This is the second in a series of reactions to my recent engagement in a dispute on the nature of modern monetary theory (MMT). The first was here.
When I first became involved in tax justice issues, two decades ago, one of the things that I had not expected was the level of absolute political hatred of tax that I witnessed from those who promoted tax avoidance, tax havens, and the role of the tax profession in both.
The sentiment that was often expressed, including quite openly at conferences by well-known lawyers of the period, was that all taxation was theft. Their consequent suggestion was that they were quite entitled to undertake transactions in any form that they could to prevent that theft from taking place.
Unsurprisingly, I found that opinion abhorrent. Implicit within it was the idea that the state was malign. It is necessarily implied that the law was imposed. It presumed that government was always in opposition to private interests.
I did not, and still do not, agree with any of that thinking, which I always associated with those who I considered to be on the far right of the political spectrum.
I believe in democracy.
I think that it is possible to have representative government.
I suggest that democratically representative government is not only benign but positively beneficial to the well-being of people.
I think the government can and does enhance freedoms rather than restrict them.
I believe it appropriate that we provide powers to government to sanction those who act against the common interest.
I suggest that evidence supports his thinking: a majority of people participate in general elections in the UK and most countries where there is freedom to do so. I do not think that is because people are brainwashed into doing so. I think it is because they believe that this system is the best chance they have of securing good government, which they want.
I also suggest that most people voluntarily, and even willingly, pay the taxes that they owe. That is not because they cannot think of another use for the funds in question. Instead, it is because they understood the benefit from making that payment, which, for the vast majority will exceed the cost of doing so precisely because communal action to supply universal basic services is always more efficient than differentiated private provision.
In that case, not only did I reject the idea that taxation is theft, but I also promoted the idea that it is voluntarily accepted through the democratic process for the benefits that it supplies.
Amongst the ideas that became associated with tax justice as a consequence was the suggestion that tax havens, and those firms and individuals who work from them to promote tax abuse, work to undermine democracy. This was because at the core of the work of such places and people is the belief that it is their job to undermine the purpose of democratically elected governments. I still think that is the case.
Saying all this, please do not think me naive. I am, of course, aware that the government can be corrupted. Totalitarian regimes do that. So has neoliberalism, with its deliberate intent to deny people choice whilst at the same time forcing them to buy services that the state should supply. I am, of course, aware of this. That awareness is one of the reasons why I have written this blog for so long. I oppose that corruption of the democratic process, which also happens to come from the right-wing.
But, and let me be explicit about this, opposing that corruption would be pointless if I did not think that a better option was available. I do think that better possibility exists.
I believe that democracy can work.
I believe that a fair and just tax system is possible.
I believe that a democratically representative government that can deliver a fair and just tax system will build a foundation for a better society.
That is what motivates me.
That is why I am also intolerant of the intolerance that argues otherwise.
But I am curious as to what you think. Three polls:
Is tax theft?
- No (93%, 327 Votes)
- Yes (5%, 18 Votes)
- I'm abstaining, but show me the results anyway (2%, 6 Votes)
Total Voters: 351
Loading ...And then:
Is democratic government benign?
- It can be, but it can also be corrupted (90%, 312 Votes)
- No (5%, 18 Votes)
- Yes (5%, 16 Votes)
- I'm abstaining, but show me the results anyway (1%, 2 Votes)
Total Voters: 348
Loading ...And finally:
Can a democratically representative government that can deliver a fair and just tax system be the foundation for a better society?
- Yes (97%, 342 Votes)
- No (2%, 7 Votes)
- I'm abstaining, but show me the results anyway (1%, 4 Votes)
Total Voters: 353
Loading ...
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Was the hatred of tax an international attitude? I have certainly come across it from USA (non-tax professional) acquaintances, but not here.
I most certainly have
I think you are simplifying the point. Taxation is not theft because it is mandated by law. If the state was to confiscate a person’s assets without a proper legal basis, that would be theft.
Here is a previous discussion on this in a slightly different context.
http://www.taxresearch.org.uk/Blog/2016/02/25/why-does-hmrc-need-a-boss-who-thinks-tax-is-legalised-extortion/
As I said back then: “tax is a legalised form of demanding a payment, enforced using the power of the state, in a manner that would otherwise be illegal”
We might still disagree about it, but I think that is just a fact.
As to the state, I agree, a modern democratic state is (or at least should be) benign. It should be there to provide the essential public services that its citizens want and need – from defence and law courts and police, via roads and parks, to social security and education and health – to provide the framework of social and physical infrastructure that allows everyone to flourish.
I am really not sure we are disagreeing…
Well, back then you replied “You mean you think democracy is about extorting, not freely made choice? […] Think about what your comment means: it is only appropriate to think as you do if it is asumed we have no power over legislation. As a matter of fact we do. This is not then extortion: this is cvoluntary payment as we can collectively stop it.”
