Out of interest – genuine interest – has there been a post-war Labour government – or, for that matter, a Democratic administration in the US – that has reduced the tax burden on the poor?

“…we don’t have a problem with low taxes…for the working class.”

How do you demarcate the working class from others?

I echo the sentiment in this article, and add another warning:

The left in America for too long assumed that the figures on tax would speak for themselves: that most Americans would just realise that they were not in the top tax brackets, and that they therefore had economic reasons to support higher taxes on the rich.

This was stupid.

1. It didn’t take account fo the fact that most people think they are better off, and higher up the ladder than they really are. The estate tax, which pre-George Bush only affected the top 2% of wealthiest Americans, was thought by some 60% of Americans to apply to them. Ignorance is a killer for the left, and a boon to the right on issues of tax.

2. It didn’t take account for the fact that most people *aspire* to get richer – and have a thought-process which goes: “well, if I get rich one day I don’t want to be taxed more”.

The second point shows why it is dangerous to adopt a retaliatory, aggressive “let’s get the rich” attitude, and why it is likely to be far more productive to emphasise the social justice aspect of tax; that is, make the argument that tax is important because we all live in a society and should all pay for its upkeep – those who can pay more being required to do so as a matter of justice, not a matter of resentment from the poorer.

Though resentment we may indeed feel at a personal level, I strongly believe we will make the most progress by keeping it out of the political arguments and campaigns.

”
“…we don’t have a problem with low taxes…for the working class.”

How do you demarcate the working class from others?
”

Well, how about income? you know, those earning below the median income could be scaled as progressively working class according to how little they earn, relative to the better off in society.

Not very hard, is it? So stop implying it can’t be done as a way of weasling out of arguments.

One reason why anti-tax rhetoric has worked so well for the Right in the USA, and Paul Sagar’s social justice argument [3] so poorly is racism. Across the pond poverty is widely thought to be something that affects black people. Aren’t social programmes weakest – and conservative support strongest – in the South?

Mr. Eugenides @1:

Has there ever been a Democratic or Labour government which was not dominated by people earning considerably higher than average wages?

As a matter of fact, yes, several Democratic governments (and two Republican ones) have moved heavy taxation away from the working poor towards the robber barons but that has only ever been politically viable during periods like wars and the Great Recession. The next administration will always move it back.

One also has to remember the uniquely mythologised political relationship Americans have with the concept of taxation.

Paul Sagar @4:

“People below a median income” is in no way a definition which matches the specification, which is ‘working class’. That has quite a specific meaning, and ‘people who earn less than is typical’ ain’t it. In fact, most working class people who have a job at all earn about or slightly more than the median wage [1], because most people earning less work in tertiary industry (cleaners, McJobs, call centres, etc.) not in primary or secondary (which is where the definition of ‘working class’ comes from).

The “working class” in the high industrial era when we still had a considerable farming infrastructure were about 70-80% of the population. That’s why giving power to the working class became synonymous with giving power to the people. They are now circa 20% and rapidly falling: we need to change the terms of debate. There’s lots of poor people who are not ‘working class’. Industrial definition paradigms become flawed as soon as you stop being an industrial nation.

[1] A good plumber or sparky can earn three to four times what I do as a publican. I have a degree and they don’t. Go figure. Also, I should note that the people this mostly does not apply to are factory assembly-line workers and similar. They get paid shit to do a nasty job, and having been one I sympathise. On the other hand, as a national economic and political consideration, that demographic is larger than (say) Wiccans, but smaller than (say) Muslims.

I’m still just childishly amused that they are calling themselves teabaggers.

Mike @5:

I refer the honourable gentleman to the comment above referencing the unique political mythology of taxation in the US, and also to suggest it’s a little more complex than that. Republican support in the South is only partly to do with racism: it’s more comprehensively to do with religious intolerance than most other factors. The Republican Party as a matter of policy have had to pull back from overt racism. They replaced it, during the 90s, with an overt bigotry they can still get away with: fundamentalist Christian politics. The Bible Belt has been there for much longer than the South has been dominated by Republicanism; it was only in Nixon’s day that the Southern Democrats split and switched sides (indeed, over race) and the Bible Belt has been that way since 1906.

My personal bugbear with American tax politics is Paul Sagar @3′s second point: but he seems to have missed that this didn’t happen by accident. The idea in American society that you can’t tax the rich heavily because one day you might be rich has always been there but it only started to take a comprehensive grip on the voting habits of the urban poor in the 80s. It is the equivalent piece of social revolution to Thatcher’s propaganda which convinced the British working poor that they too could have middle-class children, in spite of the fact that the only way for them to do so was to begin a massive debt culture. The right will do things the left won’t stoop to: that’s why the right keeps winning. That’s a truism, but they get that way by being true.

1- “Out of interest – genuine interest – has there been a post-war Labour government – or, for that matter, a Democratic administration in the US – that has reduced the tax burden on the poor?”

Have there been any which didn’t?

Off the top of my head:

Obama’s just about to do a tax cut of about $400 for people on average and lower incomes.

If you include tax credits (and I don’t see why you wouldn’t) the current Labour government and Clinton both “reduced the tax burden on the poor”.

That’s even without considering how extra social spending and redistribution of wealth from rich to poor acts in practice to reduce the tax burden on people on lower incomes.

