The Republic of Uzupis

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Have you ever heard of the Republic of Uzupis? It is nestled within the city of Vilnius. Have you heard of Vilnius? It is the capital of Lithuania. Can you point to Lithuania on a map? It is a Baltic country east of Poland, about 500 miles west of Moscow. Continue reading

Wait, High Tax Rates Make Businesses Flee? Duh.

Here’s some statist logic: we continually raise taxes on businesses which burdens both the consumer and the business. The company cannot expand as quickly, nor hire as many employees due to the tax rate. When that company decides to move out of our tax jurisdiction in order to better provide for their customers, employees, and investors, we accuse them of being selfish, corrupt, and unpatriotic. Even though the money taken through taxes by force is often wasted, given to friends of the elite, used to benefit cronies, or spent on jobs and handouts to boost reelection chances of politicians, it is the companies who earned the money, and created the wealth who are the “greedy” ones.

I am talking of course about Burger King’s plan to move its base to Canada in order to take advantage of the 26% tax rate, instead of the 40% rate it pays in America. Hey, maybe they can afford to pay more than minimum wage with all the money they save? But that still wouldn’t make the state lovers happy. Unless businesses and people submit 100% to the government overlords, the state will demonize them.

Obama has called companies that engage in inversions “corporate deserters.” And Treasury Secretary Jack Lew has criticized the companies for failing to practice “economic patriotism.”

“I don’t care if it’s legal. It’s wrong,” Obama told a crowd last month.

But stealing 40% of the company’s wealth each year is not wrong? Why do we allow the government to posture as benevolent public servants, when it is so obviously not true. They are selfish thieves and public slave-masters. The government adds nothing of value to the economy, except by restricting private businesses from supplying particular consumer demands, at which point the government provides a worse product/ service for a higher cost.

The easiest examples of this are the post office, versus private shipping, or the failure of government backed green energy companies to produce alternative energy. The argument can also be made that government roads are more expensive and more shoddy than private roads, though the examples are few due to the government force exerted to complete the projects. And I would certainly argue that the police pose more of a danger to the public since they do not have to compete to deliver a better product for a lower price, as would be required in the private market.

But back to taxes: the Burger King Tim Hortons merger in Canada is one of these examples that leaves me exasperated saying “I feel like I’m taking crazy pills!” Warren Buffet is a main financial backer of BK’s move to a slightly less oppressive tax jurisdiction. Warren Buffet, you may recall, is the billionaire who inspired Obama to call for a minimum 30% tax rate on everyone earning $1 million per year or more… Because making a million dollars each year, and making a billion per year is like, the same thing, right?

But I don’t get it. What happened to the selfless Warren Buffet? Hasn’t he earned enough already? Why would he abandon funding the glorious U.S. government and all the philanthropic work it does? It seems Mr. Buffet understands quite well the detriments an excessive tax rate can have on business. Why would he advocate taxing millionaires more, when he himself will not pay higher taxes? Does he not think millionaire would likewise relocate to friendlier tax regions in the event that the government tried to rob them at a higher percentage than it robs most people?

You want businesses to stay in the USA? Repeal the 16th Amendment authorizing the income tax, abolish the IRS, and get rid of all corporate taxes. Defund the federal government, all the “good” they do is a myth. Let the states compete, and we will see what policies create economic opportunities, and which ones stifle growth by killing the individual freedom to keep the wealth you have created, and retain what is rightfully yours.

Justifying the Upward Redistribution of Wealth in Centralized Societies

Guns, Germs, and Steel by Jared Diamond is such an interesting look into the development of human society. The other day I discussed the factors that made Japan quickly adopt, and just as quickly abandon firearms in the 16th and 17th centuries. But Diamond also speaks of the formations of various governing bodies humans create as their numbers grow. There are bands with people numbering in the dozens, tribes which can consist of multiple bands and generally include hundreds of people, and Chiefdoms generally consisting of thousands of human inhabitants. Chiefdoms resemble State’s and are the smallest organization of humans to justify kleptocracy, “transferring net wealth from commoners to upper classes” (276).

This central control was justified in larger organizations of society when everyone in a group did not know one another, and was not related to one another in some way. In bands and tribes if you came across someone you didn’t know, it was common to discuss familial relations until one was found in common. Disputes would generally be settled by a mutual relative of the feuding parties, excluding the need for a monopoly on force, which the rulers in Chiefdoms and State’s exercise.

