Doug Casey on Taxes and Freedom, Part II

Louis James: Tax Freedom Day this year was April 17.

Doug: That means that all the work the average guy does until April 17 goes to pay for the government that failed to protect him on September 11, 2001, failed to protect him from the crash of 2008, and continues failing him every day. We pay for an organization bent on doing not just the wrong things, but the exact opposite of the right things in economics, foreign policy, and everything else we’ve talked about in all our conversations. It’s rather perverse that Emancipation Day — the day the first slaves in the US were freed in the District of Columbia in 1862 — is April 16. But what is a slave? He’s someone who is deprived by force of the fruits of his labor. Sound familiar? I disapprove of slavery, in any form — including its current form.

However, Tax Freedom Day is an incomplete way of looking at things. What’s the cost to business forced to install equipment to meet government regulations? That’s not paid as a tax, but it’s a serious burden. There’s something called Cost of Government Day that’s a somewhat more inclusive estimate of the burden the state imposes on the average guy…

L: I just looked for that too and don’t see that a date for 2012 has been announced yet; but Cost of Government Day for 2011 was August 12. According to that estimate, the average US taxpayer slaved away for about two-thirds of the year to pay for the state and got to keep only a third of the fruit of his labor for his own benefit and improvement.

Doug: That may be a more accurate way of looking at the burden of government the average guy has to bear, but it still doesn’t even begin to address what economists call “opportunity cost.” Basically, I don’t just look at what the state we have costs us in cash, but in terms of the innovation and growth we don’t have because of government policies, laws, and regulations. This covers everything from new medicines to all sorts of new technologies to different forms of social and business organizations to the cleaner intellectual atmosphere I think we’d have without government propaganda machines cluttering it up.

I don’t believe in utopia, but I do believe our world could be far freer, healthier, and happier than it is today — without any divine intervention, magic, or changes in the laws of physics. Just a different path, every bit as possible as the one we’ve taken to where we are today… Without any major differences in technological development and without assuming that people would spontaneously become angels, the average standard of living worldwide would be much higher if…America had stayed out of WWI, or had not ratified the 16th Amendment to the Constitution, or had not elected FDR.

L: Okay, but those things did happen, and we live in the world we have today — the one you call a prison planet. How should people try to do what’s right in such a world without ending up in jail?

Doug: First, it’s important to think about what’s actually possible, because people will not even try to reach for what they are sure is impossible. The world needs idealists to challenge us all to aim higher… including idealists willing to go to jail for what they believe in, like Henry David Thoreau. But even he said that while he encouraged all people to disobey unjust laws, he wouldn’t ask those who support families to get themselves locked up and leave their families destitute.

So my take is as we started out saying: It is both ethically and practically imperative to starve the beast. The less cooperation of any sort we give the state — but especially the less money we give it — the less mischief it can get into. We’re unlikely to get politicians to vote for getting the state off our backs, out of our pocketbooks, out of our bedrooms, and out of other people’s countries as a matter of principle, but we could see the state get out of places it doesn’t belong simply for lack of funds. And if everybody treated minions of the state with the contempt they deserve, most of them would quit and be forced to find productive work. As Gandhi showed us, civil disobedience cannot only be an ethical choice, but a very powerful force for change.

L: Any specific advice?

Doug: Get a good accountant, take every deduction you can, and look for ways to legally reduce your tax burden. For example, our readers should know that charitable contributions in the US get deducted after the alternative minimum tax wipes out your other deductions. That means that a substantial fraction of every dollar you give a registered 501(c)(3) nonprofit does not go to the federal government.

Now, as you know, I don’t believe in charity, at least not in the institutional sense, but wasting money on charities is far, far better than giving it to the government to use bombing innocents and creating enemies for generations to come. And if that charity happens to be something like the Institute for Justice, the Fully Informed Jury Association, or any of the other libertarian think tanks dedicated to reducing the size and scope of government, you get to help fight the beast and starve it at the same time.

L: I do my economics and entrepreneurship camps in Eastern Europe under the auspices of the International Society for Individual Liberty — of which I should disclose that I am a director. I have to admit that it pleases me greatly to see funds that would have gone into making bombs to drop on foreigners and hiring more goons in uniform to oppress people at home redirected to something I consider constructive.

But what about the international diversification question: can that help reduce your tax burden back home?

Doug: It’s different for different countries, and each individual should consult a tax specialist with the details of his or her own case, or proposed case. However, there is an exclusion for Americans who live abroad for a whole tax year — it was around $100,000 the last I looked. So there are very good tax reasons for Americans to live abroad. There are even better reasons for Canadians, Europeans, and almost everyone else to leave their native country — many can live 100% tax-free. I guess it’s just a sad testimony to the medieval-serf mentality that most people suffer from that few people take advantage of this. They’re born someplace, and they stay rooted there, like a plant. Oh well, everybody basically makes his own bed, reaps what he sows, and gets what he deserves…

However, as appealing as the “permanent tourist” idea is, I recommend international living first and foremost as a way to protect your assets. As we’ve discussed before, real estate in foreign countries cannot be repatriated or confiscated by the government that thinks of you as its milk cow. There is nothing illegal or nefarious about buying real estate abroad, and it could come in very handy if things get really chaotic back home, wherever that happens to be.

L: Okay… any investment implications to discuss?

Doug: Sure, but nothing new to our readers. Starving the state-beast is the right thing to do, ethically and practically, but I believe the state’s days are numbered anyway. The thing to be aware of is that the beast won’t go quietly, and in its death throes it can do a lot of harm. Still, like Nietzsche said, “That which is about to fall deserves to be pushed.”

In the meantime, much higher taxes are on the way. More and more currency controls are coming. You may have heard that the US is contemplating a law denying issue or canceling the passport of anyone accused of owing more than $50,000 in taxes. I expect the transformation of what was once America into a police state to continue, and I expect other “developed” nations — especially Europe, Canada, and Australia — to follow suit. And this will happen whether or not the global economy exits the eye of the storm as I expect it to.

So you want to rig for stormy weather and invest for continuing crisis. Own gold for prudence, speculate on related stocks and others that may benefit from government profligacy, and as we’ve just been saying, diversify your assets and personal living arrangements internationally.

The day is coming when your local government may stop seeing you as a milk cow and start seeing you as a beef cow, and you want to have options before that day.


Doug Casey
for The Daily Reckoning