Sorry, but tax is not voluntary, even if it is imposed by a legitimate democratic process. Just as (for example) driving on the left of the road is not voluntary. The whole point of the legislature passing a law imposing a tax is to make it mandatory.
I stand by my original comment
But I agree it is not voluntary: but it is legal and it is not theft
What is more, we do have choice over the process, but it must be matched by accountability
I think this issue about tax being theft or not, falls into the same category as did the Paradox of Intolerance yesterday.
Through our political system we enter into a Social Contract to do collectively the best for the whole of society. Tax is an implicit part of that contract, in order to make the system work.
To me Richard is highlighting those individuals and organisations who choose, quite deliberately, to break that contract by depriving the collective wellbeing of society their fair contribution.
Under those circumstances correcting the issue is not theft, it is the correction of a situation after those tax avoiders have voluntarily broken the social contract on taxation themselves.
We are on a wavelength
People who think tax is theft presumably think they can own money, instead of being just the creditor of the issuer of the money in their possession. The issuer is always entitled to its eventual return, one way or another. It is difficult to undertand why a lawyer cannot undertand the principle. The lawyers should be compelled to read Christine Desan’s ‘Making Money’ before even thinking of commenting on money. Desan is a lawyer with a deep and schlarly understanding of the relationship between money and the law.
Agreed
Is shoplifting theft?
The state provides essential services. If charging for goods and services is theft, then presumably taking them without paying is OK?
Those who state tax is theft then presumably have no desire for the state to step in and enforce contracts, bail out banks, clean the streets etc etc?
What a stupendous question.
1. Any lawyer who calls tax theft, should be referred to the Law Society to re-sit their exams. Ignorance is no defence as any lawyer will tell you. For a lawyer to call tax ‘theft’ is to deny state sovereignty – the same sovereignty used to create the very laws and the post the lawyer occupies to practice law in. It’s an untenable position – even if they are being paid well to ignore the truth. My view is that any lawyer stating this is being seditious and should be struck off as it is a negation of state sovereignty. Much of what the finance sector does is financial sedition after all. That’s why they need to be taxed more – not less.
2. There are lots of problems with the perception of tax throughout history (then and now) and the concept of ‘making money’. Desan teaches us is that pounds sterling was created by the state. Money was therefore ‘made’ by the state and it is owned and legitimised by the state. Typically, capital self-aggrandises and says that it sets out to ‘make money’. Bollocks. The money has already been made. All the private sector does is move it around – albeit badly. And the other product the private sector creates is called ‘credit’ – something that has monetary value but also a cost attached to it (where banking makes money for itself and hopefully the tax man) and is known for its inflationary affects and is too readily used instead of state money which is technically free and less inflation producing because it’s aimed at non-profit making areas of the economy (I wish).
3. Tax was used to raise funds I suppose at one time if Henry VIII wanted another wedding and it could be unpopular . But not now. In a world awash with gross flows of digital cash that can only described as tsunami levels, tax has a different role. It’s role is to destroy money in order that the economy does not overheat (it can act as controlling element of the ‘velocity’ of money, like the cooling bag did on certain machine guns?).
4. But it’s more complicated than that. For a long time we were taught that taxes paid for stuff. This became more of a problem when stupid politicians started to play around with tax rates in order to get votes. However, it took the greed and stupidity of the private banking sector who needed to be bailed out and huge QE to teach us once again what Desan’s history has confirmed: that money can be made by a sovereign currency producing state any time it wants to – if it wants to. The cat was out of the bag and certain groups have been trying to put it back in ever since. That is why the assertion about tax in (3) is true.
5. But……………it’s even more complicated than that! If we don’r really need tax to pay for things, or it just controls inflation – is that it? Well, no. Over time, terrific amounts of capital have been accumulated because of a negative view of tax and lower tax to usually wealthy groups (‘lax tax’). This capital accumulation is now so big that it is a threat to our democracy (it is spilling over into politics) and to fairness in society. So, a new role for tax is in curbing the power of undemocratic forces in the world that are powered by wealth who wish to capture democracy, and that also constantly seeks to increase its share of the money supply by insisting on buy outs, privatisations, redundancies, poor working conditions (there is nothing Marxist about what we can see with our own eyes).
6. Moving on now, it is a well known fact that when the private sector creates something it likes to exploit it. Out internet was essentially created by state funding but you won’t hear Jeff Bezos talking about that often. The polio vaccine was created and released as I understand it as a public good. Instead, the private sector will want you to pay for what it has created – even if it has not created it as we see in the way patents are played around with where they try to patent God’s work just because they’ve found it!!
