Sheriff MacDonald's Tax Farm

Civil forfeiture laws are wrong.

Over the doors of the United States Supreme Court building is engraved the motto, "Equal Justice Under Law."  This enshrines a principle that goes back long before the founding of this country: no man is above the law, and all are supposed to be treated fairly by the law.  The attitude of ordinary Americans to legal matters is influenced tremendously by this principle.  For example, the fact that poor murderers are executed more frequently than rich ones is disturbing to many, even to those who believe in capital punishment.

The law doesn't just deal with matters of life and death, though; the sanctity of private property is nearly as important as the sanctity of life.  The 5th Amendment of the Bill of Rights doesn't just include the famous "right to remain silent"; it also guarantees that "No person shall... be deprived of life, liberty, or property, without due process of law." [emphasis added]

There is a good reason for this guarantee of equal treatment of property: the history of Europe, with which our Founders were intimately familiar, gives many examples of kings arbitrarily confiscating the property of their political or personal opponents.  Of course the government has to have the ability to take money from citizens either as taxes or as penalties for various crimes, but one of the goals of the Constitution was to ensure that property was taken in an orderly, just, and predictable way according to the principle of equal treatment before the law.

Today, however, these protections don't seem to be the impervious walls that once they were; they've become a wobbly picket fence.  All Americans were shocked when the Supreme Court ruled in Kelo v. City of New London that government's power of eminent domain - the ability to force you to sell your private property to the government - could be exercised, not for a public purpose like a highway or a school, but simply to help in the construction of a private commercial development that would pay more property taxes than you paid.

The resulting fury has led to several states passing laws explicitly forbidding this practice.  Susette Kelo, the main victim of this particular bit of judicial tyranny, who saw her house bulldozed for the greater glory of a private developer, at least got the moral satisfaction of seeing the development fail.  It's now an empty lot, paying less in property taxes than she had paid.

Unfortunately, while the headlines have shone a spotlight on the issue of eminent domain, another problem has been quietly growing: that of civil asset-forfeiture.  The War on Drugs has had many unpleasant side effects which we've discussed; perhaps the most far-reaching is that drug-based asset forfeitures seem to have become an addictive drug for local police departments.

Government reporting requirements, which force banks to tell the Feds of all transactions greater than $10,000, are now justified spuriously on the grounds of the War on Terror; but they were originally designed for the War on Drugs.  Illegal drugs are of such great value that the financial movements involved are truly massive.  Reporting on cash movements may make some sense in fighting drug traffic although it makes no sense trying to track the smaller amounts involved in terrorism.

The idea was that with the ordinary banking system closed to them, druglords would have to move cash by the briefcase-, truck-, and occasionally container-load, which is cumbersome and prone to being caught.  Even when the police don't happen to intercept a box with enough Benjamins to start a bank, drug-dealers are renowned for their taste in expensive cars, jewelry, and other valuable luxuries.

What better way to incentivize the police, the thought went, than by allowing them to keep some of the ill-gotten gains they seize?  After all, it was paid for by criminal activity anyway, was it not?  There is a long tradition of forcing criminals to give up the profits of crime, so as to make it clear that "Crime does not pay."

As long as the forfeiture of property is part of a criminal case and becomes final only after the defendant has been convicted, there's nothing the least bit wrong with this.  When a person is convicted of the crime of drug dealing, it's perfectly sensible for the court to sentence him not only to jail, but also to forfeiture of whatever the court believes to have been his criminal profits.

The problem arises when the law attempts a short-cut via civil forfeiture.  Civil forfeiture doesn't require anyone to be convicted of a crime at all; in some cases, the goods seized are technically the only defendants, and you get such bizarre court entries as "United States vs. Ten Thousand Dollars."

Cash On Demand

As the Economist explains:

In criminal cases, forfeiture follows a conviction and so it requires a guilty person. In civil cases, the property itself is considered guilty, and the government has only to show by "a preponderance of the evidence" that the money or gun or car was somehow shady. That is a lower standard than the "beyond a reasonable doubt" used in criminal cases.

