The Anti-Tax and Your Milkshake
An Exclusive Interview with Mr. Jeffersonian
A growing idea has emerged in the pursuit of a local governing strategy, known as the Anti-Tax. While this phenomenon has been increasingly embraced by advocates of personal liberty, it has not been widely examined from a critical lense.
To learn more about its implications, I reached out to Mr. Jeffersonian, who graciously agreed to an interview to share his perspective and concerns with this proposal. He has requested the space to elaborate at length on certain questions, to which I have accepted with enthusiasm.
I have kept the questions numbered for the benefit of the reader, and have left the contents “raw,” save for slight grammatical editing.
(1) Before getting into the weeds, I'd like you to help us understand what the Anti-Tax is in the most neutral way possible. So, what exactly is the Anti-Tax?
Thanks for reaching out, Mr. Menger. The Anti-Tax is an idea being promoted by a faction of post-libertarians calling themselves the Praxians. Essentially it is a sovereign wealth fund, so under the Praxian vision, it would allow municipal governments to essentially keep a certain portion (I’ve not heard them stipulate how much) of excess tax revenues and use their rainy-day funds to start investing directly into stocks and equities on the exchanges to grow the fund enough to eventually be a self-perpetuating source of revenue that would allow for the abolition of local taxation. This would come through dividends, capital appreciation, etc. The people I’ve heard promoting this idea are also explicitly calling for it to be used as a way to gain financial independence for the local government in question to secede.
(2) Now, I’m going to ask you to step into the bizarro world, briefly. To stack the deck, I want you to Steelman the strongest case in favor of the Anti-Tax. How might Mr. Bizarro Jeffersonian pitch this?
Mr. Menger, you’re really twisting my arm here (joking). If I were to defend the concept of the Anti-Tax, I would boil it down to 3 basic tenets:
I. I am a huge fan of secession, and I do realize that for a state or municipality to pull it off, it must have a truly independent source of revenue. This is, in my opinion the strongest point in favor of the Anti-Tax.
II. In lower income areas, infrastructure could still be funded without having to levy a heavy tax burden on the local populace. If sales taxes and property taxes in these communities could be alleviated, then the citizens would find at least some relief and hopefully be saving enough on taxes to start setting aside money to improve themselves and the area overall.
III. Parks and other public spaces could be much better maintained because the local government would be freed from the budget constraints of how much taxpayers are willing to bear to cover these types of costs. So, essentially, you could almost eliminate the practical problem of scarcity and tradeoffs.
(3) At MisesGOP.org is the following statement, “We believe in using innovative local government solutions and partnering with state-level and federal-level representatives to spread liberty, to foster economic growth, and to maximize private economic expression.”
Those seem like perfectly fine goals, and that Anti-Tax sounds pretty good so far. So, what’s wrong with any of that?
Well, firstly that is extremely vague and sounds like the type of response any beltway Republican candidate or platform would give when asked a difficult question. Concerning innovation in government, we should never forget the profound wisdom of John Randolph of Roanoke when he reminded the 1829 Virginia State Constitution Convention that “change is not reform.” As with so many things in life, the devil is in the details.
For brevity’s sake, I’ll try to distill the problems as I see them to 5 points.
I. It introduces government ownership over private companies via shareholding. Libertarians and conservatarians used to be vehemently opposed to government ownership over the means of production. In fact, they even had a word for it: communism. This iteration of it would not be communism, per se, but it does create a direct fusion of economy and state. Now, the Praxian counterpoint to this is that they are talking about municipal governments, but on interviews I’ve heard with the primary spokesmen of the idea, he has energetically proclaimed the ability to scale the idea up to the state and perhaps even the general government. But even at the municipal level, you’d be talking a wide range of numbers. Start, Louisiana, for example, has a much smaller budget than Dallas, Texas. So these larger cities could still be socking away several million dollars per year. Partner that with the compulsory power of taxation (which allegedly, the praxian government would give up, though that’s doubtful), and an indefinite lifespan, and you can quickly see how this progresses to the next problem:
II. Crowding out of private investment: to demonstrate this point, I want to reference a scene from the movie There Will Be Blood. At the end of the movie, the main character (Daniel Plainview) receives a visit at his home from an old foe. Said foe has fallen on hard times and is now seeking financial assistance from Daniel, specifically by offering him a tract of oil-rich land that he had refused to sell some years ago. In extremely cruel fashion, Daniel lets his foe know that he bought up all the land around this tract and extracted the oil horizontally through a method known as “drainage.” To drive the point home, Daniel lets his foe know that, “I drink YOUR milkshake! I drink it up!”