You may like to read Roy Edroso’s take on the matter. It seems that while tax is the issue they talk about on the news and talk shows, that’s not really what they talk about at the actual rallies:

And if past events and present promotion are any indication, on April 15 what they’ll be hearing is that the President of the United States is a socialist and/or a communist who ignores the Constitution and must be resisted as a usurper with revolution. There’ll be complaints about high taxes, of course, but everyone complains about that. The main message is that Obama is an illegitimate leader, and that the folks holding the signs, notwithstanding the electoral results, are the true voice of America. [...] But if Malkin, Reynolds, or the rest of them went up front and said, “We represent a national movement that believes the Muslim pretender Barry Soweto to be a fake President, believes the rich should hole up in a gulch with a perpetual motion machine until the poor cry for them to rule (unless the rich want to rule socialistically, in which case never mind), and wants paupers taxed the same as billionaires,” they might receive a different kind of publicity than they’ve been getting.

There’s not much point trying to engage them on issues of economic justice, because that isn’t really what they’re upset about.

Also, this post on Pandagon may shed further light on the true motivations of the teabaggers, whilst this article on Exiled looks at the organisations behind it all.

[8] JQP – quite so – that’s why you won’t find the word “Republican” in my post [5]

@10: I acknowledge that there’s a lot to be said for any view which takes these people at face value, as complete wingnuts. On the other hand, if you look at some of the comments in the articles linked to by Edroso, or in the comments of Edroso’s own article, there is a genuine sense of confused class consciousness, of the type around which Ron Paul based his campaign. So much so that, in responding to someone who calls Obama “President Barry”, one commentator asks, “Are you going to vote for Ron Paul or Ralph Nader next time round?”

It may not be straightforward ‘economic justice’ that these people are complaining about – but even the arguments about Obama’s nationality and parentage have social and economic roots. It’s no accident that, while some of the tea-baggers are professionals, some of them are also dirt poor. The tea-baggers are a lash-up between these two groups, groups which have little in common – and the latter of which especially the Left should make a priority of winning over as a means towards organising and pressuring the Democratic political leadership towards some more radical measures of redistribution of social policy.

John Q. Publican, @ #8

Yes, you are of course right. It’s closely bound up with the pioneer spirit and the American Dream.

Which means it’s a different game over here – but not that different that we can afford to ignore the lessons of the American left’s failings.

The first thing that sprung to mind when I heard about the protests was – wow, rightwingers in collective protest action? Like the anti-war marches then? I wonder if they spot the irony given Fox was so derisive of those protests.

Paul Sagar @ 3:

2. It didn’t take account for the fact that most people *aspire* to get richer – and have a thought-process which goes: “well, if I get rich one day I don’t want to be taxed more”.

The second point shows why it is dangerous to adopt a retaliatory, aggressive “let’s get the rich” attitude, and why it is likely to be far more productive to emphasise the social justice aspect of tax; that is, make the argument that tax is important because we all live in a society and should all pay for its upkeep – those who can pay more being required to do so as a matter of justice, not a matter of resentment from the poorer.

This argument is, in my opinion, ripe for some revision. Whilst there are going to be some people (Big Brother contestants and the like) who triumph despite/because of their lack of education and other opportunities, for the most part getting rich requires that you:
a) get a decent (not necessarily purely academic) education
b) have access to technology and experience of the ‘cutting edge’ of whatever industry you want to be part of
c) have the means and time available to pursue your interest in these fields before you start to ‘make it’
d) have access to a network of other people with similar backgrounds to those listed above

There’s probably more that could be added to that list. The key point is that in order for people to have these, we require a well-funded (and diverse in its provision) education system, and a reasonably generous redistributive element that buys people the means and time to experiment and find the niche that’s going to (hopefully) make them rich.

Let’s say, for argument’s sake, that you had a choice between a 1/1000 chance of a £10m fortune (net after tax), and a 1/250 chance of a £5m fortune (net after tax); simple probability theory should tell you that the latter option is better. The higher tax rates might leave you with a smaller fortune, but the fact that the redistributive policies created a far more hospitable environment (by giving you skills, means and time, and a pool of other people with the same) for you to do so raises your overall likelihood of being successful.

That’s a fairly dry and numbers-driven assessment, but it can’t be that hard to formulate that as a simple political principle, can it? That said, I suspect that part of the reason people don’t accept it at present is that they simply don’t trust the government (of whichever party) to deliver the promised benefits with the tax revenues required. For this reason I’d prefer it to be more of a straight redistributive approach through something like a basic income, rather than funneling the cash into state spending (which can easily be misdirected, either into wars and ID cards or into the hands of private companies that lobby the most effectively).

“The first thing that sprung to mind when I heard about the protests was – wow, rightwingers in collective protest action? Like the anti-war marches then? I wonder if they spot the irony given Fox was so derisive of those protests.”

A number of these “right wingers” would have been on the anti-war protests as well, as many are on the Ron Paul wing of the Republican Party.

“1. It didn’t take account fo the fact that most people think they are better off, and higher up the ladder than they really are. The estate tax, which pre-George Bush only affected the top 2% of wealthiest Americans, was thought by some 60% of Americans to apply to them. Ignorance is a killer for the left, and a boon to the right on issues of tax.”

The problem with estate taxes (if we are talking about inheritance taxes) is that it can still affect the wrong 2%, those that are asset rich but income poor. It is also discriminatory against families whose members die more often which just seems ultimately unfair. Just seems weird to levy when you could use any other number of taxes on high incomes or capital gains.

“The second point shows why it is dangerous to adopt a retaliatory, aggressive “let’s get the rich” attitude, and why it is likely to be far more productive to emphasise the social justice aspect of tax; that is, make the argument that tax is important because we all live in a society and should all pay for its upkeep – those who can pay more being required to do so as a matter of justice, not a matter of resentment from the poorer.”