Is "Ten Thousand Dollars" entitled to a government-funded lawyer or a habeas corpus hearing?  No.  What if it was your $10,000?  Well, you aren't being charged with any crime, so you don't need a lawyer either!

It should come as no surprise that, as the article goes on to say,

Sometimes the patrolman gets things wrong. In 2005, for example, Javier Gonzalez was stopped in South Texas with about $10,000 in cash in a gym bag. He was going to visit a sick aunt and planned to use the money to make funeral arrangements. He was pulled over, and the cash was seized. The police report said that he seemed nervous. Earlier this year a court in Jim Wells County reimbursed Mr Gonzalez and awarded him damages. But many people in his situation could not have afforded to take their case to court. Lawyers are expensive, especially for a person who has just had thousands of dollars stolen.

One might wonder about what sort of funeral arrangements required payment in cash, but the fact is, it's absolutely none of any of our business.  A quick look at a dollar bill reveals the pronouncement that "This note is legal tender for all debts public and private."

If Javier Gonzalez wished to pay for his dead relative's funeral in cash, what concern was it of anyone else's?  It would appear from the case that the only aspect of suspicion was the cash - in other words, the simple act of carrying a large sum of cash was in itself sufficient cause to take it away, since what honest person would conduct business that way?

Fortunately the county court corrected this gross injustice, but there have been thousands and thousands of similar injustices perpetrated.  Isn't the rule supposed to be that you are "guilty until proven innocent"?  The concept of the money or valuables themselves being the "guilty" party and thus not entitled to constitutional protections make a mockery of the entire Constitution and Bill of Rights.

This should not have come as a surprise to the lawmakers who set this system up some decades ago; this sort of situation has a long, long, long history.  Our civil forfeiture laws have resurrected what is known as a "tax farm," a concept intimately familiar to the Roman Empire.

Jesus and the Tax Man

In the days before modern accounting and widespread literacy, to say nothing of computers, it was almost impossible to establish a tax system that would be fair and equitable.  The Roman emperors would have laughed at the idea that a tax system should even have that as a goal.  They just wanted to collect money as quickly and easily as possible.  Over the centuries, as with so many other "government" functions, they found the best way to collect money was privatization.

In effect, they would sell, for cash up front, the right to collect taxes in a certain jurisdiction.  The terms of the contract would provide the contractor with a certain degree of government protection (e.g. a Roman phalanx or two), the period of performance (say, a decade), and the amount that must be turned in to the Emperor each year.

It was solely the business of the contractor how he got it.  What's more, anything he collected in "taxes" over and above the minimum required by the Emperor was his to keep.  This is why tax collectors in Bible times were so rich and were so despised by all.

Jesus was criticized for spending time with "publicans [tax collectors] and sinners", and particularly for having at least one of them (Matthew) as a disciple.  Other tax collectors are recorded in the New Testament Gospel of Luke as repenting:

And, behold, there was a man named Zacchaeus, which was the chief among the publicans, and he was rich.  And he sought to see Jesus who he was; and could not for the press, because he was little of stature.  And he ran before, and climbed up into a sycamore tree to see him: for he was to pass that way.  And when Jesus came to the place, he looked up, and saw him, and said unto him, Zacchaeus, make haste, and come down; for to day I must abide at thy house. And he made haste, and came down, and received him joyfully. And when they saw it, they all murmured, saying, That he was gone to be guest with a man that is a sinner.  And Zacchaeus stood, and said unto the Lord: Behold, Lord, the half of my goods I give to the poor; and if I have taken any thing from any man by false accusation, I restore him fourfold. [emphasis added]

While the Economist doesn't specify the amount of damages collected by Mr. Gonzalez, at least the principle that he ought to be compensated for being abused by the government is reflected in how it worked out.

