Gian Piero de Bellis
Polyarchy : a Paradigm
(2002 - 2012)
From compulsory taxation to voluntary allocation
|To the present|
|Taxation : justifications|
|Taxation : justifications and reality|
|Taxation : justifications and the hidden agenda|
|The perverse remedies|
|The possible solutions|
It has been proclaimed often that taxes (and tarts) have always existed.
It is perhaps closer to the truth to say that, from the moment somebody seized the power to dominate, control, protect somebody else, he also took the power to extract a revenue from those subject to him, in order to be paid for actual or presumed services, mainly security.
Usually, the menaces and assaults to people's security came not from the common person (e.g. the rural labourer) but from the same power that, while protecting and dominating its own productive flock, was eager to increase its revenues, attacking, subjugating and incorporating other territorial powers and their productive flocks.
So, it is very appropriate to apply the saying "homo homini lupus" (man is man's wolf) not, generically, to the 'common men' but, specifically, to the 'men of power,' and, more precisely, to those hungry for more power and willing to go to war for it.
In other words, those who produced or could produce disorder and insecurity were also those who, under other disguises, were meant to impose order and security. And, for performing these two functions of war (disorder + insecurity) and peace (order + security), all of them imposed a payment that, in the Middle Ages, during feudalism, was known as 'tithe,' being one tenth of what was produced.
In the course of time, with the introduction (or reintroduction) of monetary exchanges, payment for goods and services was more and more performed with the use of coins.
At that point, the appropriation of those gold and silver pieces became the core interest of the power, to pay for wars and wares. More so when the power became the state.
The behaviour of the state towards money has been theorized and described under the name 'mercantilism' to mark a strong interest for all the matters related to merchandising and trafficking.
Mercantilism is focused on money and on everything affecting money (circulation, accumulation, restriction, imposition, etc.). For this reason, when talking about income extraction and allocation by the state, the word eco-nomy (organizing/managing the house) is less appropriate than the word pecu-nomy (hoarding/managing money).
Mercantilism is based on the control of production and commerce by the state with a view to the accumulation of money (gold and other precious metals) through taxation and other expropriatory measures.
To give just an example of mercantilistic pecunomy, since the middle of the XV century, it was mandatory for foreign merchants coming to England to convert all the money received into English goods before departing (so, to leave behind money) and for the English merchants dealing abroad, to carry back at least some part of their proceeds in cash (so, to bring in money).
In other words, under mercantilism, the gold and silver coin was the point of reference around which everything connected to the state revolved. This attitude resulted in a series of restrictions, devised and implemented by the state, in order to control the circulation of money so as to retain a substantial quota of it.
The Industrial Revolution and the perception that too many restrictions and impositions could discourage production and commerce and, consequently, reduce the quota of hoarded money, led to the advocacy of freedom in production and to the recognition of the mutual advantages derived from unhindered universal commerce (laisser-faire, laisser-passer).
This extraordinary period of reduced economic impediments was short lived, probably because the conception and the practice of it was neither so widespread nor deep rooted, as generally believed.
The watershed on the way to the abandonment of 'laisser-faire' was represented by the First World War, with the introduction of state control on commerce and high taxes for sustaining the military effort. It sanctioned the future role of the state as a machine for taxing producers (entrepreneurs, workers) and spending the revenue unproductively (from useless consumption to plain destruction).
Taxes, once introduced, can seldom be repealed or, if so, only for a short while, given the fact that the spending habit, once acquired, is very difficult to suppress.
In England, total government expenditure went from £184 million a year (before the First World War) to £1,825 million a year (after the First World War), a massive ten fold increase that required a huge increase in tax imposition.
As a matter of fact, in England, at the start of the war, the standard rate of taxation was 6%, bringing in a state revenue of 46 million. By 1918 the standard rate had risen to 30% with a state revenue of £293 million (a 6.3 fold increase). In addition to this, an Excess Profits Duty was introduced that made the total collected by the state over £580 million, a figure seventeen times higher than that for the year 1905.
During the same period, the national debt that was £706 million in 1914, reached six years later the figure of £7,875 (more than 11 fold increase).
In the USA, the federal budget went from $1 billion in 1916 to $19 billion in 1919, more than doubling every year.
Through a tentacular occupation of every social and economic space, that resulted in draining and squandering resources (parasitic employment, arms production, etc.), the state generated the conditions for the long depression of the post First World War years.
And then, on the wings of the states and their protectionist and bellicist policies, a new World War was delivered, or better, the second act of the previous one.