Likewise, a government slush fund that can be used to inflate the stock market beyond the reach of individual investors is quintessentially the government drinking ALL of our milkshakes. They would become a vacuum once the power of dividends and compound interest took off. Once the revenues grew large enough to be allegedly self-perpetuating, then we start to see the emergence of the next issue:
III. Demagogic politicians would start using the fund in, shall we say, “creative” ways. This could be through a city UBI, city reparations for minority voters, subsidized childcare/healthcare, etc. Should the fund ever suffer a bad year and not generate enough return on investment to sustain the payouts for a given year, it is highly doubtful that the politicians of the day would have the spine to cut benefits. We already see this with social security. It is quickly running out of money, and yet no cuts or adjustments to the retirement age have been seriously debated. It would be political suicide.
IV. Any governmental surplus was confiscated from the people first, and rightfully should be returned to them. This point is self-explanatory, so I won’t belabor it.
V. In conjunction with point one, with the power of ownership comes the power of control. Many city and no few state governments have openly shown that they have social agendas that are not in line with the social beliefs of conservatives to put it mildly. We’ve also seen the rise of woke capitalism over the last few years, which many conservative and libertarian types have expressed a ton of anger over. Well, if a city or county government were to accumulate a sizeable stake in the company, corporate wokeness could become a mandated feature of being a publicly traded company. This is not some far-fetched conspiracy theory. California’s public pension system (CALPERS) has recently started telling companies it invests in that they must introduce “diversity” onto their boards or risk the withdrawal of state funds. And ownership accumulation is an all too real possibility. Norway started their sovereign wealth fund in 1990, and now, just 32 years later, it is worth over $1.3 trillion, and they have an average 1.4% stake in every publicly traded company on earth. It would take a long time for smaller cities to accumulate this much wealth, but again, they are blessed with the gift of immortality since they are corporate entities. And just to put this in perspective, it’s not like Norway has an insanely large economy. Their 2020 GDP was reported at $342 billion. That is roughly equivalent to the state of Wisconsin, which reported a 2020 GDP of $338.7 billion.
(4) As we proceed into more critical territory, I want to make it clear that we are focused on the idea itself, and it’s not our aim to attack anyone personally who might be advocating it. Those terms are reasonable and acceptable, right?
Yes. The Praxians say a lot of other great stuff about local self-governance, but this is an extremely dangerous idea that needs to be challenged and hopefully repudiated.
(5) To get an idea of where the real Mr. Jeffersonian is coming from, you don’t seem to fall in line with the old “greed is good” mantra that’s associated with Gordon Gekko and the Reagan-era Republicans. Can you summarize your ideal economy?
While I would not say greed is by itself good, I do recognize that it can serve a purpose when people create new products or services in pursuit of profits. I have no problem with that, as long as it’s done “right.” Now, what meets the definition of “right?” To me, that simply means with no coercive force used through the government.
As far as my ideal economy, I would love to see a highly decentralized economy based on individual ownership and property rights. I would severely limit the ability to incorporate, as it is honestly not necessary for most industries. This would mean a huge rise in independent restaurants, small scale and highly technological manufacturers, and most of all a transition of banks to credit unions. The corporate form should be reserved only for projects too expensive for any one person or small group of partners to ever be able to pay for. Railroads, automobile manufacturing, airplanes, etc. I would also like to see a large segment of the population pursue at least small agricultural projects such as growing their own veggies to always have at least some connection to nature and the land. The benefit of this type of society would be that everyone would have the opportunity to own real property. That gives them a stake in the system and a reason to care, unlike now where so many have become totally apathetic.
(6) In your podcast episode about Saule Omarova, President Joe Biden’s pick for Comptroller of the Currency, you went over what appears to be an extremely suspicious record with borderline totalitarian implications.
