Here is my latest University essay. The topic is tax, and I think I've done an alright job. Have a read and tell me what you think! 

Discuss the possible options for restructuring the current New Zealand personal income tax system, using the criteria of efficiency, equity and administrative simplicity.

Compulsory government taxation is theft. The government process of taking the product of a man’s labour by force is immoral and unjustified. For this reason, this essay will focus on the desirable goal of removing the current compulsory tax system and replacing it with a voluntary system where citizens of New Zealand pay tax voluntarily in order to sustain the basic, proper functions of constitutionally limited government. Underneath the issues regarding a restructure of the personal income tax system lies a philosophical question about the proper role of government, so firstly this essay will illustrate that the current government in New Zealand has vastly overstepped its boundaries, and that it is essential that the only function of government is the use of retaliatory force to defend the individual rights of its citizens. Secondly, the practicalities of the massive required overhaul of the taxation system will be explored with reference to the criteria of efficiency, equity and administrative simplicity. 

The first step towards a credible case for the elimination of compulsory taxation is to show that the government’s sole purpose is to be a protector of individual rights, and nothing more. Government holds a monopoly on the legal use of physical force. Its primary purpose is as a protector of an individual’s inalienable rights to life, liberty and property, and it must act with retaliatory or preventative force against the violator of the aforementioned rights. The existence of government as the defender of rights is both necessary and essential, because without government anarchy would result and rights would be dictated by the leader of the most powerful mob, whether he be Attila the Hun or Mao Tse Tung. However, government’s function must start and end with the defence of individual rights. Otherwise the government itself becomes the most powerful mob, and may use its monopoly on force however it chooses. 

The current system of democracy makes government the agent of the most numerous mob: 51% of the voting population, able to use force in any area it deems fit, including and especially to remove an individual’s right to life, liberty and property. The current system, whereby the product of an individual’s effort can be forcibly taken from him and given to others in the quest for voter/mob satisfaction is an unacceptable situation, and the best way to prevent this is to place strict constitutional limits on the actions of government. The only services that the government should properly provide are those related to the prevention of the initiation of force or fraud (the violation of life, liberty and property rights). So, the police, the courts, and the defence force. In the words of philosopher Ayn Rand: 

The only proper purpose of a government is to protect man’s rights, which means: to protect him from physical violence. A proper government is only a policeman, acting as an agent of man’s self-defense, and, as such, may resort to force only against those who start the use of force. The only proper functions of a government are: the police, to protect you from criminals; the army, to protect you from foreign invaders; and the courts, to protect your property and contracts from breach or fraud by others, to settle disputes by rational rules, according to objective law.  

Under the current system, where government assumes responsibility for all manner of things from social engineering and diet control to road construction and public transport, individuals’ rights are trampled by the forcible removal of their earnings – taxation. It may be argued that these taxes are levied in order to provide the aforementioned services and more, and that tax eventually finds its way back to the person who paid it. However this is simply not true. Not only are governments usually more wasteful than individuals in the way they spend money, but compulsory taxation removes the freedom of an individual to choose how his money is used. Quite simply, taxation in its current form is an exercise in government extortion, with the money then used for the purposes of pursuing ideological agendas and bribing as many voters as possible. As H.L Mencken said: “elections are an advance auction of stolen goods”. One of the reasons for the over-intrusion of government is due to the blurring of the line between the public and private sectors. As Rand explains: 

The fundamental difference between private action and governmental action—a difference thoroughly ignored and evaded today—lies in the fact that a government holds a monopoly on the legal use of physical force. It has to hold such a monopoly, since it is the agent of restraining and combating the use of force; and for that very same reason, its actions have to be rigidly defined, delimited and circumscribed; no touch of whim or caprice should be permitted in its performance; it should be an impersonal robot, with the laws as its only motive power. If a society is to be free, its government has to be controlled. 

When viewed from the position that the only legitimate functions of government are to protect the life, liberty, property, and the right to the pursuit of happiness of the people living within its borders, the only proper option for restructuring the New Zealand personal income tax system is to remove all taxation apart from that necessary to sustain these functions. Furthermore, any taxation paid by New Zealand citizens for these basic government services must be voluntary, as the only legitimate use of government force is as a retaliatory tool to defend its citizens from within or without. Rand again:

The principle of voluntary government financing rests on the following premises: that the government is not the owner of the citizens’ income and, therefore, cannot hold a blank check on that income—that the nature of the proper governmental services must be constitutionally defined and delimited, leaving the government no power to enlarge the scope of its services at its own arbitrary discretion. Consequently, the principle of voluntary government financing regards the government as the servant, not the ruler, of the citizens—as an agent who must be paid for his services, not as a benefactor whose services are gratuitous, who dispenses something for nothing. 