To the present (^)
A cursory glance at historical records should be sufficient to make everybody aware that war means taxation and that war and taxation are just the two faces of the same coin that has inscribed on it: the state.
In 1939 England, on the eve of the Second World War, the standard rate of income tax was 29% (it was 6% at the beginning of the First World War), ten million people were liable for tax and the total sum appropriated by the state was £400 million. At the end of the war (1944-1945) the standard rate of income tax was 50%, with 14 million taxpayers and a revenue for the state of nearly £1,400 million (a 350% increase). An Excess Profits Tax, introduced for business, raised, in 1944-1945, an extra £508 million.
In the USA, the spending of the federal government rose from $9.6 billion in 1940 to $95 billion in 1945 (an almost ten fold increase) and the number of taxpayers went from 14 million in 1940 to 50 million in 1945.
This extraordinary, generalized tax contribution was, nevertheless, accepted in order to win the war and to gain peace and security.
After the end of the conflict, the state had to keep the war attitude well alive to justify the fact that vast sums of money continued to be taken out of people's pockets. It then ingeniously invented and heartily embraced two new types of war:
- the cold war, where the two figureheads, capitalism and communism, were presented as fighting for world freedom and world equality. In fact, it was just two large states and their satellites who clashed (sometimes for real) for world supremacy.
- the war on poverty, where some well meaning people thought that the state could and should play a decisive role in defeating poverty and promoting welfare for all. In the end, it all amounted to give employment and distribute gifts to cronies and crooks (besides some individuals genuinely in need) in order to keep them quiet and relatively satisfied.
These two "wars" offered the justification for a colossal enlargement of the role of the state. Big Brother had finally arrived, to promise security from outer and inner enemies. And to do so it needed money, a lot of money. The necessary solution was to tighten the familiar screw of taxation. This has been done in two ways:
- more people paying taxes
In Europe and in the United States, the number of taxpayers has increased tremendously especially when the spending of the state, totally out of control, has fuelled runaway inflation. This has, artificially, brought the nominal income of many people liable to tax or towards higher levels of taxation, even while their real income was stationary or falling. This is the so called 'fiscal drain,' a real pain for the taxpayer but a bonanza for the state. Besides that, as a final trick, the introduction and diffusion of sales taxes (i.e. V.A.T.) have made practically everybody, a contributor to the state coffers.
- more taxes to be paid
The number of taxes has increased, especially with the introduction and rise of many indirect (and almost undetected) taxes. In England, during the last decade of the XX century, sales taxes have gone from 5% to 17.5% (a 320% increase). In contemporary France more than 50% (in some cases up to 67%) of personal income is grabbed by the state. This means that, every year, an individual works more than six months only to fill the state coffers; a condition more pitiful than the feudal serf, if it were not for science and technology that have improved the living conditions of everybody.
In some cases, as pointed out even by the U.K. Inland Revenue, taxes have gone literally through the roof, with some special rates exceeding 100% (e.g. in the U.K., 147.5% in 1947-1948 and 136.25% in 1967-1968).
Like frogs put in a pot of water on the stove, who might initially derive a pleasurable feeling of warmth before boiling to death, so the people have, generally and until recently, not complained about new taxes, higher taxes, more people paying taxes. This is because they have, consciously or unconsciously, accepted the reasons put forward by the state as justifications for higher and wider taxation.
Taxation : justifications (^)
The state has justified taxation on the basis of the following reasons:
- representation: the cost for the individual of having his/her interests represented;
- contribution: the cost of common services granted to each individual;
- redistribution: the cost of compassion as a social duty to help people in need.
In theory, there is not much to object to these motives and the only aspect to be stressed should concern the correct and continuous fulfilment of these functions, that is:
- effective representation
- efficient provision of services
- fast delivery of care to people in need (e.g. in case of calamities, disabilities, despondencies, etc.)
As a matter of fact, taxation could be very well accepted as a form and means to pay for services in a community, provided that the theoretical justifications for it were matched and supported by a consistent empirical reality.
Unfortunately, this is (very) rarely the case.
Moreover, not only these motives are totally disregarded with respect to reality but they serve only to cover a hidden agenda. For this reason, from acceptable justifications they have now become unbearable mystifications.