Once your listeners were sufficiently horrified about that, they’re hearing that certain libertarians of all people are pitching an idea with – at least as you suggest – similar implications. I thought libertarians of all people wanted to clean house, and refrain from stirring up more trouble in government.
But in your commentary, it sounds like they’re filling the same swamp as Saule Omarova. How do you justify this comparison?
Recall from the issues I pointed out in Question 4 that the primary spokesman for this idea has been cheerleading its ability to scale to higher levels of government.
Well, Saule Omorova wrote a paper titled “The People’s Ledger: How to Democratize Money and Finance the Economy.” In this paper, she calls for the creation of The National Investment Authority (NIA), which she describes as follows, “Another arm of the NIA would function as a hybrid of a sovereign wealth fund (SWF) and a private equity firm. Following the business model of a typical asset manager, the NIA would set up a series of collective investment funds (structured similarly to traditional private equity funds) and actively solicit private investors – pension funds, insurance companies, university endowments, foreign SWFs, and so on – to purchase passive equity stakes in its funds.”
What she wants to do from there is partner the NIA with the Federal Reserve Bank of New York (FRBNY) to manipulate stock prices, as she says this, “If a particular asset class – such as mortgage-backed securities or technology stocks – rises in market value at rates suggestive of a bubble trend, the FRBNY trading desk will short these securities, thereby putting downward pressure on their prices… and the Fed’s engineering the drop would signal to the market its determination that current prices of the asset in question are artificially inflated and accordingly best suppressed.”
This is the logical conclusion of the Anti-Tax idea if it were implemented successfully. It would be copied at higher levels of government, and they would have the ability to engineer soft crashes simply because they feel like it. The Praxians like to say that these municipal funds will be managed by private firms, but they fail to address the issue that this will be a lucrative contract gifted to a single firm, i.e., mandated profits for a monopoly firm. The way these firms make money is by assessing a fee on assets under management. They aren’t going to rock the boat too much against the government bankrolling them, so they will be subject to political pressure even at the local level. These firms typically also operate via proxy votes, so the governmental side of the fund management would ultimately reserve the right to instruct the “private” fund managers on how to cast their votes.
(7) Now, the temptation I have is that a municipality that funds its services independent of my income sounds really nice on the surface. And if I don’t ask for too much from them, they’ll deal with the essentials and leave me alone. What’s wrong with this thought formulation?
To put this in simple terms, you can’t control the voting habits of other people. So let’s say that you consistently vote down ambitious spending projects funded by the Anti-Tax fund; how do you make sure that your neighbors vote the same way?
Especially if the local government in our hypothetical scenario pitches these projects as “for the schools,” or for the local fire or police departments, you’re potentially going to be competing against unionized public employees who could live next door and have a vested interest in increasing their own salaries and benefits. If these funds came into existence, they could point to the cash flows from it and have a very strong position to say, “See, we can do this without increasing taxes.”
That may sound good, and at face value, it’s true enough, but as more money gets skimmed off the top, the continuing contributions are going to have to come from somewhere… you guessed it! Taxes: sales taxes, property taxes, excise taxes, etc. These things can never be “fully funded.” As long as there is a continual increase in local spending, there can never be a point where taxes actually get abolished. There may be periods where they are temporarily reduced, but the moment a stock market downturn happens, there will be immense pressure from these public agencies to keep the fund solvent, so they can maintain their status quo.
(8) I’m going to put my Omarova Hat on as I ask you this. Norway has a sovereign wealth fund like this. The Scandinavians are known for being very satisfied with a generous welfare state, and thanks to the sovereign wealth fund, they can afford it without too much trouble. Why can’t the United States have this, even at a local level? Wouldn’t we be happier like the Scandinavian people?
This rests on the assumption that their welfare state is primarily funded by their SWF, which is actually not the case. Their SWF is currently hoarding 331% of the country’s GDP, and they only withdraw from it very sparingly. They started this fund 32 years ago, and as of the time of this writing, they still pay extremely high taxes to fund the generous public benefits provided by their governments. A quick breakdown is as follows:
I. A minimum income tax of 22%, with higher progressive brackets.
II. A social insurance (equivalent to US social security) tax of 8%.
III. A minimum “wealth” tax of 0.7%, with higher progressive brackets.
IV. Property taxes on real estate.
V. Annual vehicle ownership taxes.
VI. A standard VAT (sales) tax of 25%, with reduced rates for certain items.
So, I ask rhetorically, “If 32 years and $1.3 trillion in fund assets isn’t enough to lessen the tax burden, then what is?” In my opinion, this reinforces the point I made in Question 7.