The problem among centrally governed societies becomes the balance between keeping peace through settling disputes, and functioning “unabashedly as kleptocracies” (276).

These noble and selfish functions are inextricably linked, although some governments emphasize much more of one function than of the other. The difference between a kleptocrat and a wise statesman, between a robber baron and public benefactor, is merely one of degree: a matter of just how large a percentage of the tribute extracted from producers is retained by the elite, and how much the commoners like the public uses to which the redistributed tribute is put (276).

Keep in mind that even though the elite maintain a monopoly on force, this does not mean that the outcome will be good for any particular feuding party. The innocent party could be punished by the elite as often as the guilty, and inevitably when the elite and their kin are involved in disputes, they will win regardless of guilt or innocence. What the monopoly on force instead does is keep violent actions to a minimum among the commoners who cannot use force without retaliation. But what makes the commoners put up with the upward redistribution of wealth inherent in all Chiefdoms and States?

Diamond pinpoints 4 solutions kleptocrats and elites have used through history to maintain control:

1. Disarm the populace, and arm the elite…

This should be obvious from Hitler, Stalin, Mao, the British marching on Lexington and so on and so forth. The biggest centralizations of power have always happened when commoners are least equipped to fight back.

2. Make the masses happy by redistributing much of the tribute received, in popular ways. This principle was as valid for Hawaiian chiefs as it is for American politicians today.

Indeed, if it is for the children, to help the poor, or to protect us from terrorists, the commoners will gladly throw more tribute (tax dollars) towards the kleptocrats in hopes that the commoners will again be safe, or taken care of. But remember what Diamond said before, the difference between a robber baron and a politician is simply the degree of redistribution. Certainly elites like George Kaiser benefited from the tribute the taxpayers gave to Solyndra through the Department of Energy, but no commoners could say the same.

3. Use the monopoly on force to promote happiness, by maintaining public order and curbing violence. This is potentially a big and underappreciated advantage of centralized societies over noncentralized ones (277).

And this is really what modern States boil down to. If their monopoly on force is used fairly, to only punish those who have victimized another, and not to protect elites who have victimized commoners, then the population is peaceful and generally happy. The real problem is how the commoners can make sure this happens.

Even in a country like the US with a generally fair justice system, the monopoly on force is used against those whose “crime” includes no victim. The war on drugs, government regulations, and corruption: these factors sometimes lead to the monopoly of force being used on those who do not deserve it, and this is when the population becomes skeptical of the legitimacy of the elites who rule them. In America for example, police officers need to be held to the same standard as the population, but unfortunately many get away with crimes because of the badge they wear while committing the crime.

The final way for kleptocracies to maintain control over a population is for elites to “construct an ideology or religion justifying kleptocracy”. Pretty much every religion has served to justify kleptocracy at least one time in history, in some society. But ideology in modern America seems to be the preferred justification. On the one hand you have an ideology that says people will not be safe from outside threats unless the elites take our money and soldier tributes. On the other hand you have an ideology that says the greater good must trump individual concerns. They are related, but appeal to different segments of the American population.

But if we throw out the ideologies supporting kleptocracy, then we realize that we can still have an organized society in modern times that does not justify kleptocracy, but keeps people safe and taken care of. It would still be centralized, but there would be no monopoly on force by one group of elites. I am not saying go back to tribes or bands of humans, that is not realistic, but perhaps take a page from their book on dispute resolution. Arbitration between feuding parties can solve problems based on the incentives of each party, and disincentive of violence. I am saying allow people to function in groups without compulsion, and decide how to get along, without elites using force to resolve differences.

Part of the ideology justifying kleptocracy involves the myth that people cannot organize themselves without an “authority”. But proper organization, the functions purported to be carried out by the elites governing, is not uniform across states, and more often leads to injustice. The fear that keeps us subservient to these elites is that things would be worse if they were gone. We may think, sure, it is an unjust society, but it beats widespread murder and mayhem.

And maybe in times past this was true, but as we advance as a society, connected by the internet and advancements in travel, we are outgrowing states. If the earth ever hopes to be linked together by a global society, we cannot rely on the archaic organizations of States monopolizing force to do it. Free interaction, trade without compulsion, and organization based on the absence of force will take humanity to the next level, where there is no distinction between elites and commoners.

Workers Moving Into Low Tax States, Out of High Tax States

A new book suggests that competition between states for residents is alive and well. It seems over the past 15 years people have overwhelming moved out of states with higher income taxes, and into states with lower tax burdens. The author says that between “1995 and 2010 over $2 trillion in adjusted gross income moved between the states.”

