Is There an "Anomalous" Section of the Laffer Curve?

By Block, Walter E. | Libertarian Papers, January 2010 | Go to article overview

Is There an "Anomalous" Section of the Laffer Curve?


Block, Walter E., Libertarian Papers


Suppose we are on the upper part of the Laffer curve. That means that if the tax rate is lowered, greater tax revenues will accrue to the government. (1) Stipulate that the state is an evil institution. This is a libertarian analysis, after all. Thus, we arrive at what must count at least, as an anomaly. A reduction in the tax rate is ordinarily counted as a pro liberty phenomenon. And here, yes, GDP will rise. We will all be richer. Deontology, at least from a libertarian perspective, along with utilitarian considerations of wealth maximization, speak with one united voice at such a prospect. This is a good thing from both perspectives. However, and this is a big exception, from the libertarian point of view, government coffers, too, will be enhanced, and this is a bad thing.

There is nothing to get too excited about here, at least not yet. This is hardly the first case on record where something positive from the libertarian perspective is accompanied by a result that can only be viewed as negative. For example, were addictive drugs to be legalized, and placed on the same footing as that of alcohol, government would be able to tax these products. Drug legalization is certainly a step in the direction of liberty, while, again, an increase in statist wealth is clearly not. (2)

So, in these two cases, Laffer curve, (3) drug legalization, we have exceptions to the general rule that utilitarianism, broadly construed, and libertarianism, always work in the same direction. Here, tax rate decreases, and the legalization of drugs, although they undoubtedly enhance wealth, liberty and prosperity (4) are also accompanied by reduced welfare: the state has more wherewithal with which to increase the scope of its depredations.

So far, so good. No libertarian would likely disagree with the foregoing. But, is there more to this issue than a mere anomaly? Is there a case for questioning whether, under these circumstances, libertarians should give their entire and undivided support to lower tax rates (and de criminalizing drugs)? To even broach this question leads us into complicated thickets, I contend. (5)

Before pursuing this line in inquiry, let us place one more case on the table: the military draft that occurred during the Viet Nam war. Here, I posit that the U.S. participation in this conflagration was unjust. Our government fought a country 10,000 miles removed from our shores, one that posed no danger whatsoever of invading us. This was an imperialist war, plain and simple. We assume, further, that had there been a voluntary military at the time, that the U.S. would have been able to pursue its murder of these foreign innocent victims for a longer duration, and to a much greater degree than was actually the case. (6) Thus, the draft saved lives by ending this unjust war earlier than otherwise would have been the case. (7)

We have in the balance, here, interference with the convenience of an age cohort of American citizens who are drafted, and, yes, the deaths of more than a few of them, (8) versus murder on a massive scale of innocent Vietnamese, both in the north and in the south. (9)

What all three of these cases have in common is a clearly libertarian policy (10) that was followed, in a cause and effect relationship, by anti libertarian results. (11) Should libertarians, therefore, oppose these three initiatives? Specifically, should we as libertarians resist lower tax rates when we are located in the upper section of the Laffer curve? Do we as supporters of laissez faire capitalism contest drug legalization on the ground that it will aggrandize government wealth, and thus enable it to pursue even more evil deeds than at present? Should the freedom movement, perish the thought, actually favor a military draft?

"Not bloody likely" would be the typical response emanating from this quarter. And, indeed, these positions do indeed seem counter intuitive, indeed, wildly so.

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