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Few words on the nature of Taxation
People are getting so used to taxes, that questions on the nature and fairness of taxation as such or of the phenomenon of taxation generally arise quite rarely. At most people are arguing about a level of taxation or about a nature of newly introduced taxes. Arguing about taxation generally does not seem to do any good since as far as we have no any alternative to the State per se, we have to support it somehow, even though it may be not a very efficient or not even a very socialized social institution, but rather a single source of power and coercion in the modern world and a monopolistic agent with exclusive (on particular geographic territory) social and property rights.
general morality is allowing to expropriate people’s income (or what is the same – people’s property) and to redistribute it to the other people? Where is a justification for that? Such an action seems to be very close to an act of robbery and in its nature merely represents a primitive forcible expropriation. Law is a very poor argument here. Mainly because the law does not explain and does not introduce anything in society – it is merely marking down on paper existing social realities or existing in society balance of power. Much more interesting is what societal realities, developments and what social processes are allowing non-punishable expropriation of people’s income and of people’s property
2. Why do we tend to redistribute financial resources from the most efficient private proprietors to the least efficient, being based on coercion to one degree or another always non-socialized and the most gigantic monopolistic economic and social agent – the State?
3. Where is the end to this process if at all? How to stop it, since every year governments and States invent and impose a handful of new taxes as well as increase already existing and afterwards people are always voting for all that?
4. How is it possible to make people absolutely resilient to their own interests and “robotize” them to such a degree that they would be glad to voluntarily give up parts of their hard-earned income? How people being in a complete sanity are able to vote against their own interests? There are must be much more profound and concealed interests involved, which are playing here a major role.
In order to bring at least some clarity to an issue of why do we have taxation and why do we have it permanently growing, we must determine what interests or vice a versa what types of misapprehension of private interests are allowing and stimulating taxation in the modern society. Generally speaking four types of such interests, which are driving up the phenomenon of taxation, can be identified.
1. Major promoter and major beneficiary of income redistribution in modern society is the top-level state bureaucracy. Basically a single interest of top-level state bureaucracy in the State is based on existing opportunities to appropriate an extra-natural (non-market) income connected with the state monopoly. Otherwise, business or entrepreneurial activity would probably be more profitable for them. Nature of income of the top-level state bureaucracy is very simple – if we take all tax collections as a state revenue and deduct all the state expenditures associated with income redistribution and with provision of the state or “public” services – leftovers, which might be considered as state profit or state income, are appropriated by the top-level state bureaucracy in a large variety of ways. Those ways in fact are rather complicated and deserve a special separate analysis, however, for a simple exhibition we will name first of all salaries and monetary bonuses related to performance of various State functions; office related benefits such as luxurious transportation (cars, traveling etc. related to particular positions), office premises, dining and wining, social events; employment possibilities for friends and relatives; opportunities for promotion of affiliated organizations and political parties; political, social and economic influence including contracting influence and bargaining power; forthcoming from the service after-the-office benefits; information transferable in financial benefits, for example on stock exchange; and so on and on. Big idea, however, just like with any other corporation stands in the fact that in order to get more profits one must generate more revenues and in case of the State it is only possible through additional taxation. The nature of business of the top-level state bureaucracy is a justification of current and additional state spending as well as justification of associated current and additional state tasks and state programs
2. Poor and middle-income people are always eager to get an income on behalf of more affluent or rich people. And since those who consider themselves to be “poor” or “poorer” and who envy to enlarge their income are always in majority – it is very difficult to counteract such an interest under the “one man – one vote” election system. While so far we do not have any viable alternative to universal suffrage.
3. Owing to a substantial rise in standards of living in the modern world and in associated level of comfort from one side as well as owing to a widespread of socialist policies and ideas dominating modern economically developed countries from the other, human nature is becoming weaker, softer, more gentle and more eager to rely on various types of assured social support and guarantees further pushing and pulling taxation, socialism and state domination in society.
