I’ve just given a presentation in the Lagting on flat tax.
Simplifying it a bit, a flat tax is where everyone pays the same tax rate regardless of how much they earn. In reality, most flat taxes aren’t flat because there is usually an amount which you pay 0% on. This injects some progressivity into the system – the amount that isn’t taxed is a greater proportion of low earners’ pay, so their tax rate is lower on average. You also get rid of tax deductions (usually with exceptions) when you introduce a flat tax.
I’m against it for three main reasons-
1. It will increase inequality – increased economic inequality is linked to higher crime rates, poorer health, lower levels of trust and a mass of other bad stuff.
2. It isn’t fair to require the same tax rate of everyone regardless of how much they earn. Taking 30% from someone who lives on a low income has a far more dramatic impact than from someone with a high income. Those with lower incomes spend more of them on necessities such as food, accomodation, etc.
3. It will envitably lead to cuts in the welfare state.
Unfortunately, as usual, I was extremely nervous. I knew my stuff and I’d prepared, but it didn’t feel like it with an audience in front of me. The presentation went ok, but ok isn’t good enough for me. Still, I won’t get any better at it if I don’t persevere. On the plus side, I did manage to get some useful tips from my uncle-in-law (an undisputed master of the craft of public speaking) on the way home.
I find the suggestion that you can fight crime with taxastion to be facinating, mildly put. I’ve heard many arguments for taxation, but the crime fighting angle was new to me. As for the other consequenses you describe, they are hardly the result of economic inequality due to the lack of progressive taxation, but rather a result of a corrupt, abusive and oppressive state machine. The more corrupt, abusive and oppressive the state is, the more crime, poorer health, lower trust and “masses of other bad stuff” are you likely to encounter. The world, both present and historical, is littered with evidence of this very thing.
It is always fair to require the same amount of tax from everyone. What indeed could be fairer? To claim otherwise is to suggest that the people who earn more do not do so thanks to their own hard work and well placed investments(such as a higher education for instance), but have somehow reached their high income by the use of illegal and/or immoral means.
The most fair would obviously be to let people keep what money they earn and decide themselves what to spend it on.
Cuts in the welfare state is naturally a positive thing, as it decreases the power of the state. With that, the dependency induced into the people by the Welfare State policy lessens, making the individuals more free to manage their own affairs through voluntary cooperation on the free market rather than the coersive compulsion of the state.
I am sorry I missed your presentation though, but I was in the pool swimming my laps in the public bathhouse of Godby. God bless government initiative, eh?
On your three reasons
1. I think you are making the assumption that inequality includes poverty. And that it is the combination of inequality and poverty that causes these problems. But it is not shown that inequality leads to or aggravates poverty. It might even be that it is (forced)equality that worsens poverty.
2. I think most people think it is unfair to take 30% from the income of those on low income. How that shows that it is fair to take 60% from those with higher income is beyond me.
3. A small price to pay. After all, that which is morally right is more important than any (alleged)economics benefits. Is it not?
Just a quick reply, guys. I hope I’ll have more time later this evening.
Kaj,
Taxes go to pay for the police and courts, don’t they? If that isn’t crime fighting, I don’t know what is. There are indirect ways of fighting crime too. Crime rates are higher in countries with greater inequality. Why do you suggest that is? I’m sure the state is to blame somehow, eh?
Jakob,
No, inequality in itself causes problems. Various research has highlighted this. Putnam’s work on social capital in the US is a well known example. States with higher levels of ineqaulity had lower levels of social capital. His results could not be explained by looking at absolute levels of poverty.
Jakob and Kaj,
On fairness -
The impact of the same rate of taxation on lower incomes is greater – they have less disposable income and so on. Assuming you accept that we should pay tax (something I know Kaj questions), isn’t it fair to take this into account?
Andy
Some would argue that since the police and the courts have “too little resources”, meaning they neglect hundreds of thousands cases every year, that the state doesn’t value crime fighting much at all. But I’ll let you have this point due to the neat counter
I’m sure the crime rates are higher in say third world countries, where the inequality is much higher than here in Finland. But to suggest that could be corrected with the introduction of progressive taxation in said countries doesn’t seem plausible. Keep in mind that the worst criminals in those countries generally are the people in power, i.e the state itself. Its the corruption and state violence that has destroyed civil society, not economic inequality, which in itself is little more than a consequense of said corruption and violence.