(9) You seem to be arguing that in effect, this is a tax. But wait, it’s supposed to be an Anti-Tax! How does this idea work against my earnings and my interests as a local citizen? Aren’t we going to enjoy something closer to “consumer as king,” in a free market environment?
By itself, it isn’t a tax. The issue is that it won’t accomplish its stated goal, which is to eliminate existing taxes. You will be forced to contribute to it every year to keep it going. There is no magical stopping point. Politicians would likely never give up the power of taxation, even if it were truly possible to make it self-perpetuating. And let’s also contemplate what this would imply.
Since this is a local sovereign wealth fund, we need to look at the definition of the word “sovereign.” Oxford defines it thus, “possessing supreme or ultimate power.” This means that all this money will be the possession of the government as an entity. Not the people. You aren’t entitled to any of it because you don’t own it. While some politicians would be willing to dole out benefits for votes, we must remember the old adage that the “power to guarantee is the power to control.” These benefits could be weaponized against local dissidents over time. This isn’t some conspiracy theory. I would refer readers to the IRS scandal with Lois Lerner during the Obama administration. If an area like Chicago were to set one of these up, would we really put it past the likes of Lori Lightfoot to employ similar tactics?
Let’s say you own a small business in the area and have received investment funds from the local municipal governments (many state pensions do require a certain portion of funds to be invested locally); what are you going to do if you criticize a certain act of your local city council, and they instruct the fund management firm to pull all of those funds from your business? As for the “consumer being king,” this in my opinion wouldn’t really have an impact on their day-to-day experience.
(10) The philosopher Hans Hermann-Hoppe has inspired well-meaning people to get involved in local politics to create a freer society around them.
These Hoppean localists are largely the ones promoting the Anti-Tax. They expect this to have a domino effect, with neighboring local governments adopting this idea. Are they right about its potential, and what if they are?
I. They probably are correct that this would end up being a copycat phenomenon. Not only with other municipalities, but vertically as well (i.e., states and eventually the general government). Imagine the billions, and then trillions of government dollars that would start flowing into corporate treasuries. These Praxians argue that the municipal levels would, in theory, use these funds to compete for citizens on lower taxes. I think this is naïve. They would instead, be more likely to compete on increased spending. And they’d be attracting more public employees along with the private ones. So, more policemen, teachers, firemen, etc. seeking a cut of the higher wages. Again, reference Question 7.
II. As we move vertically, the problems of crowding out become more apparent, and most obviously at the general level. The general government has the power of the printing press; states and municipalities do not. What happens when they decide to print a trillion dollars a year for the sole purpose of “contributing” to the federal SWF? I want to reiterate here that with only $1.3 trillion, Norway already has an average 1.4% stake in every publicly traded company on earth. A country the size of the US would be able to eclipse that in no time.
III. The individual states would be interesting. Collectively, their individual funds would be enough to rival that of the general government (unless of course the general government used the printing press to ensure it was always the biggest bully on the block). Individually, you’d probably have competing unofficial factions of states warring over control of pet company boards. Envision Texas wielding its voting power against California’s to take over the board of a company like Apple or Microsoft. While this would be interesting to see happen, it highlights the point that it becomes a full fusion of economy and state, with corporations becoming almost official arms of the biggest bidder.
(11) The leading Anti-Tax proponents currently propose this idea with the explicit goal of local secession. Realistically, what would it take to get even a slim majority of City Council members to publicly favor the idea of secession?
I. Well, Dr. Brion McClanahan says it best. From one of the essays in his book, Southern Scribblings, “Political decentralization cannot feasibly work without a viable and vibrant cultural tradition to undergird its existence.”