4. Unsustainable idealism of “middle classes”, which are subjugating themselves and the entire society to coercively imposed generosity, creating in this way a whole row of societal deficiencies rather bad not only for themselves, but also for society as a whole. If somebody wants to help other people – it is much more preferably to do on his own within the market environment through a large variety of charitable and non-profit organizations and without coercive involvement in this process of the other people against their will as well as without general application of the instruments of coercion for the purpose of generosity. Otherwise what kind of generosity is that?
Taxation is not an isolated social phenomenon – it is actually inseparable from a much more profound and influential social phenomenon – the State. What determines the entire nature of taxation is that taxation represents a major, if not a single, source of state revenues in modern society. Taxation is not very pleasant as it is, but its main problem and deficiency is characterized by an associated generation of certain negative and even disastrous societal consequences, every one of which worth special separate consideration. Additional problem with taxation is that not only it stimulates all those negative consequences, but also that all those consequences in their turn are further on promoting higher taxation. We are actually trapped by an endless circle of negative cause-and-effect relationships such as:
1. Expropriation of income and property, which is the most uncivilized angle of taxation.
2. State domination in society – when more taxes means more State, more state involvement and more state dictate in society up to a dangerous point on the edge of democracy and dictatorship
3. Social parasitism or living on unearned income owing to a forcible expropriation of income and property.
4. Social idealism or inadequate and false apprehension of social realities, which is based upon a variety of societal factors, high taxation being only one of them.
5. Exchange of private investments for the state consumption
6. Tax discrimination coming from progressive taxation, when those who work harder and more – also pay heavily, while those who work less or do not work at all are receiving money from the State.
Another interesting subject for inquiry, analysis and investigation represent taxation systems or the mode in which taxes are collected in modern world and in historical retrospective as well as potential prospective systems of tax collection. Any taxation system we have is not a matter of reason and logic – very far from that – just like almost everything in society. Any taxation system is rather a matter of the balance of power, which exists in society. So far a dominating worldwide progressive tax system accompanied by a huge variety of indirect taxes is almost the least efficient and the most damaging for property and societal relations amongst everything we can imagine under democracy and it can only mean one thing – for the time being people are heavily loosing a power battle to the State. At least five taxation systems in order of their preference in terms of societal justice and economic efficiency can be proposed for investigation:
1. Progressive taxation – the most inefficient, unfair and discriminative system threatening with unlimited and uncontrollable escalation of income expropriations as well as of the state domination up to a dangerous point on the edge between dictatorship and democracy.
2. Flat rate income tax – fixed non-progressive percentage levied from every person independently from the level of income. For example fixed 10% income tax rate withheld from every single person without dependence on individual income. Richer people are paying more than poorer (because their income is higher), but not progressively more.
3. Flat rate related to indirect taxation without collection of an income tax. Better than previous options because of a restrained discrimination in taxation, but mainly because of a limited coercion applied for tax collection purposes under indirect taxation. Richer people are still paying more (because they are buying more) than poorer.
4. Lump-sum taxation – a fixed amount of money paid by everybody expressed in absolute figures rather than in percentage level and levied from every person in society independently from the level of income. For example – one hundred dollars from every single individual. This is quite a way to stop social parasitism, which is one of the main factors promoting permanently rising levels of taxation and permanently mounting state domination in society. Lump-sum taxation is completely undermining for poorer parts of population the reasons to vote for higher taxation and vice a versa is significantly turning them against any taxation at all. Rich and poor people are paying equally. Tax equality prevails and there is no any tax discrimination.
5. Voluntary contributions or charity donations to the State without any coercive taxation and similar to the mode of financing of non-governmental or non-profit organizations. The State has to engage in a free-market competition with non-profit organizations for scarce financial resources. Extraordinary way for elimination of the State coercion and therefore also a huge step towards complete annihilation of the state monopoly.
Such a noble task as searching for alternatives to the taxation per se and to the State in its current form generally unfortunately is very far from being on agenda of social science and of social practice. One of the main reasons for that would probably be a general disbelief in existence of any alternatives. However, a demand for alternative options might be escalating enormously already in the nearest future because in many instances we are now on the edge of how much of the State we can take. At least the following guidelines might be proposed for further research and investigation on how to erase the State or at least the state monopoly from our lives.
