sources (e.g., lottery)) should cover all proper government functions.

(May 13 '15 at 14:26) ericmaughan43 ♦ ericmaughan43's gravatar image

As far as asking the police to sacrifice, this is not what we are advocating. No one is saying that the police officers should not be paid for their service---they should be paid, and the government will pay them out of the general coffers. What we are saying is that each citizen does not directly pay for the police service on a quid-pro-quo basis---e.g., if the police stop a break in at your house, you are not presented with a bill for the service, instead the government foots the bill.

(May 13 '15 at 14:38) ericmaughan43 ♦ ericmaughan43's gravatar image
1

As for whether it would be okay for some people to receive services free-of-charge (e.g., police service), and then to not contribute to the government, you are completely correct that it would be wrong for people to freeload in this manner. Every person who refused to contribute to the government (within their means) is doing something morally wrong. Thus, it would be perfectly just for other people to treat the freeloaders accordingly---shunning them or bringing other social pressure to bare against them.

(May 13 '15 at 14:43) ericmaughan43 ♦ ericmaughan43's gravatar image
1

However, what would not be okay is the initation of force against them. Just because it would be wrong for people to freeload does not mean that it is okay to use force to keep people from freeloading. There is a huge distinction between social pressure (shunning, mocking, etc.) and physical force.

(May 13 '15 at 14:47) ericmaughan43 ♦ ericmaughan43's gravatar image
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Asked: Apr 12 '15 at 16:59

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Last updated: May 13 '15 at 14:47