Friday, December 7, 2012

Higher Taxes: Means of Societal Suicide

The New York Times recently reported, that there are few places to hide as taxes trend higher worldwide. As the parasitic welfare warfare states around the world are going broke, due to years of borrow and spend Keynesian policies, they are getting desperate to find any means of survival. And what better means than to fleece and slaughter their slave sheeple citizenry. The trend is clear world over e.g., after winning the French election, the socialist president Hollande has raised the personal income tax over income of 1 million euro to 75%, and eliminated the limits on wealth tax; US taxes are about to go up as the reelected Obama government is planning to deal with the looming so-called fiscal cliff with tax hikes; tax rates across Europe are also going high; and, the Indian government is also looking to plug the tax loopholes while simultaneously trying to change the tax laws retrospectively.

Those of you who understand the true nature of the state - as the gang of criminals - know, that these taxes are just nice names of a simple phenomena of day light robbery of citizens' wealth by the state officials. As Frank Chodorov said, Taxation is Robbery. Now, why I am writing this small piece today is to discuss the dire consequences of these higher taxes worldwide. I just finished reading J B. Say's A Treatise on Political Economy last night where in  book III, Ch. VIII he discusses taxation and its effects. While reading that chapter, I could see, that whatever Say said there is absolutely relevant with today's events of worldwide tax hikes. I thought everyone should read this chapter to understand what is going to happen next when governments all over the world are raising taxes. Instead of solving any problems, these tax hikes are going to result into economic disasters in future. Once you will read Say in full, this fact will become clear to you also. Economic laws are immutable and once they are violated, their dire consequences are sure to follow. Below I reproduce some important excerpts from Say's chapter on taxation. I think it is self explanatory so I will keep my commentary to minimum.

First, Say defines what taxation is,
Taxation is the transfer of a portion of the national products from the hands of individuals to those of the government, for the purpose of meeting the public consumption or expenditure. Whatever be the denomination it bears, whether tax, contribution, duty, excise, custom, aid, subsidy, grant, or free gift, it is virtually a burthen imposed upon individuals, either in a separate or corporate character, by the ruling power for the time being, for the purpose of supplying the consumption it may think proper to make at their expense; in short, an impost, in the literal sense. (emphasize added).
And then he dispels the myth, that taxation can somehow increase national wealth,
It is a glaring absurdity to pretend, that taxation contributes to national wealth, by engrossing part of the national produce, and enriches the nation by consuming part of its wealth.
 After dispelling this myth, he goes on to discuss the major characteristics of least bad taxes. But before that, here is Say on the best system of finance,
The best scheme of finance is, to spend as little as possible; and the best tax is always the lightest. 
You can easily see, that most of the governments today are doing exactly the opposite! Their spending is going through the roof, and taxes are going sky high too!

He then discusses the characteristics, and the first one is of our interest because it is directly relevant with our discussion of worldwide tax hikes today. Here is that characteristic followed by Say's further elaborations.
1. Of such as are most moderate in their ratio. 
He then discusses what happens when taxes are not moderate,
Taxation, pushed to the extreme, has the lamentable effect of impoverishing the individual, without enriching the state. We may readily conceive how this can happen, if we recall to our attention the former position; viz. that each tax-payer's consumption, whether productive or not, is always limited to the amount of his revenue. No part of his revenue, therefore, can be taken from him without necessarily curtailing his consumption in the same ratio. This must needs reduce the demand for all those objects he can no longer consume, and particularly those affected by taxation. The diminution of demand must be followed by diminution of the supply of production; and, consequently, of the articles liable to taxation. Thus, the tax-payer is abridged of his enjoyments, the producer of his profits, and the public exchequer of its receipts.
This is the reason why a tax is not productive to the public exchequer, in proportion to its ratio; and why it has become a sort of apophthegm, that two and two do not make four in the arithmetic of finance. Excessive taxation is a kind of suicide, whether laid upon objects of necessity, or upon those of luxury; but there is this distinction, that, in the latter case, it extinguishes only a portion of the products on which it falls, together with the gratification they are calculated to afford; while, in the former, it extinguishes both production and consumption, and the tax-payer into the bargain. (emphasize added).
As Say said, excessive taxation is a suicide for the society, and the coming tax hikes will not be any different. And there are possibilities, that these higher taxes will plunge our societies again back in the age of barbarism, as Say said,
But, should the abuses and complexity of the political system lead to the prevalence, extension, increase, and consolidation of oppressive and disproportionate taxation, it is much to be feared, that it may plunge again into barbarism those nations, whose productive powers are now the most astonishing; and the condition of the labouring classes, who are always the bulk of the community, may in such nations present a picture of drudgery so incessant and toilsome, as to make them cast a wistful eye upon the liberty of savage existence; which, though it offer no prospect of domestic comfort, at least promises emancipation from perpetual exertion to supply the prodigality of a public expenditure, yielding to them no satisfaction, and, perhaps even operating to their prejudice.
J B. Say was a classical liberal thinker, so he favored lower taxes, but today we know, that taxation itself - even low rates - is a drag on societal progress. As I said above, taxation is a robbery, and we must stop it. Lower tax rates should be seen as just one small step in the direction of no taxation at all. Abolishing all kinds of taxation is our final goal. Only after stopping this robbery can we see our societies and its inhabitants flourish again. Meanwhile, when the tax rates are sure to go higher in future worldwide, we must protect ourselves from the coming economic disaster. 

2 comments:

  1. Madhusudan, what do you think about the Islamic wealth tax called Zakat.

    Under this system, there is no income tax levied at all. A person needs to pay a nominal tax of 2.5% on his assets if they have been within his possession for more than one year.

    At the end of a year a person needs to calculate his total wealth, gold, cash, livestock etc and then if it is above a set value(a threshold), they need to pay 2.5% out of it as tax. If it is below that threshold then they need to pay nothing.

    More-ever, this tax payed is to be taken by the government and distributed to the poor people of the society. The government cannot make use of this money at all as salary for bureaucrats or national expenses and so on, so the politicians cannot misuse this money.

    ReplyDelete
    Replies
    1. Samix, is this Zakat compulsory? If you don't want to pay it, then, will they force you? If it is forced on people, then, it is robbery just like any other taxation. It is immoral to rob Peter to pay Paul.

      And there is only one way of helping poor people: increasing the total wealth - i.e., real economic goods and not money - of an economy, and for that you need an Anarcho-Capitialist society with its free markets. Only freedom can increase standard of living of people. As F A. Harper said, "The greatest economic charity is that which enables persons to become independent of alms and therefore most self-reliant and secure under freedom (here: https://mises.org/daily/3879). Making poor people dependent on alms is no charity. As the saying goes, a society can have as many paupers as it can pay for.

      Delete

Please leave a civilized and intelligent comment. Usage of bad language is strictly prohibited. I always welcome a healthy discussion.