Taxation : justifications and reality (^)
The justifications advanced by the state, in the last decades, for the (high and large) taxation, affecting practically all individuals, are not supported by reality. We witness a situation that is the exact opposite of what is stated. To all rational human beings it appears more and more evident that:
- representation is laughable
The elected person is not bound to keep to his/her promises, or to follow in any way the mandate given by the electorate. As a consequence, people have realized that their vote counts for nothing and so, in great and increasing number, have decided not to take part in this colossal farce that has become the electoral process.
Moreover, some people (the so called "foreigners") are obliged to pay taxes without being given the right to vote in general elections, negating in this way one of the pillars of democracy that consists of "no taxation without representation."
- services are appalling
In too many cases, the services provided by the state are an insult to human dignity and rationality: the administration of justice is a slow moving lottery, the police a nest of brutal and violent individuals wearing a uniform, the school a training ground for misinformation and indoctrination, the health service involves long waiting and, sometimes, a hard, shocking experience, the prison system a school for crime and depravation, and so on and so forth. All these disservices cost the taxpayer a fortune and to be subject to them might be a real misfortune.
Moreover, in many countries some services are not any longer financed entirely by the state (e.g. transport) or are performed, in large part, by voluntary organizations (e.g. protection of the environment, social assistance) or are supported by extraordinary earnings (e.g. lottery money for building restoration). With the result that, the main bulk of taxation is used only to feed the growing appetite of bureaucrats and politicians.
- compassion has turned into corruption
The redistribution of resources, falsely qualified as compassion, has bred corruption amongst people. Not only has it not, generally, succeed in lifting them out of poverty, but it has reinforced and perpetuated the need for assistance, with mutual satisfaction for the providers (who keep their employment) and the receivers (who keep their receipts).
If this is the reality, we should be asking ourselves how it was and is possible that an increasing and expanding taxation by the state be accepted for so long, with so little opposition by the common person.
Probably the answer can be found in the witty statement put forward by the economist Frédéric Bastiat (1849): "L'État, c'est la grande fiction à travers la quelle tout le monde s'efforce de vivre aux dépens de tout le monde." [The State is the great fiction through which everybody endeavours to live at the expense of everybody else].
In other words, the people that support or simply accept the existence of the state as a natural eternal fact, are under the illusion that some of the resources extorted from them by the state will come back to them, if not as collective services, hopefully as specifically targeted favours under the form of jobs, donations, concessions, economic protection, exclusive rights of exploitation, and so on.
For many people, the money collected by the state through taxation represents the necessary means for implementing a hidden agenda.
Taxation : justifications and the hidden agenda (^)
What is here called the hidden agenda is not really very hidden. In fact, it is plainly visible to those who bother to keep their eyes open and see. As for calling it 'the agenda,' it is, more precisely the "raison et façon d'être" (the why and way of being) of the state, that is of the people living parasitically on the resources produced by somebody else.
The term 'hidden agenda' means that behind each noble justification there are less noble or, to say it bluntly, ignoble intentions. They concern:
The concentration of power in the hands of some elected "representatives" is so high and the gap between them and the electorate so large, that only strong pressure groups (lobbies) have the time and money to ensure that their interests are well taken care of. So, a collusion is set up between those elected to power and some powerful parts of the electorate. It follows, often, that the latter pays the former in order not to pay or to pay only a reduced quota in terms of taxation. In some other cases, the mission of the elected representatives becomes the commission demanded in exchange for granting a company a specific contract.
The taxes that are meant to pay for services, or for the building of infrastructures, have been and are used for appointing and remunerating cronies in high position, for giving employment to their own supporters in order to compensate and consolidate their obedience and fidelity and for impressing simple-minded people with pharaonic constructions used as show-cases for the magnificence and munificence of power (from l'Arc de Triomphe in Paris to the Millennium Dome in London).
The quality of services or the usefulness of the works might be negligible, but the quantity of money spent and the number of people employed or gratified is astonishingly high, and this is what matters most.
Redistribution has become a means for political
manoeuvring, to get approval and buy consent from influential groups. For
instance, in Italy, in the 2003 state budget, the amazing figure of 5 billion
euro have been set aside for redistribution amongst industries (most as
This practice is also a powerful way to keep people quiet and obedient to the state power and to attract votes for those in power.
The evidence that redistribution, per se, does not help in promoting development and eliminating poverty but encourages industries and individuals to fall into a state of dependency, is so overwhelming that no one, anymore, seriously advocate this as an instrument of progress. Nevertheless, the gains of those affected are so strong and so mutually reinforcing that no effective solution to this problem is in view while the state is in existence.