Paying for the upkeep of society and “social justice” are not the same thing. If you talk about upkeep, people start to get a pissed because they can look at countries like Switzerland and Hong Kong, or Singapore (http://en.wikipedia.org/wiki/Taxation_in_Singapore#Tax_rates_for_individual_residents) and see that taxes don’t really need to be that high at all to keep the state running smoothly (rather too smoothly in Singapore’s authoritarian case).

Social justice, on the other hand, makes the claim that the state taking control of people’s income is somehow beneficial for the poor (unless it is to a service a direct distribution like a citizen’s basic income which is perhaps not as bad). It is funny why people would think that, because much of the evidence suggests that the state rarely operates in the interest of the worst off. That is because the worst off don’t have as much political influence as others.

Rob Knight

I agree, to an extent. Those numbers paint a good picture of why a self-interested person who wants to be better off should support higher taxes. I’m in favour of pushing that sort of argument.

But I also want to push a more “moral” argument: that it is right that everybody pays their fair share in society’s upkeep, and that means that the rich should pay more (and certainly not pay less as a poportion of their wealth than those who are poorer, as is currently the case).

And I don’t think that more “moral” argument is best parsed in terms of either “let’s get the rich” or “hey look, taxes can make you richer”. We might want to deploy those sorts of arguments, but I think we should do so whilst also stressing the importance of tax in making society possible, and hence why it is right and good for people to pay fair shares for its upkeep.

“Paying for the upkeep of society and “social justice” are not the same thing. If you talk about upkeep, people start to get a pissed because they can look at countries like Switzerland and Hong Kong, or Singapore ”

Agreed, but social justice and paying for the upkeep of society are certainly connected, although they are certainly not identical.

After all, we all live in society, so we should all pay for it’s upkeep. I believe that it is just that people pay a fair share – i.e. proportionate to what they can afford to pay. It seems to follow quite clearly that ensuring the rich pay their far share for social upkeep is a matter of social justice (though of course not the only one!) because it would be/is manifestly unjust if the rich pay proportionately less for society’s upkeep than the poor.

I take your point, but surely you can take mine too?

“Social justice, on the other hand, makes the claim that the state taking control of people’s income is somehow beneficial for the poor ”

Not necessarily. It’s a contested term. It could include many things, like “ensuring nobody starves in a modern democratic society” or “ensuring that women get paid equal pay for an equal day’s work”. Those look like good candidates for falling under the banner of “social justice” to me. It certainly seems like a mistake identify social justice solely with redistributing income to benefit the poor. I reckon it will certainly involve that – but it will also involve a lot more.

” It is funny why people would think that, because much of the evidence suggests that the state rarely operates in the interest of the worst off. That is because the worst off don’t have as much political influence as others.”

You are right about that. It’s depressing. But it’s also an impetus for those who believe the historical precedent is heinous to do something in order to change it.

oh, and Nick, on the subject of inheritence tax, I wasn’t necessarily saying the US estate tax was justifiable in its existing format, but was rather using it as an example to illustrate how the left lost the intiative on an issue which it should so easily have won if cold economic facts spoke for themselves.

The US might have a mythology about popular uprising about unjust taxation but so do wee – from Robin Hood to the Poll Tax riots.

The key is the definition of ‘unjust’, which has a different meaning for Left and Right. We have to get across the fact that taxes are high for the poor because the rich aren’t paying what they can afford.

[16]

Let’s say, for argument’s sake, that you had a choice between a 1/1000 chance of a £10m fortune (net after tax), and a 1/250 chance of a £5m fortune (net after tax); simple probability theory should tell you that the latter option is better

You don’t need to take a hypothetical. How many people have money in Premium bonds? And how many play the National Lottery? If I won £0.25m on the latter I’d still have to budget – if I won £5m on the former I wouldn’t. Maybe people really really hate budgetting that much – or maybe rationalistic examples address the wrong issue…

A significant influence on attitudes to taxation may be how income is received. If it’s all salary/wages many people probably just look at the bottom line and don’t even know what’s been deducted – particularly if their pay is pretty much the same every week/month (as it will be for, say, an NHS clerical worker). On the other hand, tax rates are highly visible to the self-employed, particularly where their customers pay in cash (e.g. the greengrocery stall round the corner).

I also think, Rob, that in your rationalism you have missed luck off your list. For example, oil drilling and film-making are both hit-and-miss affairs, and it can be fairly said that everyone who made a pile in those industries “got lucky”. (And yes, I did choose them because they are American stereotypes…)

You may like to read Andrew Sullivan’s blog for in-depth coverage of the Tea Party from an American perspective: I think it contains a lot of nuance that David Semple has left out. He is very negative towards them, but at least he explains why and presents evidence which those considering may use to reach an opposing view.

http://andrewsullivan.theatlantic.com/the_daily_dish/

Put it in yer feeds.

The TEA Party protest was about saving the liberals ass by letting ALL those in power and government that we Americans can’t afford to pay for pet project that have nothing to do with every American in the U.S. The truth is, the word “Liberal” is defined as agreeable to anything that is inclusive “Socialism” that will benefit them on another persons dime. I am a Democrat and I’m not buying into the reports of the Tashington Post, CNN or any other media that distorts the truth. A lie is still a lie. I see clearly where we are headed and thank God I won’t live long enough to be controlled by the State.

Nick wrote:

Paying for the upkeep of society and “social justice” are not the same thing. If you talk about upkeep, people start to get a pissed because they can look at countries like Switzerland and Hong Kong, or Singapore (http://en.wikipedia.org/wiki/Taxation_in_Singapore#Tax_rates_for_individual_residents) and see that taxes don’t really need to be that high at all to keep the state running smoothly (rather too smoothly in Singapore’s authoritarian case).