Albert Jay Nock wrote an interesting article dealing with the criminality of the state. I believe I sent it to you by email. For those reading this discussion I’ll post the link again.
http://www.mises.org/story/2352
There is no evidence to support the claim that state intervention is the reason for the low crime rate in Finland, if indeed you wish to claim it is low. However, there is ample evidence that state intervention is the cause of crime, lawlessness, violence, poverty and misery all around the world today and throughout history.
On the fairness issue
This is really a philosophical question one can take to all kinds of interesting degrees. Asking everyone to pay the same percentage is fairer than a progressive rate. Bear in mind that the amount of euros paid still varies even in a flat tax system. If you really want to go the extra mile on this fairness thing you could demand that everyone pay the exact same amount of money. I’d love to see the central planners tackle that one
You could also try to apply the progressive taxation principle to other things, just for fun. Take schools, for instance. Now, some pupils are obviously more talented than others and this is obvious to the teacher. Should they be given more difficault exams, in the name of equality, since one can tax their intellect to a higher extent than the less talented kids?
I don’t dispute the fact that a flat tax, regardless of the percentage, would have a greater impact on people with smaller income. But is that unfair? No, I don’t think it is, it is merely a mathematical fact. Is it fair to take more, in some cases twice or thrice as much from people with high income? No, I don’t think it is fair as long as they earned their money in a lawful and moral way.
But that’s just me, and perhaps a few more
On fairness
The problem I se is your assumption on a fixed amount of tax income when discussing fairness.
To make an analogy, Ben the bully beats upp James and Jenny every lunchbreak. If it is assumed (and possibly supported) that Ben needs to throw a certain number of punches each day, one might think that James should bear the brunt of the beating (as he is stronger). But supporting Bens beating of James in order to protect Jenny is not accepteble from a fairness point of view. Because it is simply not fair that Ben beats up James, period.
The assumption of a fixed amount of tax income is used to avoid the question of the fairness of taxation itself. Leaving only the question of who to tax.
Jakob,
Needless to say, given that I don’t see taxation as akin to violence, I don’t think your analogy is very appropriate. I’m not sure we can really debate it because it comes down to a fundamentally different world view, but I’d be interested to hear your argument as to why all taxation is unfair.
Andrew
I am glad you of your interest as many would reject radical discussions like this without rational thought. And I would not think different opinions, even strong ones, are hinders to debate. To the contrary, it makes it much more interesting.
The reason I find taxation akin to violence is that refusal to pay taxes is meet with gun carrying police officers and time involuntary spent behind locked doors. This makes it very clear that it is not donatations we are talking about. But could it be that the money is owed to the state and the police is merely collecting a debt? For a debt to exist there would have to be a previously agreed upon contract. The contract theory of govenment was often used to justify monarchies. The problem is of course that no such contract has ever existed nor does it explain how a present population would be bound by previous generations contracts. With the advent of democracy it was clamied that the contract laid in the act of voting. But evertbody is still included in the supposed contract, whether or not they want to vote. It can therefore still not be considered a voluntary contract. And if there is no contract, there can be no debt.
And thus taxation is theft.
I would argue that the fact we have a democracy gives legitimacy to the tax the state collects.
If a group that wants to reduce to a bare minimum, or even abolish taxation can get enough support from the public in a democracy, it can be done. Indeed, there are states where rates of taxation are very low/virtually non-existent for some groups.
However, the view that all taxation is theft is a minority one. There are many that view it as a necessary evil (not including me though), but very few who believe it is unnecessary altogether.
If we follow through on the idea, we have to conclude that there can/should be no state at all (something I suspect you agree with). I don’t see that as tenable. I’m reminded a little of Churchill’s famous claim that democracy was the worst form of Government except for all the other ones that had ever been tried.
I do not belive that democracy, monarchy, funny hats or shiny crowns legitimises otherwise unjust behavior.
