Some Libertarians have argued that a consumption tax, sales tax, or value added tax (VAT) is voluntary. They argue that if you do not want to pay the tax, you do not have to spend your money. If you want to pay less tax, spend less money. Sounds simple enough and apparently it is pretty compelling to some people, but think a little harder about it.
If I have a dozen apples and I’m willing to sell them for $10,00 and you have $20.00 in your pocket and you really want those apples, we will make the exchange if you value the apples more than $10.00. It is a given that I value your $10.oo more than my apples, since that is the price I’m willing to accept to part with my apples. You give me your $20.00, I give you a dozen apples and $10.00. We are both better off. You profit by having the apples and I profit by having your $10.00, and it was a completely voluntary exchange.
However, let’s say my neighbor stops by and makes a threat to physically shut down my apple-selling operation or even lock us in a cage if we do not give him 20% of the transaction. We hand over the $2.00 because this guy has backed up threats to others in the past. It doesn’t matter whether it comes from me, you, or a little bit from each of us, it is going to cut into the total profit in the transaction, and he is clearly not a voluntary party to the transaction. Any sane person would say the my neighbor’s action was illegitimate. He stole $2.00 from us.
“But the state provides the roads your neighbor drove on to get to your apple store!” That’s the typical counter I hear from sales tax supporters. Well, I didn’t ask them to do that and I’d prefer they didn’t. I think that could be handled better in the market. If we go back to the apple-selling scenario, let’s say my neighbor wake up early every Saturday to cut my lawn and water my plants without my permission. I never asked him to do it. I don’t think he does a great job. And I think I’d be better off if I did it myself or hired someone else to do the job. How does cutting my lawn entitle him to take money out of a transaction between you and me?
It doesn’t. There was nothing at all voluntary about him taking the $2.00. Besides, if your logic is that a sales tax is voluntary because you choose to buy something, then be consistent and apply the same logic to an income tax. You choose to earn money, you don’t have to earn money. Money is useless unless it is spent. The very reason we earn an income is to spend the money.