"Are a liberal economy and taxes two incompatible notions ?" - At the CIFA conference (23-25 april, www.cifango.org), held in Monaco, I had to answer this tough question in a short introduction to a larger panel on the subject, also featuring Cato's “libertarian Rock Star" Daniel J Mitchell, Lord Daniel Brennan, from the international bar association, and famous criminologist William K. Black, who inspired me several parts of my 2nd book on bank crisis. Here is an approximative reconstitution of this short speech from my memory. Please notice that I use the word liberal in its european meaning, i.e. “libertarian” for US audience.
Coming from a liberal think tank, some of you would expect that I'd say that taxation and liberal values are not compatible, since taxation is about coercion, and fundamentally contradicts liberty. But as states are there and are likely to last for a while, I've to take a more pragmatic approach and answer to the question, "what would be the taxation system which would be the closest to liberal values, in the real world ?"
The question of taxation and liberal values, as you can see, is not a technical one. It's a philosophical one, and technicalities only derive from philosophical and ethical considerations. I'll shortly develop five points of my definition of what could be the characteristics of a “liberally acceptable" taxation system.