This article was written by The Conversation. Since it references my work, and I have a lot of sympathy with its argument, I share it here:
who is a senior lecturer in Taxation, Te Herenga Waka at the Victoria University of Wellington, New Zealand,. It first appeared in the Australian (and I presume, New Zealand) edition ofRhetoric plays an important role in tax debate and therefore tax policy. If your side manages to gain traction in the public imagination with labels such as “death tax” or “dementia tax”, you have gone a long way to normalising the labels and winning support.
Some truth underpins these particular labels – an estate tax is triggered by a person's death, and the United Kingdom's abandoned levy for end-of-life care would have been particularly relevant for dementia sufferers.
Nevertheless, these tags are essentially political messages and we should expect unbiased media to use neutral terminology. Fair reportage would not, for example, repeat the extreme libertarian claim that “tax is theft” – a baseless slogan incompatible with the rule of law.
However, both reputable media and politicians of every stripe invariably use the phrase “taxpayer money” to describe government funds, despite the phrase having no constitutional or legal basis.
This article argues that truth-based media should avoid the phrase, and progressive politicians should recognise they fall into a conservative trap when they repeat it.
Taxpayers don't own their taxes
Richard Murphy, one of the founders of the UK's Tax Justice Network and author of The Joy of Tax, explains that “taxpayers' money” is the money left in our pockets after we have paid taxes that are legally due. Money payable through taxes is the government's property.
This is quite easy to prove – try not paying your income tax and see if the courts will enforce government property rights in that money.
Murphy also observes that “taxpayer” is typically understood as “income tax payer”, thereby implicitly preferring high income earners while excluding beneficiaries. But a goods and services tax (GST) ensures everyone is a taxpayer, and indirect taxes disproportionately affect the poor.
Similarly, at a local level, “ratepayer” has become synonymous with the propertied voice to which councils should pay heed, even though renters (rather than the registered ratepayer for a leased property) bear the effective burden of local rates.
If the government is the legal owner of its funds, then, does it hold tax revenue in trust for taxpayers? Not at all. Subject to the rule of law, governments can do what they choose with their money.
Elections decide how taxes are spent
Self-appointed watchdogs such as the Taxpayers' Union claim to bring government waste to public notice. Rightly so – as citizens, we should demand proper stewardship of government funds.
But our actionable right as electors is to vote a wasteful government out of office. The electorate as a whole, rather than an ideological interest group, determines the size of government we should have.
Unlike trust beneficiaries, we do not have an equitable interest in the government's money. If it were otherwise, groups of taxpayers might have some claim on the government to spend or not spend its money in particular ways.
For example, paying taxes to fund belligerent activities is problematic for pacifists, notably certain religious groups. A Religious Freedom Peace Tax Fund Act, which has been regularly introduced to the United States Congress, would permit dissenting taxpayers to assign the defence portion of their taxes to supporting peace work and social services.
Proponents of the legislation have not sought to pay less tax than their fellow citizens but to direct how their tax contribution is spent. These attempts have failed, as they must do. Democratic political communities permit dissent, but nonconformism does not extend to directing how taxes should be spent.
Tax is part of the social contract
In The Variorum Civil Disobedience (1849), a reflection on his imprisonment for failing to pay a highway tax, Henry David Thoreau recognised that an individual citizen can protest against government by refusing to pay tax (and accept the consequences), but they cannot treat the government's choices in its expenditure as if it were a cafeteria. He wrote:
It is for no particular item in the tax-bill that I refuse to pay it. I simply wish to refuse allegiance to the State, to withdraw and stand aloof from it effectually. I do not care to trace the course of my dollar, if I could, till it buys a man or a musket to shoot one with – the dollar is innocent – but I am concerned to trace the effects of my allegiance.
Liberal democracies are based on some form of metaphorical social contract, most obviously manifest in the constitution. Under this arrangement, parliamentarians are elected representatives, not agents for particular groups.
Like any government that fails to comply with the basic values of society, groups that seek to control government expenditure outside the electoral process can be seen as bending, if not breaching, the social contract.
