I joined in the discussion about to what extent the
agorist approach of trying to build a free society within the shell of the
state was worthwhile.
Joey has responded to my remarks
and clarified his position a bit (which I clearly didn’t really understand at
all before, and still don’t feel like I really get). The gist of it seems to
be that the problem for liberty lovers is that people, because of their family
upbringings, have internalized certain habits of thinking that bias them
toward authoritarianism, and so a more libertarian outlook on the big scale
can’t really get a foothold until we have a culture in which children are
raised in a less-abusive manner.
So to that end, the best thing a freedom-loving person can do is to encourage
our own intimate circle of peers to appreciate freedom in their personal
lives, in the hopes that this will eventually lead to the withering away of
the state as fewer people are convinced of its importance. Trying to confront
the state more directly, by creating underground economic structures that
evade it, or by refusing its demands head-on, is (in Joey’s view) making
yourself vulnerable to a lot of trouble without much hope of anything good to
show for it.
If you are self-employed, you may be classified as a sole proprietor, or as a
corporation of some sort. If you are a sole proprietor, the profit your
business earns is considered your personal income, and you’re taxed on it as
such — both income tax and self-employment tax. But if you’re organized as a
corporation, the income accrues to the corporation, which pays taxes on it at
corporate rates and doesn’t pay self-employment tax or
FICA on its own profits.
It can then pass the profits on to you via dividends which are also free from
Richard Winchester has put a paper on this subject up at
SSRN: The Gap in the Tax Gap: What Congress Should Do About It.
As you can tell from the title, Winchester sees this as a problem, and not an
opportunity, but he gives a good summary of how this loophole works, which
could turn out to be a useful thing.
I’m currently organized as a sole proprietor, and so I’m vulnerable to
self-employment tax. It’s possible that if I were to reorganize, I could
eliminate that tax, and possibly the corporate tax I would then be vulnerable
to would be less (I haven’t done the math). I know precious little about
C-corps and S-corps and such things, and I have this premonition that by the
time I learned enough to successfully do a reorganization, Congress would get
around to figuring out how to close the loophole, but I’m curious…
Jeffrey Tucker has a
good article up at LewRockwell.com about the
underground economy. According to Winchester’s article that I referenced
above, self-employed folks report fewer than half of the transactions that
aren’t otherwise automatically reported to the government. In other words, if
someone pays them in cash, there’s less than a 50% chance the government will
find out about it.
Tucker’s article is about these cash transactions, and how you can frequently
get a better deal on goods and services by paying in cash because those you
pay know that cash transactions (on which they can evade taxes) are more
valuable than transactions that leave a paper trail (and which then get
whittled down by the government).
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