“A Response to the ‘AntiTax’” Debunked
Recently, an organizer named “Drake” from the LPMC-Ohio wrote an OpEd criticizing the AntiTax. The criticisms can be characterized as misleading or misinformed at best and bordering on deceptive-by-omission at worst. This article would have been better done as a “Here are several questions for Andrew to answer” sort of piece, rather than its current format. Here is the link to his OpEd if anyone wants to review his arguments in full. He made 8 basic arguments outlined here:
- Cities already invest
- The math doesn’t add up
- The Real Inflation Rate
- Taxes Raise Automatically with Inflation
- Real city budget and reserve totals
- Organizations generally prefer specific dollar values taken out instead of percentages of earning:
- Hedge funds normally charge more, and make less
- Cities can and do raise taxes/Cities can compete with increased spending, not just reduced taxes
- Investing in infrastructure and the like can get better returns than the stock market
- This whole model assumes no population growth or immigration
- Success in this way will also raise property value, which raises the tax burden
- Public choice theory. The larger the amount of money, the stronger the incentive to take over
- Good times make weak men
- “At the end of the day, this system is essentially welfare”
- Differences with a sovereign wealth fund
Let’s take them on one at a time:
Objection: “Cities already invest”
Answer: This assertion is misleading at best, deliberately deceptive at worst. His claim stems from a line-item on Lockhart, TX’s balance sheet from its 2020 operating budget, where the city had an “investment” return of $119k on approximately $17m in reserves. Right away, this characterization should send up some red flags for anyone who passed 6th grade algebra, as this ROI comes out to be less than 1%. As I have claimed repeatedly, the cities basically let their reserves languish in savings accounts, which every good libertarian knows return essentially 0% due to the Fed’s zero-interest rate monetary policy, and this figure is negative when compared to inflation. We can confirm that this is in fact the case by simply looking at pages 160-164 of the 2021 Budget where Lockhart outlines its exact investment strategy in detail. See below.
Far from being “a pretty big hole in the argument”, this ends up proving my point that what is being characterized as “investment” is actually just a glorified savings account, which isn’t even coming close to beating inflation. In the context of what I offered in my numerous public appearances on the subject, where I suggested investments like the SP500 and crypto, claiming “the cities already invest” is misleading at best and deceptive at worst, as just reading a few more pages would’ve informed Drake that this was not actually the case.
Objection: “The Math doesn’t add up: The Real Inflation Rate”
Answer: His argument here appears superficially sound. However, what he’s neglected here is that inflation rates, which here means, “prices rises” instead of “money printed”, are in no way geographically homogenous. This is due to what is called the Cantillon Effect. The price rises that result from money printing affect the physical places where the money is actually spent. This is why housing prices in California and New York have gone through the roof, while prices in other markets have grown at or even below inflation. This geographical characteristic of the Cantillon Effect is seen most clearly in the top 20 wealthiest counties in the United States, all of which are within 75 miles or less of a Central Bank branch because those are the geographical areas that physically get the printed money first. For a rural or suburban township, the price rises will be substantially more muted the farther away they are from the money spickets. This is why my paycheck only rose 0.7% from inflation last year (and a further 7% for being good at my job and seeking responsibilities, but that’s irrelevant) because prices only rose about that much in my specific area.
This is partly why I used smaller numbers for my inflation estimates, but there is another even more important reason that I did so. Why should government workers get inflation adjustments at the full rate when private sector workers often do not? As a libertarian who is 100% in favor of additional budget cuts on top of the AntiTax and classical tax cuts+shifts, that inflation rate seems to be the easiest thing to cut. I would happily limit those salary adjustments to 50 basis points per year, inflation rate be damned. I imagine that 99% of the LPMC would agree with that sentiment and even view it as moderate.
Objection: “The Math doesn’t add up: Taxes Raise Automatically with Inflation”
Answer: To answer this objection, first, I would like to forward everyone to Hoppe’s WMBD strategy which Pete Q and I have talked about at length. In it, Hoppe suggests that all property tax increases be forced to be put to a vote by property owners, excluding public employees due to their inherent conflict of interest. I’d be shocked if there was even one LPMC mayor/city councilman who didn’t support that suggestion. For my example, to make the math simple, I assumed the LG would raise their tax revenues to match inflation. Given that, statistically, there are 350ish nominal libertarians for every municipality in the country, assuming there are 1-2 MC libertarians on the city council, I see this assumption as being generous as I can’t imagine any Ron Paul clones voting for any spending increases, and can easily see them fighting tooth and nail to restrict inflation adjustments like I suggested earlier. Like Yarvin says in his Open Letter to Ron Paul Supporters, “The sort of change Obama is talking about making [to DC] is cosmetic at best….With Ron Paul, the bonesaw is a given.” There’s no such thing a liberty that works on autopilot. There is such a thing as liberty that is actively-managed by Ron Paul-styled libertarians in public office. The AntiTax is a system that is tailor-made for libertarians to use as a swiss-army knife for liberty. It is not meant to be run by Bernie Sanders and AOC.
Second, case-and-point, actually, taxes when down from 2019 to 2020 as shown on their financial tables (page 25). Why Drake did not check this before writing this point is beyond me. Not only did the taxes in Lockhart not go up with inflation, but they actually went down overall, which proves my point about the competitive forces being extremely high in suburban and rural governments. It’s fairly simple to ignore incentives and focus on facts. How one ignores both facts and incentives is beyond me. See below.
Objection: “Real city budget and reserve totals”
Answer: Here, I will quickly point the reader to the table of expenditures and revenues. The expenditures for 2020 are about $12.9m and the net position (reserves) was $16.9m, 92% is able to be freely used to cover any and all expenses Lockhart might have. 8% is locked up for future debt obligations. Therefore, the sum total of investable funds exceeds the expenditures, meaning they have slightly less than 16 months of taxes on hand. Lockhart is doing very well to say the very least. If only they were actually investing that sum in the SP500 or Crypto. This is why Drake’s calculations are incorrect. Moreover, he is assuming that no taxes ever get added to the fund. As I said to Dave Smith in my talk with him, I fully intend on adding tax revenues from decriminalized drugs (all the way up to and including heroin) to the AntiTax fund as a means of accelerating the obsoletion process. Having an AntiTax fund sitting there will be a very effective means of convincing the powers that be (and their voters) to end the prohibition drugs…and then turn around and drop a WMD of socialism (think Colorado’s 13” taxation/regulatory dildo they shove up every pot dispensary’s ass) on the (now legitimate) drug dealer’s asses, which will be far more effective at dropping drug production and consumption rates than prohibition. The same strategy could be used for all other vices as well like gambling and prostitution. Obviously, socialism isn’t anywhere close to an ideal for Misesians, but we can probably agree that it’s preferable to prohibition and throwing people in cages, especially when we’re able to channel the worst of its tax increases into tax cuts through the AntiTax.
Objection: “Organizations generally prefer specific dollar values”
Answer: 1) Source? 2) Retirees generally prefer a 3-4% rate of withdrawal from their retirement accounts to live off of because that’s much more stable. The AntiTax is modeled after a retiree’s 401k account with the minor difference being that retirees die and states don’t (yet). It doesn’t matter at all if the market does well one year to the next as this AntiTax is only a substitute for direct taxation. If it falls one year, then it simply substitutes less. However, due to compounding interest, it will always average more and more cuts. The worst-case scenario is the status quo, so there’s no actual downside compared to where we are now.
Objection: “Hedge Funds normally charge more and make less”
Answer: This is actually a decent point. I will address the “make less” argument first. As someone who has been winning every year in the markets since 2014, when I did my wealth management internship at Merrill-Lynch, I’m well-aware of just how easy it is to beat your average financial manager. What Drake neglects in this criticism, however, is that state and federal laws require the public funds to be managed by licensed professionals, and even if they didn’t, Hell would freeze over before I let the average politicians “invest” the funds because we all know how that would end up. Even if they were all Misesian city councilmen, I would still insist on do the work since there’s no guarantee that they won’t all lose to AOC’s and Bernie’s in a few years. Thus, I’m happy with letting the managers do the work. Moreover, as I mentioned in my article, bringing in professionals creates an additional layer of defense against the evil socialist Left by handing the banksters some easy money to make fees off of. Do I love the banksters? No. Are they good at their jobs? Not really, but they’re good enough. Do I trust them to do the right thing? Also, no. In fact, I wholeheartedly expect them to do the evil crap they always do and lobby the government for more money to manage and to also fund the campaigns of the opponents to toxic Leftists, who want to “invest” the funds in socks for hobos. Thus, I expect them to do the evil thing, which, in this case, works out to the benefit of the AntiTax funds.
As for the “charge more” argument, you may have a point here, but there is a multitude of money managers out there and I’m betting that we can leverage the fact that, unlike the rest of their clients, governments are (sadly) immortal and we can get better rates from the managers, given that they don’t have to worry about their state client dying and handing its fortune off to its spendthrift kids who will withdraw all the money and squander it. I’d say that’s worth more than a few bases points reduction in AUM. If they outperform the SP500 benchmark, then I consider paying them an extra 10-20% of the difference between them and the SP500 to be a good problem to have.
Objection: Cities can and do raise taxes/Cities can compete with increased spending, not just reduced taxes.
Answer: I’m way ahead of you… Give me some credit. I’ve been developing this concept for 4 years now. It’s a full framework of thought, not just a simple sovereign wealth fund with a catchy name. Here’s a thread I wrote to answer this question two months ago. My method will be substantially more popular amongst the voters than the alternatives and will make the AntiTax untouchable as far as public-choice theory goes. This channels the archotropic spending impulse into something more productive, more resilient, and more anti-fragile.