In other words, a movement like this would have to start from the bottom up. Now, obviously, if a charismatic local politician had the courage to make secession a primary focus of his/her campaign, that could inspire the people. But, at least in what I’ve heard from the Praxians, that is not really their approach. They essentially want to take over and infuse libertarianism from above. If they pick their targets well, this strategy may work, but having one Mayor or one City Council member will leave them on tenuous footing.
In my opinion, we need to play the long game. It starts with taking back the schools. The left didn’t achieve their cultural dominance overnight. They’ve been using incrementalism since the 1950s. The right needs to understand this will not be an easy or a short fight.
II. Aside from these obstacles, the unfortunate reality is that we have been living in Lincoln’s and Hamilton’s America since 1865. Many people now cannot fathom a possible breakup of the American empire, even as we grow angrier and angrier. The really unfortunate part of this is that many folks in the modern South have fully embraced the nationalist version of a unitary American State. The masses have to be stirred to embolden the local and state representatives. Thankfully, the Texas Nationalist Movement, spearheaded by Daniel Miller, is doing just that. It all starts with making secession at least an acceptable topic for conversation.
(12) By now, we’d agree that this isn’t the most stable proposition. If it incentivizes too much activity, generating surpluses and compound interest, then that’s the government’s ownership of capital that should rightfully belong in private hands. If it doesn’t break even, you have deficits. Would notions of good local citizenship encourage a voluntary tax to compensate the shortfall, or would the reliance on cronies destroy that notion?
I. I can imagine a situation where a slick politician appeals to the local citizenry to make voluntary contributions to the fund in a time of economic decline. However, if those voluntary contributions don’t materialize, they have the power of the pen to simply raise a sales tax rate, or they can reassess property values to generate increased property tax revenues (the Texas county commissioners are notorious for doing this to get around the state constitution laws against raising property tax rates).
II. As for the question on cronyism, this will end up being a two-way street. The governments will have a vested interest in never letting these badly ran corporations die. Why would they kill the geese that lay the golden eggs? As these corporate entities keep getting bailouts, there will be an increasingly higher level of “private” consolidation of the US economy. This is Mussolini-style fascism run completely amok. Notably, James Burnham predicted something like this all the way back in 1941 in his book The Managerial Revolution.
(13) You’ve been immersing yourself in what you call the Jeffersonian Tradition for roughly two years now. What kind of solutions does that school inspire in the pursuit of local autonomy that would better meet the stated aims of the Anti-Tax?
One of the key desires of Jeffersonians is that we seek sovereign people, not sovereign government. If a government is sovereign, it has a despotic authority and can treat its citizens terribly. If instead, governmental authority is based on the consent of the governed, the people retain the right to alter or abolish that government, as Jefferson proclaimed in the Declaration. The solutions from this frame can be broken down as follows:
I. Strict separation of economy and state. No kickbacks for pet industries or companies stolen from the fruits of others’ labor.
II. Local autonomy to handle local political issues, but based on the consent of the people. Not the arbitrary will of a Mayor or Governor.
III. A severe limitation of the ability to use the corporate form. Corporations are creatures of the state. By limiting the use of this form of business organization, you return to a political system based on the private property rights of individuals, not immortal corporate entities that can be co-opted by despotic governments.
IV. The states are the political units in this school of thought, not an aggregated mass of individuals forming “one America.” As such, any secession movements need to happen at the state level first, and only once a state has reclaimed its sovereignty should we consider further decentralization (counties or cities leaving the state).
V. A communitarian brand of individualism. Smaller, more locally controlled and focused politics allows room for individuals, though the local culture still has the ability to coalesce around the community should it ever be threatened.
Mr. Jeffersonian hosts The Jeffersonian Tradition podcast. He also writes on Substack.
External Resources:
The Jeffersonian Tradition: John Taylor of Caroline vs Saule Omarova
The Jeffersonian Tradition: James Burnham's The Managerial Revolution
The People’s Ledger: How to Democratize Money and Finance the Economy By Saule T. Omarova
Book: What Must Be Done by Hans Hermann-Hoppe
Video: What Must Be Done by Hans Hermann-Hoppe
Video: "I Drink Your Milkshake!" from There Will Be Blood
The Pete Quinones Show: “It's a Private Company, Bro” w/ Keith Knight
A Response to the "AntiTax" by Drake Lundstrom
See Also:
