Taxation without representation is a powerful phrase. It is one that sparked one of the most important revolutions the world has ever seen. Consequently, one would hope that governments would have learned the lesson that extracting taxes from people who reap no benefit from their use is a dangerous, or at the very least, an unwise course of action.
Yet, this sort of unilateral demand remains depressingly common as governments clamor for any way they can think of to secure more revenue for their ever increasing spending projects. One example of such behavior comes from the American government seeking to collect taxes from nominal citizens who have lived their whole lives abroad and who have no ties to the country which they are expected to financially support.
Some Canadians, born in the U.S., are rebelling against the practice, arguing that their United States citizenship is merely an accident of birth and does not reflect either their loyalty or their heritage. They do not vote in American elections and reap no benefit from the domestic policies that taxes are meant to support.
Indeed, the whole idea behind taxation is supposed to be that of a large public goods problem, where the incentive to free ride renders voluntary payment for services such as national defense and roads problematic from an efficiency standpoint. Leaving aside the actual economic and philosophical merits of this argument, it can scarcely be denied that those who in no way benefit from services such as these, such as lifelong Canadian residents, should hardly be expected to pay for them.
Nor is it only in the realm of international affairs where taxation without representation can be observed today. It is well known that the District of Columbia suffers from a lack of meaningful congressional representation, and in fact the phrase “taxation without representation” appears, somewhat ironically, on the license plates of that district.
There is also the issue of the internet sales tax bill, known as the Marketplace Fairness Act, currently moving through the legislature. This bill would require businesses to collect sales tax on online sales of merchandise based on the destination to which they are being shipped, even if the store has no physical presence there. Thus, a state will receive sales tax revenue from a business that is not benefitting from that state’s public policies. In other words, the business is being taxed without being represented.
The incentive effects of such a law mean that the states no longer have a reason to lower their sales tax rates in an effort to compete with their neighbors and attract businesses to locate themselves in a climate of favorable taxation, since they will be taxed by any states they ship to anyway. Likewise, consumers lose the ability to protest high sales taxes by purchasing goods online from a state where the tax burden is less onerous.
It should be evident to fair minded people that the involuntary extraction of taxes from those who do not stand to benefit from their use in any way is tantamount to simple theft. Those Canadians refusing to acquiesce to the unreasonable bullying of the IRS should be commended for their willingness to stand up against injustice and retain their rightfully earned property in the face of legal threats by a foreign government. If only we all were so principled, we might see a very different world.