Objection: Investing in infrastructure and the like can get better returns than the stock market.
Answer: While sometimes true, this is a recipe for corruption and graft and I’m stunned a Misesian wouldn’t see that coming a mile away. There have been sad cases of urban wealth funds in Europe being squandered by corrupt do-gooder leftists and crooks (but I repeat myself) because they didn’t prohibit “investing” their funds in assets within their jurisdictions. These funds would often get “invested” in politicians’ friends’ businesses, buy overpriced real estate from, jobs programs for local unions, etc…, so yeah, we’re not doing that. Prohibiting that kind of corruption and graft is one of the reasons I’m fundraising for lobbying for state-level regulations.
Donate here: www.MisesGOP.org/donate to help us prevent the Left from investing taxes in socks for hobos.
Objection: This whole model assumes no population growth or immigration. Success in this way will also raise property value, which raises the tax burden
Answer: As a right-winger, I consider population growth to be a good problem to have. Unfortunately, that’s not what I expect to happen since I am installing tens of thousands of these funds in every red state in the nation, not just one fund in Lockhart. I agree Leftist immigration would be a problem if there was only one of these funds around, but with 10,000+, there simply aren’t enough leftists to invade that many states and rural areas, whom the Left hates with a burning passion, seeing them as backwards hicks and hayseeds. I like living in red rural America for exactly that reason: Leftists hate living here, try to move away as fast as possible to the big blue urban 3rd-world liberal shitholes they call “civilization”, and no amount of money is going to change that. And again, there simply aren’t enough lefties to invade 10,000+ suburban and rural municipalities in Red America.
As for natural population growth, that’s pretty baked into the cake already and the birth rates are publicly available. Needless to say, population GROWTH is not at all the problem our country is facing. That would be population DECLINE, which doesn’t even begin to factor in all the kids the Left is sterilizing, abusing, and traumatizing, which will certainly drive the birth rates even more pitifully low. Frankly, while I categorically oppose abortion and the sterilization of children in all circumstances (unlike the LP), I enthusiastically support the Left not reproducing. I think it’s healthy and unequivocally for the best if Leftists never reproduce. Now, if only we could get them to stop reproducing ideologically in public schools, then victory would be a generation away, but that’s irrelevant to this discussion.
As for the second part of this objection about property prices going up due to the lowering of effective tax rates on them, I consider that a good problem to have. If that somehow brings in more revenue, then that’s totally fine as it would simply get re-funneled into the AntiTax, further accelerating the obsoletion.
Objection: Public choice theory. The larger the amount of money, the stronger the incentive to take over
Answer: Well, at least you recognized that this was a weak argument. See the earlier thread.
Objection: Good times make weak men
a. “At the end of the day, this system is essentially welfare”
Answer: “Tax cuts are welfare.” I expect that sort of argument from the Left. This is my first time hearing it from a Misesian though, and, same as I would with a Leftist, I’m not going to bother debunking it. Regardless, if future generations squander it, then that’s on them. I think this system is pretty anti-fragile, robust, and resilient with its wide distribution, intense competitive forces, multiple layers of industrial-complex lobbying defenses, restricting voting on tax hikes to property owners, and spending-reinvestment channels, so I’m not particularly concerned if a few of them fail here and there because the vast majority of them will obey their incentives properly and will succeed. That’s the beauty of competition and the free market, which doesn’t quite apply to local governments, but might as well given how intensely competitive they are. I’m sure that a few of the 10,000 Lichtensteins won’t make it, but that’s fine because there are thousands more that can pick up the slack.
Objection: Differences with a sovereign wealth fund
Answer: The comparison of local SWF’s with intense competitive forces to national SWF’s that have negligible competitive forces is sloppy at best, certainly disingenuous, and dishonest at worst. The AntiTax is a system meant to be managed by right-wingers and libertarians. This is a local-level system that puts the greatest amount of accountability on the system possible. If the Misesians can’t manage the AntiTax in towns with a few thousand very right-wing people, who are already ultra-predisposed to low time preferences for power and cheer when politicians say “taxation is theft”, then there’s zero hope for ancapistan.
Let’s circle back to earlier when I said there was no such thing as “liberty on autopilot”, which is a mindset a lot of Rothbardians are prone to, and one Late Rothbard profoundly disagreed with. Hans Hoppe has made a name for himself saying exactly the opposite. If you’re looking for a system of liberty that you can just “set it and forget it”, then you can forget about liberty. Liberty MUST be actively managed and Leftists must be ostracized and physically removed. If you don’t intend on being extremely careful and responsible with your own rights as well as taking responsibility for the rights of the rest of your rural/suburban community, instead of just shrugging them off and saying “not my problem”, which I see MANY self-described Rothbardians being prone to do, then you’re kidding yourself and ancapistan is a pipe dream.