Libertarian-leaning UCLA law professor Eugene Volokh asks why adult incest should be illegal. He points out that the risk of birth defects is not compelling, that court decisions favor sexual autonomy based on mutual consent, that problems of undue pressure can be circumvented, and that severe penalties are not likely.
This demonstrates a flaw in libertarian thinking. For every argument against incest, you can concoct a scenario where it will not hurt anyone, and where it is impractical for the state to do anything about it.
And yet incest is considered immoral for good reason. It is nearly always harmful, and I think that most people find it so repellent that they would rather live in a society where incest is not an acceptable option.
The problem is not just the genetic one, and not just a conflict of interest. We don't want step-parents and adoptive parents having sexual relations with their kids.
We live in a democratic republic, not a libertarian paradise. If there is an overwhelming consensus that something is harmful, then we have laws and public policies that discourage it.
More and more, the public is being asked to accept things that used to be considered immoral. Adultery, sodomy, inter-racial marriage, transsexuals, etc. Putting a transgendered kid in the schools may seem like a liberty for that kid, but it imposes a burden on everyone else to explain it. Sometimes kids think and do foolish things as a result of being given bad ideas.