Some considerations (^)
This brief analysis of taxation, focused on plausible justifications, actual realities and hidden agenda, need to be completed by some considerations before presenting possible transformations.
State activity in matters of taxation has directly encouraged or is directly favoured by the existence of four negative aspects. They are:
- the monetization of social intercourse
Generalized taxation is only possible and can only spread if it is matched by a generalized commercialization and monetization of all (or most) social intercourse. While capitalism has operated, also, through barter and could very well survive through barter (exchange of commodities through commodities), statism and the existence of its unproductive strata are linked to the control and extraction of money and can continue only insofar as money plays a predominant and central role.
- the abnormal concentration of wealth
The state has introduced progressive rates of taxation, justifying it as a means for income redistribution, cunningly playing the role of the benevolent father. In relation to progressive rates, it is worth remarking that this kind of taxation brings in a better harvest for the state whenever we are in presence of a concentration of wealth, provided that the rates are considered either bearable or inevitable (otherwise there is total evasion). It is then a matter of fact that the concentration of wealth is in the best economic interest of the state, given that the higher the income the more is paid as a percentage. Seen in this new light, some state interventions (protectionism, preferential share allocation to big groups, exclusive rights to one or a few companies, etc.) become 'economically' (i.e. pecunomically) understandable while remaining socially unacceptable.
- the diffusion of unhealthy behaviour
The state, willing to appear as a provident father and an ecologically minded person, taxes heavily the consumption of tobacco and alcohol, and the use of cars. At the same time, we are in the presence of some very strange facts. In certain countries (e.g. Italy) the state is a producer and the monopolistic distributor of cigarettes (revenue in the year 2000: almost 9 billion euro). In most countries the state is the active builder of new roads and motor ways, felling thousand of trees and bringing destruction to the countryside. In many cases, the states are the main promoters of gambling and betting from which huge revenues can be extracted. In some countries the vicious circle of taxation, welfare assistance and alcohol consumption is very well known as appears in the common saying that "most of the cost of a pint of beer is tax; most of the tax is spent on dole; most of the dole goes on beer." All this gives substance to the belief that, to the state, in general, a person having all the worst habits of this world is so much more precious and economically valuable than a healthy one that does not smoke, does not waste money in gambling and walks or cycles to move around. Furthermore, the person with a healthy life style usually lives longer and this longevity is becoming a serious problem for the coffers of the state, unable to keep its promises of assistance from cradle to grave when the grave takes so much longer to be filled.
- the multiplication of administrative jobs
Taxation has become, in the words of the UK Inland Revenue itself, "a big business and a big employer."
Currently, in the United Kingdom, there are more than 50,000 people employed directly by the Board of Inland Revenue and many times more people work in the area of taxation as tax advisers, accountants, lawyers, etc.
This multiplication of jobs is not a positive state of affairs because it has to do with often parasitic occupations that can survive only by sucking resources from productive activities, hampering them from spreading and flourishing.
Notwithstanding this incredible grabbing of income, the squandering has been even more incredible and many states, all over the world, have accumulated mountains of debts.
The perverse remedies (^)
The devilish remedies put forward in the past by many states to avoid bankruptcy have, mainly, consisted of the printing of money, which has led to high inflation and to people paying taxes at a higher rate (fiscal drag).
This was possible in a world of national central states, where an economic crisis was solved by devaluation (debasement of the currency) to keep the national economy competitive.
With the restarting of real world trade and the coming on the scene of regions that have been cut off or shunned by the world exchanges (e.g. Eastern Europe, Africa), this is not any longer possible.
The current solution envisaged by the states to deal with their bankruptcy is to cut spending while keeping relatively high levels of taxation.
This is all done in the most silent possible way, shifting taxation from a highly visible tax (income tax) to a fairly concealed one (VAT), it being included in the price of goods, at least in most European countries.
The state is moving towards undetectable taxes to cover its failure to provide good services or to cover the fact that it is not providing some services at all.
In fact, the state is passing on to individuals and companies (the so called "private" sector) the task of offering services that were once run (badly and expensively) by the state. Furthermore, with a creative move ascribable to its greedy instinct, the state is using people's betting habits in order to find extra sources of revenues for the upkeep of buildings and monuments (e.g. national lotteries).
So we have reached the nightmare scenario for civilization, that of high taxation (draining) meant to feed a vast parasitic machinery (squandering) while the real services are silently provided by non governmental organizations or paid directly out of everybody's pocket.