A handbrake on decisive action
A progressive government should reject the suggestion that its funds are not its own to use as it sees fit for the betterment of society – as always, in accordance with New Zealand's two fundamental constitutional principles of parliamentary sovereignty and the rule of law.
Kowtowing to a myth of “taxpayer money” may act as a handbrake on decisive action. We are taxed in accordance with statutory law. If Inland Revenue seeks to collect more from us than is due, we have access to various tribunals and courts.
These legal rules and processes determine what is mine and what belongs to the government. Broadly, we are free to deal with our own property as we see fit – and the government is too.
Media and progressive politicians should stop perpetuating the untruth that taxpayers retain some residual property interest in the taxes they pay. Taxpayer money is nothing more than their after-tax property and the government's money is its own.
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Excellent – and thank you.
I peddled this crap about taxation for ages working in housing.
I started to question it because initially I saw politicians competing over low taxes and the apparent effect that this was having on services. It seemed so stupid.
I saw the Iraq war and did not see my taxes go up. How did they pay for that?
Then I saw the 2008 crash and saw QE and did not see my taxes go up (but saw my wages going down from 2010). So the Government was able to get money from somewhere – but how?
And then I started coming here – thank goodness – because I began to find the truth.
Our services were not being cut because of taxation, but to stimulate the private sector and give the ruling rich elite more opportunities to grow their money.
It was a deliberate choice to underfund pensions and other services so that the rich could live off us like the parasite they are.
I hate the phrase – it implies that non (income) tax payers are second class citizens with less of a claim to decide (via the ballot box) what tax/spend policy should be. The BBC (and other broadcasters) really should stop using this false and loaded term.
I could be wrong, but I suspect that the rhetoric about government funds being ‘taxpayers’ money’ is one of the many things we owe to Mrs Thatcher and her allies. I seem to recall the Tories banging on about that endlessly in the late 1970s/early 1980s (and since, of course).
The phrase “taxpayers money” certainly is a very effective emotive right-wing propaganda tool and should be challenged on every occasion it is used. The media and all commentators for that matter, should be challenged to see the absurd and anti-democratic nature of this phase whenever it is trotted out by lazy pundits.
Proudon’s slogan “property is theft” was certainly a stirring slogan to promote the political theory of anarchism in the 19th and 20th centuries. Of course the worship of private property and the defence of these rights at all costs is one of the bastions of free market capitalism and any criticism of the inequalities and injustices arising from its undemocratic nature is not counternanced in polite society today.
Nominally the purpose of taxation is inflation control & behavioural nudging.
I have hypothesised elsewhere that high(er) marginal rates of tax on the working classes are maintained not for the control of inflation (we have none) but to keep the working classes in a state of penury where they are required to resort to borrowing money from Finance Capitalism and are “encouraged” to take employment at wages they might otherwise reject.
It seems to me that raising the lower tax boundary to say, £36k would be:
1) Very popular.
2) Entirely in keeping with the magnitude of stimulus our economy requires.
You’d think that any government and particularly a Tory government would rip your arms off if you offered them the chance to lift half the population out of taxation.
Wealth is relative. You are only rich because others are poor.
You could, if you were of a mind, increase your own relative wealth by increasing tax on groups other than your own.
That would also crush services or lead to hyper inflation
Sorry – but that is wholly unrealistic
Why would it crush services? A higher deficit may be required but there’s no inherent reason for services provision by government to change because you low income tax.
Why would it cause hyperinflation? Personal debt is at unsustainable levels, people are borrowing to live, borrowing to consume. 36k won’t even secure you a mortgage on the average priced house in the UK. An increase in the incomes below that threshold just might reduce that debt to reasonable levels.
Tax is required to maintain balance in our economy. Increase IT to a £36k threshold and three things follow
The first is there will be too little Rac to maintain balance
The second is VAT will go up to compensate, which suits the wealthy very nicely
Third, the same wealthy will then argue that those who do nit pay should not vote
This is a very nasty trajectory