So, using the private sector’s own logic, having created the pound, the dollar and even the Euro, the issuing bodies of a currency have a case to charge for the use of their currency. Of course the private sector will cry foul of a government charging for the currency because its all double standards for them anyway. But why should the state charge when they can just create it (except for the reason above)? What a government and even the ECB get out of issuing money is an economy, a society, infrastructure – which should lead to stability of some kind – and yes – peace! Happy people! Social problems being addressed. Quality of life. Care for people and the environment maybe? That’s the payback on state money. It gets spent to make things happen, not to make someone more powerful by accumulating it. That’s how it worked in the first place – ask Desan! How else did this little country become so powerful?
Personally I don’t see the need for a narrative that creates users of a currency that pay for it by paying tax. I’m sorry if this is too radical a departure but I think we should not go down that path. It’s too redolent of private sector thinking, it undermines just how revolutionary Desan’s history of money really was at the time and it also I think undermines the positivity of MMT. And it might rob us of new ideas we need – or old ideas renewed.
However, the state as money maker can try to have a moral objective/tithe attached to its money production, rather than a financial one?
Perhaps the best way to express this is to tax money therefore based on how it is used in certain applications. My view is that money used for speculative/derivative banking should incur transaction taxes that reflect the risk? Other than that the notion that tax is a financial ‘tithe’ on its every day creation and use is not a good one.
7. Throughout my life I’ve known people who don’t mind paying taxes and those who don’t like it. Those who don’t are either very well off or those whose income is not regular ( a point worth noting). Paying taxes should be a point of pride – it’s an expression of nationalism in my view as neutral as listening to nationalistic music.
My view is that Tax had come into its own right now. And I just wish we could acknowledge it more as a society and not just here.
We should tax to control money which is a state creation of which it has a legitimate interest to:
1. Try to keep inflation in check.
2. Keep capital in its place serving society and not itself – protect democracy.
3. Reduce the gaps between the different economic strata of society – I don’t mind the rich – but how much is enough?
4. Tax appropriately and in line with the aims and objectives of the state money being used – investment should be taxed lower than speculation which should be higher. Money as a resource needs to go where it is needed – not where there is already enough. We also need to watch out for crime and money laundering.
Thank you.
Another great comment
Thanks
Fabulous work Pilgrim
Thank you. Your paragraphs 5 and 6 are so important and so rarely stated.
I can’t see how this issue arose from an MMT dispute. As I see it the legitimacy of tax is the same whether you take an MMT view or think government finances have the same accounting basis as domestic housekeeping. Paying your taxes (and not breaking the law) are your half of a social contract you have with the government whereby you share the benefit from services provided for the public good.
Your lawyer colleagues presumably acknowledged the justice system was a public good, and it is hard to imagine they never set foot (or tyre rubber) on a publicly funded road. They may have only ever used private education and healthcare themselves (though the latter is extremely unlikely in Britain) but it is almost certain their legal practice benefitted from staff whose capacity to do the job will have come from public education and healthcare – not to mention all those in the supply chain for their food and housing.
No, they did not acknowledge the tax system was a public good
And the latest post shows how the ideas develop and why they are linked.
Tax was simply theft, just as MMT says it is imposed violently. The similarity in thinking is what I am highlighting.
People are happy to take from the state: defence, legal system, education, healthcare, infrastructure, etc
But they are not prepared to give back.
I think this an “entitlement” mindset, that is seen mainly in those who do not credit the state with providing them with the ability to prosper.
I am very simplistic in some ways and view the payment of tax as effectively my subscription to what I hope is a decent society. Not quite working out that way at present, of course.
Not simplistic at all, I would say
Maybe I’m different from others here, a fair tax system, strong public services, low crime, good public health are the outcomes that I desire. The political system is not the be-all and end-all to me. There are some incredibly badly functioning democracies in the world plagued with cronyism and kleptocrats but I also understand non-democracies are extremely prone to personality cults too. I will always generally steer towards a representative democracy though but it’s not impossible for a non-democracy to deliver what’s needed. I should add that in all cases liberty and private property should be the core of any political system, these are human rights after all.
Thought provoking column!!!
My own preferred changes are :
1. Capital gain taxes should be progressive and equal to the taxes on labour.
2. Upon death the entire estate should be treated as if sold and be taxed at the income rates. The beneficiaries have to understand that the sudden income for them is a windfall and unearned.
3. Land taxes should be added to property taxes. We all need to pay for the privilege of monopolizing a lot, and pay for the added value to the lot by the investment of the community – streets, hospitals, schools, fire stations, museums, public transit, libraries, police, …
I would apply CGT on death – that is fairer than income tax.
I remain concerned at haw regressive land tax can be for some, and it will be passed on to tenants.
I too was concerned about the tenants, but I was shown that there is proof that landlords already charged with the market will bear, so they can’t pass on the tax. Rather they would lose tenants.
I suspect that the tax is passed on: when all landlords suffer it the market adapt