This is true, up to a point. However, the value that a rich person gets from the existence of the state is considerably higher than the value a poor person gets from the same arrangement. The reason for this is that the state is the enforcer of property rights, and it is only due to such enforcement that the rich person has any wealth whatsoever (irrespective of whether they have a moral claim to their wealth). It’s not entirely dissimilar to insurance premiums or, if we take a slightly dimmer view, mafia protection money. Those with the most to lose from the collapse of the state should, therefore, pay the most. This is tempered by the possibility that a state which confiscates too much of its wealthiest citizens’ wealth may face either a revolt or determined efforts to evade taxes. My point is merely to illustrate that the rich do get benefits from the state, in terms of recognition of their private property, that go beyond simply ensuring the efficiency of state institutions.

The problem with estate taxes (if we are talking about inheritance taxes) is that it can still affect the wrong 2%, those that are asset rich but income poor. It is also discriminatory against families whose members die more often which just seems ultimately unfair. Just seems weird to levy when you could use any other number of taxes on high incomes or capital gains.

Fair point on estate/inheritance taxes. One of the side-effects of land value tax would be to abolish inheritance tax entirely, on the basis that estates are constantly taxed (though at a much lower level of course), eliminating the problem of death frequency, as well as the possibility of dodging the tax entirely by passing the asset to a trust. In the asset-rich-income-poor scenario it’s worth bearing in mind that income can easily be had by… selling the assets, or at least a portion thereof. I think we need to be a lot more flexible and creative in the mechanisms available to do this (here is one of my favourite examples, albeit not a typical case).

Mike Killingworth wrote:

I also think, Rob, that in your rationalism you have missed luck off your list. For example, oil drilling and film-making are both hit-and-miss affairs, and it can be fairly said that everyone who made a pile in those industries “got lucky”. (And yes, I did choose them because they are American stereotypes…)

The example I had in my head was founding an innovative company, e.g. a software company, which has made some people phenomenally rich in the last 20 years. There was some luck involved, but mostly the luck was in having access to computers and spare time, and the basic funding necessary to take a punt on running a business for a few months to see if it works. All of which would be improved by a better education system and a redistributive system that ensured people were able to afford these things. Film-making may also fall into the same category; it might be a lot easier to live as a struggling actor/writer/director with a basic income, and a society with more leisure time would have greater demand for films. However, at this point we’re descending (if we’re not there already) into back-of-a-fag-packet economics.

I don’t think that most people really believe in luck-or-nothing. If they truly believed that they have no hope of legitimate success then I suppose they would oppose taxes on the rich just on the off-chance that the billionaire fairy happened to visit them, and they’d be rational to think that way. Most people, I think, would prefer to believe that if you work hard (or work ‘smart’, as it were) you can be successful and would recognise that a system that taxes people proportionate to their wealth (not just their income, which is temporary) would actually be better for them and give them a better chance of having the life they want.

Robknight

“This is true, up to a point. However, the value that a rich person gets from the existence of the state is considerably higher than the value a poor person gets from the same arrangement. The reason for this is that the state is the enforcer of property rights, and it is only due to such enforcement that the rich person has any wealth whatsoever (irrespective of whether they have a moral claim to their wealth). It’s not entirely dissimilar to insurance premiums or, if we take a slightly dimmer view, mafia protection money. Those with the most to lose from the collapse of the state should, therefore, pay the most. This is tempered by the possibility that a state which confiscates too much of its wealthiest citizens’ wealth may face either a revolt or determined efforts to evade taxes. My point is merely to illustrate that the rich do get benefits from the state, in terms of recognition of their private property, that go beyond simply ensuring the efficiency of state institutions.”

I agree. I back everything in that paragraph, actually. It adds weight to the argument that the rich should pay more in tax. And I may as well come out of the closet; they shouldn’t just pay more in the sense of being brought up to a level where they make a proportionate contribution (e.g. so that the effective rate of tax is equal between rich and poor), they should (for precisely the reasons you point to) pay proportionately *more* in tax, because as you say they benefit the most from society’s existence.

“Most people, I think, would prefer to believe that if you work hard (or work ’smart’, as it were) you can be successful and would recognise that a system that taxes people proportionate to their wealth (not just their income, which is temporary) would actually be better for them and give them a better chance of having the life they want.”

hmm, an interesting point.

but to what extent do we have to acknowledge – and how much will this acknowledgement matter – that the truth is most people are not rich and/or wealthy because of merit or hard work (alone), but because of luck? Usually such luck comes in the form of accident of birth (being born to well-off parents who read to them as children [a striking indicator of future academic and financial success] ) or sheer market-place luck (the oil-drilling and movie-star examples offered above).

A point made at the Tax Justice Rally by Tim Horton of the Fabian Society is that the credit crunch has rocked ordinary people’s comfortable assumption that the rich are rich because they are hardworking and deserve to be. I think that is going to matter in how the discourse on tax is changed – or rather, how we attempt to change that discourse.

“The reason for this is that the state is the enforcer of property rights, and it is only due to such enforcement that the rich person has any wealth whatsoever (irrespective of whether they have a moral claim to their wealth). It’s not entirely dissimilar to insurance premiums or, if we take a slightly dimmer view, mafia protection money.”

I take your point but that doesn’t go anywhere near justifying a complicated progressive tax system. Rich people still pay more cash to the state under a flat tax system. It just easier and scales directly in proportion to their income.