Robin Hood, the Sheriff, and Taxes

Moving closer to the present, we find Robin Hood's legendary nemesis, the Sheriff of Nottingham.  As with the Roman tax collectors, the story tells us that the Sheriff was charged by Prince John with bringing in funds to the royal treasury; the Disney version memorably portrays the Prince as shouting, "Double the taxes!  Triple the taxes!  I'll make them pay!"

Disney had the Sheriff slyly "collecting taxes" from church poor boxes, the begging-bowls of the blind, and a young boy's birthday party.  The Robin Hood legend is not exactly a precise historical record, but the stories generally reflect prevailing practice in feudal Europe.  The various lords, barons, sheriffs, and other notables were granted royal charters of authority in exchange for specified annual remittances and the right to skim cream off the top.

The disadvantages in such a system are readily apparent, as the very name of the "Dark Ages" somewhat reveals.  It takes an unusually foresightful baron to realize that he will grow his county's economy if he lowers taxes, and thus be better off in the long run.  There are all too many politicians even today who still do not understand the Laffer Curve.  The generally violent end of most feudal monarchies shows the hatred that the common people have for these sorts of injustices.

A Buck-Buck Here and a Buck-Buck There

It should go without saying that in a government of, by, and for the people, we really don't want to be setting up tax farms, yet that's just what has come of the civil-forfeiture laws.  Apparently there are quite a few jurisdictions in rural areas who gain a large part or even all of their budget from this source.  If the sheriff knows that he needs to confiscate something, anything to pay his own salary, is he likely to be as scrupulously careful about what and whom as we'd like?  A uniform and badge don't change human nature, not even for TSA employees.

Another principle of American law that's not as widely known is the concept that those who enforce the law should not directly benefit from decisions they make.  We expect judges to recuse themselves from cases involving companies they have invested in; it's obviously unjust for judges to make rulings that lead directly to their own personal profit.  We don't even like officials to be rated by the amounts they bring in, as public repugnance at the idea of ticket-quotas for traffic police illustrates; the more the police chiefs deny setting quotas, the more ordinary people believe that they do.

Why, then, do we tolerate this system which flies in the face of so many foundational principles of American justice, law, tradition, common sense, and basic fairness?  It's not like there is no other way to punish the truly guilty, or even to have the same result of confiscating their corrupt profits.  All we ask for is, as the Constitution says, "due process of law", complete with a proper criminal trial and conviction.

It's time to put the modern tax farms out of business.  Where local police departments have become addicted to this source of revenue, they need to quit cold turkey - just as we'd ask of addicts to any other drug.  Withdrawal may be painful, but we'll all be the healthier for it.

Petrarch is a contributing editor for Scragged.  Read other articles by Petrarch or other articles on Economics.
Reader Comments
As long as it can be proven in court that an asset was purchased with tax money, I see no problem with asset forfeitures. It's a great idea, and imposed strictly and universally is one of the great ways to really making a dent on the drug business. The key is that it must be proven in court. Perhaps something should be done to fix the middle process and make bad forfeitures susceptible to large back payments and covered court costs. But I don't think that this is the same as what is wrong with the tax system. Let the government go after criminals any way they can - that includes financially - so long as they are not unfairly targeting innocent bystanders.
July 16, 2008 10:37 AM
As a bit of a tangent, most noble lords in the Middle Ages were in charge of rural farming operations not thriving towns, towns often were ruled by an oligarchy of citizens. This means that lowering taxes wouldn't have been effective as a way to encourage more tax revenue in the long run. Obviously the oligarchic cities could and did lower taxes when ever they could, since the rulers generally paid taxes as well, then raised them in times of need (eg war).

There were other ways to encourage economic growth in small towns, but that was mostly through tolls, which they did figure out that lowering those were helpful.

Also, it was illegal for lords to raise taxes on their serfs because becoming a serf was a legal agreement between you and your offspring and who ever owned the land (even if ownership changed). It was therefore illegal for the lord of the land to change what was required of his serfs. And yes, these agreements were enforced, generally by the Church.

(sorry I have to pretend my Medieval history degree was good for something.)

Great article by the way :).
July 16, 2008 11:00 AM
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