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How to Free the Iraqis

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In terms of the sheer image, no freedom lover could help but be moved by the scenes of Iraqis stomping on the fallen statue of the vicious dictator Saddam Hussein. Whether or not one thinks the U.S. government should have invaded Iraq (I believe it was an unconstitutional action), one can nevertheless rejoice at the dissolution of a totalitarian state.

President Bush says the goal is to bring freedom to the Iraqi people. I also believe that that is not among the powers delegated to the U.S. central government by the Constitution. But if the president is intent on doing this, I have a suggestion for him: If Iraq has an income tax, abolish it. If Iraq does not have an income tax, do not impose one.

Aside from disbanding Hussein’s secret police, almost nothing could advance the freedom of the Iraqi people as much as letting them avoid the snare of an income tax. When a government has the power to tax incomes, it becomes, in the words of many early American statesmen, “inquisitorial.” The last thing the Iraqis need or want is an inquisitorial government.

The power to tax incomes has several necessary implications that would be inconsistent with Iraq’s becoming a free country. Taxing incomes logically requires the state to define “income.” That may seem straightforward, but it is not. Wages may seem a simple case. But many questions are left to be answered: Should every dollar be taxed? Should there be a personal exemption? An exemption for children? How large? What should be deductible: food, medical care, housing costs, savings? And once government is in the business of defining what is and is not income, it necessarily influences people’s behavior. Government then becomes a social engineer — with all the intrusion and political corruption that implies.

Another obvious danger of the income tax is that the government will need to know how much money each person makes and the source of that money. Simply put, the government will not trust the people to tell the truth. There’s a reason for this: few people really believe the government should be able to confiscate their earnings. To be sure, they comply with the law because they fear the consequences of not doing so. But most people eagerly use every provision of the law, and even the gray areas, to keep what they believe is rightfully theirs. That’s one of the bad consequences of the income tax: it erodes the otherwise bright line between honesty and dishonesty, between honorable conduct and cheating. The law puts people in the position of having to be dishonest in order to hold on to what is theirs. Once that occurs, some people begin to have trouble making moral distinctions in their dealings with others.

To make sure the taxpayers are telling all, the government will inevitably resort to measures that should discomfort anyone. For example, it will offer bounties to people who snitch on their neighbors. Imagine the government’s promising to pay people if they turn in those whom they suspect of not paying taxes! It sounds worthy of Saddam Hussein.

Of course, the tax authorities will also compel third parties to report other people’s income. Banks will have to report interest paid. Corporations will have to report dividends. Even casinos will have to report their customers’ winnings. All because the government doesn’t want to miss out on a chance to levy its tax.

The upshot is that a major part of the individual’s autonomy — financial privacy — disappears if the government taxes incomes. How ironic it would be to overthrow Saddam Hussein’s despicable government and then impose (or maintain) an income tax.

I have no doubt that President Bush would like to use our own society as a model of freedom for the Iraqi people, for we Americans enjoy more liberty than almost any other people in the world. Therefore, keeping our shining example in mind, let’s make sure the Iraqis are free from the oppressive income tax, because … Oh, wait — never mind.

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    Sheldon Richman is vice president of The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State. Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..." Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics. A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.