“A point made at the Tax Justice Rally by Tim Horton of the Fabian Society is that the credit crunch has rocked ordinary people’s comfortable assumption that the rich are rich because they are hardworking and deserve to be. I think that is going to matter in how the discourse on tax is changed – or rather, how we attempt to change that discourse.”

I agree with that up to a point as well. I think we need to make a distinction between the productive sort of business that people use voluntarily and for their own benefit, and the parasitic sort that uses state power to claim customers in an uncompetitive market. Banking falls, for the most part, into the latter as the financial sector has been perhaps the most regulated and government association of all sectors for many years now. As I have said before, it wasn’t Tesco that brought about the crisis.

This is true, up to a point. However, the value that a rich person gets from the existence of the state is considerably higher than the value a poor person gets from the same arrangement. The reason for this is that the state is the enforcer of property rights, and it is only due to such enforcement that the rich person has any wealth whatsoever (irrespective of whether they have a moral claim to their wealth). It’s not entirely dissimilar to insurance premiums or, if we take a slightly dimmer view, mafia protection money. Those with the most to lose from the collapse of the state should, therefore, pay the most. This is tempered by the possibility that a state which confiscates too much of its wealthiest citizens’ wealth may face either a revolt or determined efforts to evade taxes. My point is merely to illustrate that the rich do get benefits from the state, in terms of recognition of their private property, that go beyond simply ensuring the efficiency of state institutions.

This argument always bemuses me. The total cost for policing is currently £32bn, out of a total government spending of £620bn (source: http://www.ukpublicspending.co.uk). So an upper limit to the cost of enforcing property rights is £32bn, which is probably overkill given that a lot of this is probably going to be spent on the prosecution and enforcement of victimless crimes etc. So at most, your argument seems to justify that the rich pay a higher proportion of this £32bn. How you apparently conclude that social justice also requires, say, that the rich should pay a higher proportion of their income so it can be spent on transfer payments is beyond me – it simply does not follow from the argument you’ve put forward.

What I suspect, of course, is that for a lot of people, ‘social justice’ means that the state really is the rightful owner of all of everyone’s wealth, and people are only entitled to keep the wealth that the state decides, in its infinite wisdom, that they should be allowed to keep. But this doesn’t sound nearly as attractive as woolly platitudes along the lines that ‘everyone should pay their fair share’ which is why the latter is what is put forward.

Let me see if I’ve got this right – the Rich benefit from the state more then the poor because the state is what allows the rich to keep their property/wealth and therefore they have to pay a higher percentage of their earning in taxes to maintain the state.

How did people maintain their property prior to the state?

“How did people maintain their property prior to the state?”

They didn’t have any.

“Rich people still pay more cash to the state under a flat tax system. It just easier and scales directly in proportion to their income.”

Eh?

WHAT?

No, under a flat tax system, everyone pays the same. Regardless of income.

You mean a flat percentage system, whereby everyone pays, say, 30%.

Which of course means the rich pay proportionately less in terms of their overall income, for the simple reason that if you are paid £10,000 and are taxed 30%, you are left with £70,000, but if you are paid £1,000 and are taxed at 30%, you are left with £7,000.

Result? 30% means a lot more to somebody who is paid less. Why? Because if you end up with just £7,000, then the “lost” £3,000 is a significant loss of income. If you are left with £70,000, then the “loss” (I use the apostrophes because it’s not a loss, it’s a contribution to the upkeep of society) of £30,000 in manifestly less of a worry – because you still have £70,000!!

Also, could somebody please explain how marginal effective tax rates are worked out – I’ve forgotten how to explain it properly. thanks.

““How did people maintain their property prior to the state?”

They didn’t have any.”

Brilliant.

Dan,

It’s not just about providing a police force.

What about the courts, state-proviced lawyers (OK you probabl think they shouldn’t exist and the poor shoudl receive no legal defence, but i’m talking to everyone here), prison system, rehabilitation efforts for criminals, the bureaucray required for all of these things to work?

They all add to your sums. Because “enforcing property rights” requires a lot more than just having a few bobbies on the beat.

Because, after all, a system of stable property rights is predicated on having a stable society. And that means, amongst other things, having education and healthcare systems (the US has a healthcare system, it’s just disguised and incredibly inefficient and unjust in many ways) is essential for a working economy.

And think of other points: there would be no possibility of a functioning economy without things like roads for people to get to work on. Without roads, no proper economy, no point in having property rights. And guess what? Roads are really, really expensive to build and maintain. And only the State can do the job properly. So you have *pay* for stuff like that.

Etc etc etc.

To say that the protection of property rights requires the funding of the police and nothing else is rather silly.

There’s a reason that no successful economy or society has ever had a minimal state you know? There’s also a reason Robert Nozick repudiated Anarchy, State and Utopia as “a young man’s book” and never went near politics again after writing it.

“Rich people still pay more cash to the state under a flat tax system. It just easier and scales directly in proportion to their income.”

Won’t some please explain to me how much Tax Avoidance involves people altering their income so that they fall into a lower income bracket?

For example, allowance = £6,035

Starting rate: 10% £0-£2,230
Basic rate: 22% £2,231-£34,600
Higher rate: 40% Over £34, 600

How many people earning £50,000 pounds alter their income make up so they appear to earn under the £34,600 threshold?

It seems to me that any argument about a Flat Tax is only relevant if people are altering their make up of their income so that they appear to earn under the £34,600 threshold.

Otherwise we are talking about tax allowances which are totally separate to tax bands.

