January 18, 2002

Economic Freedom Threatened By Asset Seizure Laws, Income Tax, Immigration

Every year the Heritage Foundation in Washington, D.C. publishes an Index of Economic Freedom. It is a valuable work that ranks countries in four categories: free, mostly free, mostly unfree, and repressed.

The Index gives no comfort to those who believe in Big Government or the equality of cultures. The per capita incomes in the free and mostly free countries are many times higher than those in the unfree ones, thus confirming that economic freedom is an extremely important factor of production.

One of the most striking features of the Heritage Index is the scarcity of freedom. Despite its economic advantages and despite the power and influence of Great Britain in the 19th century and the U.S. in the 20th century, freedom is barely present in the world. Free peoples comprise a small percentage of the world population and occupy a tiny portion of the landmass. Contrary to multicultural claims, successful cultures are rare.

The Index presents paradoxes. For example, according to objective measures Chile is one of the freest countries. Yet, that country’s economic and political institutions are entirely the product of reforms implemented by the “tyrant” General Pinochet. Obviously, the demonization of Pinochet is not supported by the facts.

The Index’s measures are not without problems. Most of the countries ranked as free owe their inclusion in that category to a definition of economic freedom that ignores a person’s right to the fruits of his own labor. The income tax has taken this right away.

Successful Americans own no more of the income that they produce than did medieval serfs and 19th century slaves. The share claimed by the IRS is equal to the share claimed by feudal lords and slave owners. We can be said to be free only by ignoring government’s extraordinary claim to our personal incomes.

The Heritage Index greatly exaggerates the security of property rights in the U.S. The ever-expanding asset seizure laws have made American property rights among the least secure. Over the past 18 years, federal, state and local governments have acquired the power to use a large number of pretexts to confiscate the assets of citizens without bringing any charges against the owners.

The new anti-terrorism laws have expanded the number of pretexts. Most Americans are unaware of the danger, but as the confiscations continue to mount, sooner or later everyone will know someone who has been a victim of confiscation.

The outlook for income and property security in the U.S. is bleak. Everyone has a vote, but the percentage of voters with income tax liability is shrinking. Currently there are about 129 million taxpayers, but the top 25 percent of income earners—32 million people—pay 83 percent of the total personal income tax collected. The remaining 75 percent of taxpayers—about 97 million people—bear only 17 percent of the income tax burden, and 70 million voters have no income tax liability whatsoever.

Forty-three percent of those who file income tax returns actually benefit from the income tax as they collect refundable credits in excess of their tax liabilities.

With 167 million voters with little or no income tax liability and 32 million burdened with 83 percent of the total, it is unlikely that successful Americans can escape their situation as an exploited minority. They are outvoted by five to one, and immigration is worsening the odds.

The massive legal and illegal immigration from the Third World guarantees the tax captivity of successful Americans. Although many of us know immigrants who are successful, the vast majority are “tax users” and comprise a voting bloc for politicians who support income redistribution programs.

Recently, California GOP gubernatorial candidate Richard Riordan, seeking immigrant votes, addressed the Greenlining Institute, a “nonprofit” organization of Asians, Latinos and blacks that lobbies (illegally?) for minority benefits.

The San Francisco Chronicle (January 14) described Riordan’s audience as minority businessmen, but the newspaper reported that the audience’s concerns were whether Riordan would support their goals for more income taxes on the rich and the repeal of Proposition 13, the landmark measure that limited California property taxes.

Few Americans know it, but many immigrant businesses originate in preferential financing or loan set-asides from the Small Business Administration. What many see as immigrant success is really the fruits of taxpayers’ money.

The feeble reduction in income tax rates that President Bush managed to have enacted is probably our last. Democrats—the party of income redistribution—are already trying to take it back before it phases in.

The Heritage Index’s measure of income and property security in the U.S. is unrealistic, because it ignores the vulnerability of taxpayers who are a small, shrinking and demonized minority.

Paul Craig Roberts is the author (with Lawrence M. Stratton) of The New Color Line : How Quotas and Privilege Destroy Democracy