The minimum that can be said of this, is that there is something wrong and vicious in the entire matter of taxation, so wrong and vicious as to put into question the entire idea of compulsory taxation by a monopolistic organization called the state.
The possible solutions (^)
The draining and squandering of resources by the state reminds one of the similar behaviour by the aristocracy of the ancien régime which was still pretending to play an indispensable progressive role even after its justification for existence (as social order) had totally disappeared.
So it is nowadays with the state.
The new reality is making the function of the state superfluous and the possibility of it performing its role of general controller more and more difficult, if not impossible.
The vast movement of people settling in different regions ("foreigners" and "foreign countries" in the terminology of statism) at different times; the widespread introduction of electronic wallets and electronic currencies; the final coming into the scene of real world trade and of real competition, with providers-purchasers of goods and services in contact from all over the world, and with immediate comparison of prices; all this, amongst other realities, foreshadows certainly the overcoming of the nation state and probably the extinction of the state tout court, the last manifestation of the ancien régime.
The extinction of the state does not mark the end of the world but surely the end of taxation and, as a consequence, the disappearance of the distortions caused by pecunomy, the statist version of economy.
At the same, it should lead to the extension and expansion of mutually beneficial relationships based on:
- Required payment
This involves goods and services used and consumed. The payment could be carried out at various times and take various forms such as, for instance:
- pay as-you-take
- pay as-you-use
- pay at regular intervals
- pay in currencies/vouchers/goods/services
- The difference from taxation is that a person pays for goods and services she/he uses and is the one who makes the choices instead of having somebody else (the politician) deciding how to allocate resources. In this way, the cost/benefit process is made visible and left to operate in direct relation to the capability of evaluation of the users and consumers. The better the user-consumer (more cautious), the better (more satisfactory) the cost/benefit ratio.
- Voluntary donation
This involves giving something (time, money, etc.) to whoever or whatever a person deems worth supporting. It could be:
- a recurrent gift to an organization (e.g. supporting people in need)
- an ad hoc extraordinary offering (e.g. disaster relief)
In the case of voluntary donation, the helper and the receiver are identifiable human beings and not social security numbers. The persons giving and those receiving are interested in the best use of the resources, otherwise they might stop giving and receiving. On the contrary, in the case of taxation and state assistance, both the social worker and the recipient of benefits want more money, irrespective of the results. As a matter of fact, paradoxically, positive results might signify an improper or excessive reduction in the allocation of funds.
- Binding contribution
This is something that affects only those who want to belong to a community and freely use the services provided to the members. It could be, for instance:
- the fee for joining a club and covering the running costs
- the charge for a health insurance, security provision, use of education facilities, etc.
The binding contribution is a very common practice of allocating resources for purposes that affect the well-being of the person in conjunction with the well-being of other individuals.
Moreover, as the case of associations and trusts for the protection of nature shows very well, people are willing to pay for collective amenities even if they are not the only ones to use them or even if they are not the ones who will use and enjoy them. What they aim at with their contribution is the satisfaction of being part of an honourable cause. And this should put to rest the objections of those who advocate compulsory taxation on the basis of the existence of positive externalities and possible free riders.
There is no clear cut division between payment, donation and contribution; the common aspect is that they all arise from voluntary choices made by individuals who, through these free choices, become independent, mature human beings instead of being kept forever as subjected minors under the tutelage of Big Brother, the state.
In fact, payments could become contributions and contributions can be topped up by donations or by other forms of participation; the only proviso is that they all be voluntary.
The state (or whoever under its spell) will proclaim confidently and firmly that, with voluntary allocations, nobody would pay for green spaces, clean streets and modern libraries. With the same confidence and firmness, we should reply that this is not an earnest objection; it is just an utter and plain lie, a distortion of past and present reality.
Already, in ancient Greece, many of the most splendid public buildings were constructed by rich benefactors competing among themselves for the honour. As for those who did not have enough material wealth to give to the city, they contributed with their labour. These voluntary allocations were called "liturgies" and were usually several times higher than expected.
The selfish human being, as portrayed by state propaganda, exists only in relation to the state and as a product of the state.
The common human being of any community was and is more prudent and provident than the common bureaucrat of the welfare state, who keeps bringing moral and material disaster.
We have to go forward to a higher civilization, one that existed, in part, before and will exist, in full, beyond the state.
It is time to recognize that it is only through the freedom of voluntary allocations that each one can become responsible and accountable for his/her decisions. And this is the best way for promoting and enhancing the well-being of mature individuals and their beneficial intercourse.