Why do flat taxes want one tax band? Surely 4 tax bands are only marginally more difficult to administer and police?

I would think 5 bands with no allowances would be even easier to administer than one band with some allowances thrown in.

Correct me if I am wrong, but it seems Flat Taxers are just throwing straw men about when it comes to tax avoidance.

““How did people maintain their property prior to the state?”

They didn’t have any.”

True that

Paul Sagar @33:

““How did people maintain their property prior to the state?”

They didn’t have any.”

Brilliant.

Err, not quite. They would have had to seek protection from others, either by paying them or by finding some basis for common cause with them. In lawless parts of the world – and even in relatively law-abiding ones – it’s commonplace to employ bodyguards and private security guards to protect one’s property. A relevant question here would be this: would this anarchic, stateless scenario result in higher security costs than at present, where property security is enforced by the state?

Lilliput wrote:

Let me see if I’ve got this right – the Rich benefit from the state more then the poor because the state is what allows the rich to keep their property/wealth and therefore they have to pay a higher percentage of their earning in taxes to maintain the state.

Pretty much, yes. What’s your property worth if we abolished the state? Seriously, without laws many forms of property are almost worthless. Tangible goods would retain some value, and some (gold, probably) would increase in value. But most of the world’s wealth is not in tangible goods like houses, land and gold. It’s in intangibles like shares and bank accounts and so forth, and these only have any value because we can, ultimately, exchange them for land, houses, gold and food. Without any form of law enforcement, it would become very hard to value these assets. It would be like the current credit crunch (which is precisely a crisis of asset valuation) multiplied by several orders of magnitude.

Now, it might be possible to transition to a stable anarchy. We might employ private institutions to carry out many of the functions of the state (the private security guards etc. I mentioned above). Private contracts, and private contract enforcement, would in turn be carried out by enforcement agencies. If this works out well, these enforcement agencies are all just efficient police forces. If it works out badly, it’s a cross between The Godfather and a holiday in Somalia. There are substantial risks associated with going down this path, such that it’s perfectly rational for a rich person to accept heavy costs simply to avoid it. The rich may rationally calculate that it’s better to pay taxes and have a stable, secure society that isn’t going to turn into a mob that steals all of their stuff. Like I said, if you want to look at it that way then it really is just protection money. The point is that you’ve got to pay something to someone for this.

Dan wrote:

So at most, your argument seems to justify that the rich pay a higher proportion of this £32bn. How you apparently conclude that social justice also requires, say, that the rich should pay a higher proportion of their income so it can be spent on transfer payments is beyond me – it simply does not follow from the argument you’ve put forward.

Stop paying anything beyond £32bn and I’d bet that the subsequent riots would raise those policing costs substantially above £32bn anyway. Also, most assets that the wealthy own are very much dynamic in their valuation. Let us assume that there is a risk of societal collapse in the event of the sudden withdrawal of the state. As I said earlier, assets like houses and gold would probably keep most of their value. But shares in companies, and other assets which depend on stable economic performance? Possibly not. There’s a risk that the consequences could be so bad that the collapse in asset values would be far greater than the costs of simply paying the taxes in the first place, and it’s worth paying up to a certain level of tax to avoid that risk.

What I suspect, of course, is that for a lot of people, ’social justice’ means that the state really is the rightful owner of all of everyone’s wealth, and people are only entitled to keep the wealth that the state decides, in its infinite wisdom, that they should be allowed to keep. But this doesn’t sound nearly as attractive as woolly platitudes along the lines that ‘everyone should pay their fair share’ which is why the latter is what is put forward.

Some people may believe that. Personally I think it’s bollocks. However, you do need to remember just how much of today’s wealth is backed by some form of state guarantee. Like I said, even in an anarchic system you’d still be paying someone to protect your stuff, enforce your contracts, prevent fraud and prevent people who owe you money simply absconding with the cash. The state does a very good job of minimising these risks and the core public service institutions (health, education) do generally represent a good investment too, in that they create conditions for economic growth (with one caveat: these institutions are tremendously badly administered by the centralised state; as I said earlier, I’d rather just give people the cash and let them choose school and health providers).

I’m in total agreement that the state presently pisses a great amount of money up the wall. In my opinion, the best solution to that problem is to hand the money to individuals to spend as they see fit. The very wealthiest would make substantial net contributions; those in the middle could pay less; the poorest would have a negative tax rate, in that they would receive a payment (which would, in turn, enable us to scrap most of the benefit system as it would be redundant). We can be redistributive or we can have big government, but we can’t have both.

Shall we try living in the real world?

First, it makes no sense to regard taxes as payments by an individual for services received by that individual. For example, the people who “spend” most of the total tax income are probably the very severely disabled (who will usually have no income at all – certain no earned income). Presumably no one here is prepared to see such people die unless their families and/or private charity can meet their needs – although it is noticeable that libertarian utopias seem to consist only of the able-bodied.

If we accept that one group should be the beneficiary of transfer payments, we cannot use “in principle” arguments against them – it reduces to a matter of taste as to which ones we like. For example, there is (or used to be) a degree of resentment in the gay community against paying taxes for schools – other people’s kids.

There is of course one argument for progressive taxation which oddly has not yet been made on this thread. That is the argument from marginal utility. Those who want the first £X of income to be tax-free, with a tax of Y% on the remainder, acknowledge the concept of marginal utility – each succeeding pound I earn is of less significance than the one before it – which is why we have tax allowances already. The “loss” I experience from a higher rate of tax is the less the greater the income that is taxed.