In the short-term, the elimination of compulsory taxation would mean the cancellation of all government services besides the court system, the defence force, and the police. As a transitional measure, all services currently provided by the government would either be given back to taxpayers in the form of shares (schools, hospitals, roads), or sold to the highest bidder with funds from sale used to boost investment in law and order and defence. The mass shut-down of government departments and agencies resulting from the implementation of a voluntary tax system would cause a temporary flood of the labour market, however this would be a temporary disruption as most would be employed quickly by private enterprise filling the void left by government. Regardless of any short-term problems, it is certainly no argument to keep the overwhelmingly unjust status quo in place. Importantly, the new voluntary tax system would meet all the criteria of efficiency, equity, and administrative simplicity. Most importantly, the ‘equity’ criterion is met, as all New Zealanders would now be treated equally by government. 

At this point it will be noted that a progressive tax system is possibly the most inequitable system imaginable, as not only does it penalise individuals for being successful, but it charges higher and higher amounts for the same government services that are provided to lower earners at cheaper rates. In fact, with the availability of usually higher quality private alternatives to public services, such as medical care and education, a person earning more money and paying more tax is likely to use less government services. The basis of the progressive tax system is the supposedly desirable altruistic goal of a redistribution of wealth, which was most famously expressed by philosopher Karl Marx: “From each according to his ability; to each according to his need.” The foundation of this altruistic philosophy of communism/socialism is the arbitrary assertion that need is a claim - ironically, Russia is one of the few industrialised nations not to have a progressive income tax system. Taken to its logical conclusion, this altruistic assertion that need is a claim implies a denial of individual rights, as man is assumed not to be able to live for his own sake, but as a slave to the needs of others. It is important to note that it is the use of government force to take from one person to give to another that is immoral. Need is not a claim. In a truly free society voluntary donations to those in need would be at the discretion of that giver, and would most likely be looked upon as a desirable action, just as it is currently. 

Regardless of whether the reader accepts the arguments for a voluntary tax system, the injustices of the progressive tax system must be accepted. At the very least, a flat personal income tax rate should be established to provide a more equitable system. Whilst removing the blatant class warfare that a progressive personal tax system is responsible for, a flat rate system would also remove the disincentive to work harder and earn more, whilst also providing a somewhat more accurate distribution of government services. Incidentally, a flat personal income tax rate system would be both more efficient and easier to administer.

As a side note, the case for a voluntary taxation system does not end with the personal income tax. A voluntary taxation system would see an end to all indirect and other forms of tax, including but not limited to: Company tax, Customs duty, Dividend withholding tax, Excise duties, Alcohol tax, Tobacco tax, Fringe benefit tax, Gaming duty, tax on Savings, Goods and services tax, Non-resident withholding tax, Provisional tax, Resident withholding tax, Stamp duty, Gift Duty, and Carbon Tax. Any and all tax revenue collected by government would be as a result of the voluntary contributions of the population. Rand again emphasises the point: 

In a fully free society, taxation—or, to be exact, payment for governmental services—would be voluntary. Since the proper services of a government—the police, the armed forces, the law courts—are demonstrably needed by individual citizens and affect their interests directly, the citizens would (and should) be willing to pay for such services, as they pay for insurance. 

The removal of compulsory taxation and the subsequent massive reduction in government regulation would lead to a much freer and more prosperous economy and country. New Zealand would become an attractive option for overseas investors, whilst local businesses would enjoy a huge comparative advantage over most other businesses from around the world. During the transition period, unemployed accountants and former employees of the State would find employment either in existing businesses, or in one of the various new private enterprises that would undoubtedly spring up to fill the void left by the removal of government services. Most of the providers of vital services such and doctors, nurses, and teachers would be unlikely to be greatly affected by the removal of taxation, as the only thing that would change would be their employer. As a result of the elimination of compulsory taxation, just over 93 billion dollars worth of tax would no longer be forcibly collected, and the average household on an annual income of $67,973 would no longer pay $17,779 per year in personal income. Coupled with the decreases in the cost of goods and services due to the elimination of all indirect tax, this would result in most New Zealanders experiencing an increase in their standard of living. 

The only morally justified option for a restructure of the New Zealand personal income tax system is to eliminate compulsory taxation and restrict government to its true legitimate functions. As shown, strict limitations must be placed on the activities of government due to its exclusive position as the only legitimate user of physical force. If its functions are not constitutionally limited, government invariably switches from the defender of rights to the abuser of rights, using its monopoly on the use of force for evil rather than good. Unfortunately, this situation is seen throughout the world in almost every single nation, leading the unjustified use of government force to be viewed as the status quo. Whilst the task of eliminating compulsory taxation would be a difficult one initially, the ultimate benefits of the action would be well worth it. The voluntary taxation system proposed would see a laissez-faire style of government that would ensure each and every individual was treated equally, without fear or favour from the government.

References available on request.