1. Essential limitation of the state functions, state expenditures and state budgets. Ideal target for the state expenditures for the time being might be established at around 10% of GDP. And this is only an initial target quite distanced from current societal realities (in vast majority of economically developed countries this indicator is around 50% and sometimes even more).
2. Possible elimination of state financing based on direct taxation, which is heavily relying on comprehensive inspections and therefore on more state interference and coercion.
3. Employing private sector operators and business service providers to perform specific state or governmental tasks and general state management functions particularly aiming at restraining “public” services as such
4. Investigation of modes to enhance a competition between States and societal systems all over the world including liberalization of production factors’ flows aiming at undermining of the state monopoly on particular territory
5. Comprehensive inquiry into further development of regional autonomy or wide-scale federalization of the national State. Particularly worthwhile an examination of general transfer of tax arrangements as well as of majority of state functions (including income redistribution) primarily to regional administrations aiming at acceleration of interstate and interregional competition between regulatory institutions and simultaneously at dissolution of the state monopoly.
6. Terms limitation for absolutely all positions of top-level state bureaucracy similarly to two terms limit for United States presidency as well as terms limitation for every single person in society to be employed as a top-level public official in legislature, government and judiciary.
7. Introduction of the other State’s ruling on particular territory in order to exchange national governance with more efficient one of the other State. This dimension might be particularly worthwhile in case of underdeveloped countries in order to make immigrate the State, not people and capital.
8. Analysis and reassessment of a social value of property census bearing in mind that management of the state property is almost the only thing what State is all about. Even power and coercion are merely the tools for management of state property and state revenues. All other visions of the state’s nature are brought up by non-sustainable emotional appeal and by associated with the State non-sustainable social ideologies. Only a lack of exclusive property rights based on power and coercion as well as a profound respect of property rights, which is sufficiently problematic under representative democracy with its enormous income redistribution, can bring along a complete realization of personal freedom and societal justice. The State is just another conventional commercial enterprise, which from the point of view of political economy, serves (as any other enterprise) in order to extract money from the customers (people in this case) and to distribute money to its real proprietors (top level state bureaucracy in this case) after all expenses are paid. If this is so – why not let major customers to determine how much services do they want to buy or whether they want to buy them at all. This is probably a single recipe in order to diminish extraordinary and inefficient state expenditures bearing in mind that the State is also a monopolistic enterprise based on power and coercion. Probably property census in our contemporary realities is not relevant and should be exchanged in consideration for an income census democracy since it is mainly an income what is being expropriated by the State. More income, more taxes paid, more contribution to the state enterprise – more votes on price of the State and on management of the state property; less income, less taxes paid, less contribution to the state budget – less votes. In this way state property will start to acquire any “public” character based on public influence and will cease to be a private machinery for extortions in favor of the top-level state bureaucracy, any people being unable to control neither state property nor income redistribution through the State. Of course, nature, negative characteristics (if any) and social value (if at all) of income census democracy need to be examined in a much more detailed way. Particularly worth consideration how income census might shift a balance of power in society and whether it is not a threat to personal freedom for particular individuals and social groups or rather whether it is not a bigger threat for personal freedom than permanently accelerating state domination in society under representative democracy.
9. At the end of the day might be suggested a comprehensive inquiry into nature, options and outcomes of a general State cancellation or of the anarchism per se, whatever fantastic and unrealistic it might seem and sound.
Taxation systems here identified as well as the general guidelines for annihilation of the state monopoly proposed herewith are very basic and in no way pretend to be exclusive, comprehensive and even very realistic for the time being. Main idea, however, is rather to declare once again that it should be, there are and always will be ways to manage societal affairs with as little state involvement as it is only possible and one day may be even entirely without the State in its current form. Their investigation is quite a long-term and labor-intensive procedure, which, nevertheless, will pay back enormously because taxes collected by modern States are counted by trillions of dollars taken worldwide, while inefficiency, corruption, economic waste, injustice and a risk of comprehensive social cataclysms brought up by tax collections are beyond any comprehension.