This is why we have the present system, allowances loopholes and all. At very high levels of income, consumption by definition is conspicuous consumption, and that may be thought to be a bad thing in itself (the analogy is with “sin” taxes on alcohol, tobacco etc) so tax systems tend to encourage very high income tranches to be invested – and few states are going to resist the opportunity to use the tax system to signal that they prefer some investments to others – or donated. One problem with the radical simplifiers is that they would presumably abolish tax relief for charities. And where, precisely, is the constituency that benefits from that?

Rob Knight – thanks for answering – I was beginning to think that LC is being overrun by bad comedians!

What would then say to the rich who already pay for private security firms to watch their houses and property – not to mention their children. I can now understand why they emply experts in minimising tax payments – they pay for their own protection, schooling, healthcare, transport etc etc

One thing you haven’t mentioned is intellectual property – by far the most valuable commodity. Knowledge is power and all that?

‘““How did people maintain their property prior to the state?”

They didn’t have any.”

Brilliant.’

But bollox: http://www.libertarian.co.uk/lapubs/histn/histn051.htm

“Presumably no one here is prepared to see such people die unless their families and/or private charity can meet their needs – although it is noticeable that libertarian utopias seem to consist only of the able-bodied.”

I would not be prepared to let them die, which is why I would donate money to help them.

Paul @ 34

Actually, the £32bn figure includes law courts, the police, and prisons. I don’t know whether or not it includes rehabilitation and legal aid, but I’d be surprised if they’re more than a couple more billion. The point is that as a proportion of government spending, protection of property really isn’t that much.

Now, as for ‘a system of stable property rights is predicated on having a stable society,’ this may well be true. But you’re running together the (obviously separate) questions of whether having a stable society is a) a necessary requirement for justice and b) whether or not it’s an expedient idea from the point of view of the rich. Yes, if you need to provide transfer payments/education/whatever in order to maintain stability, it might be a good idea to do so – but it might also be a good idea to pay your child’s kidnappers when they send you a ransom note. Doesn’t make it just, though. If you want to make the case that it’s actually justice that requires the rich paying for all these things, feel free, but an argument to that effect will look a lot different to saying “well, if they didn’t, society might not be as stable.”

And it’s a minor point I know, but it was in fact AJ Ayer who called his Language, Truth and Logic a “young man’s book,” not Nozick. If you look at, say, the interview done with him in 2001, you’ll see that Nozick remained a libertarian until his death.

“‘““How did people maintain their property prior to the state?”

They didn’t have any.”

Brilliant.’

But bollox: http://www.libertarian.co.uk/lapubs/histn/histn051.htm“[1]

No it isn’t: Read Schwarz States vs Markets – Capitalism, market transactions, property rights all grow up side by side with the State.

There’s also a wealth of literature joining the dots between the development of the rule of law and capitalism. The growth of courts, laws and an independent judiciary map onto the development of capitalism. Because it needs the state to survive.

http://www.amazon.com/States-Versus-Markets-Second-Emergence/dp/0312233027

[1] I am pretty sure that site slanders Polanyi quite awfully when ostensibly denouncing ad hominem attacks. He’s a good lad our Polanyi and I’ll thank libertarians to give The Great Transformation a read.

37 – “We can be redistributive or we can have big government, but we can’t have both.”

I don’t think the evidence supports this claim.

Historically in the UK, the lowest levels of inequality were in the 1970s, when the state directly provided a much greater range of services than previously or subsequently.

The countries today with the lowest levels of inequality are also those with relatively high levels of taxation.

The funniest thing about the tea parties has been the jokes made across the news media (except Fucks News) at the expense of these pathetic racist protesters:

http://www.huffingtonpost.com/2009/04/16/fox-news-teabagging-jokes_n_187845.html

It’s a bit like what the Tories would do over here, I suppose, if LFAT, Dale and Guido are anything to go by:

http://www.huffingtonpost.com/2009/04/16/10-most-offensive-tea-par_n_187554.html

This should be called tea bagging for rich people, because it has been organised by well known Republicans who specialise in ‘Astroturf’ events. Fake grass roots. And has been heavily promoted by Fox.

Funny how the same corporate news shows ignored millions of Americans when they demonstrated against the Iraq war.

Mike @12:

Point, well made.

Paul @14:

It’s more than that, though. There is a real, and academically supportable, argument to be made by constitutional fundamentalists that specifically federal taxation has precisely two constitutionally legitimate uses: administrative cost and national security. Their views are used as soundbites by the right in their campaign to lower taxes on the rich, but they’re used because the mythology surrounding federal tax in the US includes the causes of the Civil War and the underlying class warfare which still surrounds the discourse of the New Deal. Immense numbers of people respond powerfully to the idea that any federal tax beyond that which pays for the White House and for the army is intrinsically an unwarranted interference with state autonomy; that the FBI are an imperial organ of an invasive executive arm. We had King Arthur: they had “No Taxation Without Representation”.

It ain’t the size of the state guys, it’s the type of state. As for these “tea parties”, I can’t see that they amount to anything other than Republican sour grapes, so sod ‘em.

“It ain’t the size of the state guys, it’s the type of state.”

It’s true, the 40s – 70s didn’t have lower inequality just because the State redistributed wealth. Its that it supported stronger unions so that wealth was better distrubuted where it was created.

A double blow has been struck since then reducing state spending and weakening unions. Although State expenditure is still relatively high its hardly going towards the right things – war, oppression and basically all the worst bits of Revelations.

donpaskini @44

37 – “We can be redistributive or we can have big government, but we can’t have both.”

I don’t think the evidence supports this claim.