Obviously wealth is going to move between states as people change jobs and scenery. What makes this move of wealth suggestive of state competition on tax burdens is the net loss/ gain of residents in states with high/ low taxes respectively. “[T]he nine states without a personal income tax gained $146 billion in new wealth while the nine states with the highest income tax rates lost $107 billion.”

It should not be surprising, but states that continue to raise the tax burden on their citizens lose more residents, and have economies that are stagnating. Blue states can whine that the competition between states isn’t fair because of “aging infrastructures, large pensions to pay, and entrenched trade unions” in the more liberal states, but that is the point; these big government tax and spend policies are not sustainable or good for the economy.

Wisconsin however, proves it is never too late to reform. Governor Scott Walker cut taxes and reined in the unions, and since then Wisconsin has been on the rise. An attempted recall of Governor Walker failed to oust him, and he claims that since Wisconsin Democrats “refuse to pledge to roll [reforms] back”, this shows that the electorate sees the success and is unwilling to risk the economy to go back to failing liberal governing policies.

And this is precisely why states need to have more control over their affairs than the federal government. State competition means better policies in states, because people can easily move within the US. Blanket policies that affect all of the US can do more damage when there is nowhere to escape to. Being from Massachusetts, I am from one of the high tax states slowly killing their economy. Massachusetts lost a congressional seat after the 2010 census (as it did after the 2000 and 1990 censuses) because our population didn’t grow as quickly as the rest of the country.

I’ve known multiple young people with engineering degrees who have left the state for economic opportunity elsewhere, at least one nurse, and other skilled workers who have moved to New Hampshire, the Carolinas, and Florida. Family members who want to start a business plan to move to a more business friendly climate down south within a year and a half. As the economy is still the number one issue for voters, the lesson should be clear. Freer states with less restriction and lower taxes are more attractive to workers and business owners, and will therefore be the homes of more economic opportunity.

We Don’t Trust the Feds: States Need Their Power Restored

A new poll has found a “historic low” in the trust young people have for government. 18-29 year olds’ trust in the President, Congress, the military, the Supreme Court, and the federal government as a whole has declined for years, but especially over the last 2 years. Trust in the media has also declined, but trust in state and local government has remained the same for the past 4 years.

And that is what is so great about America, we have 50 state governments to pick up the pieces when the federal government drops the ball. The federal government does everything it can to boss the states around, in an attempt to exert control, but some states are starting to fight back. Since there is no Constitutional way for the federal government to issue orders to the states, the feds have been holding money over the states ever since the 16th amendment was passed authorizing the federal income tax. States comply with the feds if they want their handouts of highway funds, education funds, grants, and other bribery.

But when we think about all the failures of the federal government, we still seem to have this “it is a necessary evil” attitude; but why? Our state governments are practically like little countries anyway, and think of how much money they would have to work with if the federal government wasn’t stealing a quarter of the wealth created by Americans every year.

So really when you think about it, what would be so bad about the federal government just disappearing? States would finally have control back of their national guard. We would see competition among intelligence and other military capabilities where one state would build a good international spying system, and trade intelligence to other states in exchange for, say, the other state’s naval capacity, or just for a price. This would be the same specialization technique which allows business to thrive without having to perform every little task involved in making and marketing their product. And what is even better, the states would be hard-pressed to agree to send their own militias overseas to fight wars relatively unrelated to the states’ interests, so our national offense would be restored to national defense.

Other competition among the states would see industry boom, without the federal regulations, which currently cost businesses in America more than the entire gross domestic product of Canada! If one state has little regulations, businesses might set up shop there. If that lack of regulation leads to death and suffering, people would move out of the state, or use businesses from states with the proper regulation in place. But more likely, businesses would behave appropriately from the start, because they would have to succeed on their own making customers happy, unable to appeal to federal funds to bail out or subsidize their terrible business practices.

The state governments existed before the federal government, and created the national government by joining together, believing they would be just as able to exit the union peacefully. Today our national government works against the interests of individuals, and against the interests of the states. The 10th Amendment—anything not authorized under the Constitution is left for the states to decide, unless also prohibited by the Constitution—has gone by the wayside as the feds seize ever more control, ignoring the Constitutional limitations that the states originally placed on the national government. It is time state government stand up and refuse to recognize the authority the feds falsely claim to have, and restore balance and peace to our great nation.