That the ability of a democratic state to reduce or abolish taxation would justify it is mistaken. It confuses the will of individuals with the will of the state. But even in a perfect democracy the will of the state can only be seen as the will of the majority, and in the real world, the will of a few intrest groups. It is therefore not the will of the entire population and not a voluntary act. And as mentioned there is no contract were the minority has given approval of the rules of the game.
The necessity and the morality of taxation are two different subjects. The view that taxation is a necessary evil (that I do not hold) fully supports my point. I have only stated that taxation is unjust, not that it is unnecessary. I am sure there are peolpe that supports taxation even though they se it as immoral as well as people that opposes taxation even if they belive it to be (more or less) necessary. The fairly long discussion on the necessity of taxation is probably best left for an other time.
Taxation is the very epitome of the evilness and immorality the State has always represented. The Tax Office is the great bastion where the bloodsucking beaurocrats dwell, financing their own fiendish activity with the very capital they forcefully extract from private individuals and enterprises, who toil under their unjustified, bloodridden and violent rule.
The aim of the state, no matter be it ruled by an absolute king or a “democratically elected” president, is and has always been power. To further its dark cause it caters to the vampiric and equally immoral drones who cherish in the system created by their idols, a system that sees wealth redistributed from an ever shrinking minority to an ever growing majority. Democracy is an illusion, a sham and the work of charlatans, seeking to win legitimacy for all the blood they have on their rotten hands.
Sitting in their thrownrooms the high and mighty send their military wings to persecute thier critics. They laugh at the ignorant drones who keep on toiling under ever growing burdens of taxes, fees and regulations. They reward their faithful subjects whose support enable them to enjoy the luxuries that comes with power. Safely they sit, behind impenetrable walls of red tape, feasting on the suffering of the people so far below them.
To Hell with them all, I say, for surely there is no other place in myth or reality which could have spawned such utterly evil creatures, so utterly void of any kind of human decency, morality and sense of right.
Jakob,
It’s late, so I’ll be keeping it short I’m afraid.
I guess I don’t accept that an individual’s wealth/property rights, unlike human rights, are absolute. We aren’t just indivduals, but part of a larger community. Individuals don’t create their wealth in isolation and the natural resources they rely on are to some extent also the communities. A genuinely democratic state therefore has a good claim to set tax rates and collect taxation.
I must say that although I find your views frighteningly extreme, they do at least get you to think about basic assumptions you take for granted.
Kaj,
If mises have a propaganda department, which I suspect they do, you should definitely apply. Fabulous English, though it looks somewhat as though you are leaning towards losing your grip on reality and sanity
Dealing with the Finnish Tax Office is enough for anyone to lose their sanity. Quite frankly, the amount of patience I’ve shown in my dealings with them should earn me the Nobel Peace Prize. My previous post was written after my latest phone conversation with one of the officials, the seventh in line.
As for the actual discussion. Human rights are deducted from the indivudal property rights. Your rights to your own life, body and mind are part and parcel with private property rights. No one has anymore claim to your life, body and mind than to your physical or monetary property, and vice versa. They are one and the same.
You are quite right in stating that indivuduals do not create their wealth alone. The Free Market is about voluntary, mutually beneficial cooperation. The community of people is thus of the utmost importance to all indivduals who wish to engage in commerce or simply enjoy the commodities and benefits of the modern, civilized world.
What the state has to do with all this is beyond me. There is no need for it, and certainly not any moral basis to it. The state is an arbitrarly defined territorial monopoly of violence, which borders generally are decided through war. It has no claim on any natural resources which coincidentally happen to exist within its boundries. If I find gold in an area, and invest in a mining enterprise the proceeds of the excavation belongs to me and my fellow investors. No one who hasn’t invested in the enterprise has any claim to anything I dig up.
I again refer to Albert Jay Nock’s article on the Criminality of the State. Whatever legitimate claims any “genuinely democratic” state may have in the views of some people, the vast amount of criminal activity which is inate in all states, past and present, is more than enough to nullify said claims completely.
Andrew
It does indeed seem that we have differing views on property rights. And this would account for the different ethics we hold.
I am well aware that my views are radical. But after much contemplation this is the answer I have reached. And belive me, when I realised that I no longer supported democracy, I was quite shocked
i read some similar in other blogs. but i do not think the same. sorry. maybe check better some more sources to point the thing out. community resources
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