Historically in the UK, the lowest levels of inequality were in the 1970s, when the state directly provided a much greater range of services than previously or subsequently.

The countries today with the lowest levels of inequality are also those with relatively high levels of taxation.

I’m not sure that your counter-examples rebut my original point. I’m sure this is just an oversight, but your response is a bit muddled. You make an observation about the 1970s and the amount of government services provided at that time, and state that this was a time of low inequality. This doesn’t directly address my point about redistribution vs. ‘big government’, but I suppose what you’re saying is that big government can have good outcomes viz. a more equal society.

You then go on to make what seems to me like a totally unrelated point, that countries with high taxes are those with low inequality. I didn’t make any direct suggestions about the level of taxation, merely about how it’s spent. I’d rather see direct transfer payments, you – I assume – would rather see direct spending by state institutions. All I was saying is that we can’t do both transfers and big gov institutions at the same time, irrespective of how much we raise in tax to fund either activity.

Also, based on the figures here, spending in the 70s was between 42-48% of GDP (the 48% is an outlier, in 1975). In 1978, the final year of Labour government, it was 42.8%. The figure for 2009 is, apparently, 41.6%. Perhaps slightly on the low end for the 1970s as a whole, but not dramatically different. Projects have it rising to 41.7% for 2010 and 41.9% for 2011, but I imagine these are based on slightly optimistic forecasts of GDP growth.

The point is that we’re not raising and spending vastly less than we were in the 70s. We do, however, seem to be getting less value for our money in the sense that it’s obviously not leading to the desirable outcomes you identify. Might I speculate that we’re now spending similar amounts, but this spending is being woefully misdirected? I would tend to blame this on the difficulty (near-impossibility) of setting good spending priorities centrally, and that the cure would be radical decentralisation, to the point of giving individuals direct cash transfers in place of the existing benefit system and abolishing anything that isn’t a core government service (BERR would be first on the chopping block for me, swiftly followed by large chunks of the Home Office). Health and education are emotive topics, but my personal preference would be to convert them to a number of employee-owned and democratically-run institutions. Local councils could be given a much wider remit to offer and operate services on a local scale, provided local people approve them, and central targetting/rating of councils and their spending would of course be abolished.

Sorry, this has turned into a mini-manifesto. I’d be greatly curious to know people’s thoughts on this kind of thing though.

Read – http://trueslant.com/matttaibbi/2009/04/14/americas-peasant-mentality/

Why aren’t they protesting against the billions lost in tax evasion by the uber-rich and corporations?

Texas loses around $9bn per year, as does New York State. All the states are screwed out of many billions of dollars, which has a truly massive effect on the tax burden felt by families.

Strangely, Fox has been silent on this.

Hi Rob,

There’s lots there, and this could probably benefit from its own comments thread, but a couple of thoughts:

Not sure that the British government wastes significantly more money than in the 1970s – we don’t, for example, spend money on British Leyland.

As for direct payments vs spending by state institutions, I’m genuinely open-minded and think this is one of those case-by-case things. I think, for example, that greater state spending on child care and social care for the elderly to make both free-at-point-of-use is probably better than massively increasing direct cash payments to people with children or to elderly people (either on a universal or means-tested basis) in order that they can afford the current very high fees demanded by service providers; that the switch to personalised budgets for disabled people is interesting but has some problems; and that direct cash payments to e.g. people who are out of work should be higher. i.e. Higher income and better services, not just one or the other.

I don’t think radical decentralisation is a panacea, though it can help if done well (it can also increase inequalities if done badly). In at least the short term, though, decentralisation requires the government (in some form or another) to spend a lot more money on, for example, helping people to find out how they can get involved and influence local services (otherwise the only people who do so are “the already empowered” and services end up being targeted towards the most vocal rather than where they are needed most).

“Because, after all, a system of stable property rights is predicated on having a stable society. And that means, amongst other things, having education and healthcare systems (the US has a healthcare system, it’s just disguised and incredibly inefficient and unjust in many ways) is essential for a working economy.”

We had barely any welfare state in the 19th century but society didn’t collapse. Instead we had charitable hospitals, mutual insurance societies etc.

“And think of other points: there would be no possibility of a functioning economy without things like roads for people to get to work on. Without roads, no proper economy, no point in having property rights. And guess what? Roads are really, really expensive to build and maintain. And only the State can do the job properly. So you have *pay* for stuff like that.”

Roads were initially built privately before the state took over the task. In any case state subsidies for roads has artificially advantaged big business and prevented the development of a more decentralised economy.

[54]

We had barely any welfare state in the 19th century but society didn’t collapse. Instead we had charitable hospitals, mutual insurance societies etc.

Please confirm that you would be happy for the level of infant mortality (to take only one indicator) to return to what it was then.

Soory forgot to turn the blockquote off…

Richard @54:

Actually, no, they really weren’t. Do not mistake the medieval state as being synonymous with the King’s Privy Purse.

Road- and, importantly, bridge-building were requirements of peerage from William the Bastard right through until the modern era. The maintenance (as in, physical engineering) and extension of the road and bridge network was carried out locally by the aristocrat on whose land the road was, yes: but also at their own expense, and it wasn’t a choice. The king could send lads around to take your title off you if he decided a given road hadn’t been well enough kept. Another part of the same duty was public order: specifically, hunting down bandits to secure the roads during the truce of the summer fairs.

The King spent vast sums of money building and maintaining roads and bridges in the same period: also harbour facilities, river dredging and walls around civic centres. The developing middle class also put a lot of money into these things: but very little of it directly, as the authority for these communal building projects was usually administered via mayors and borough authorities.

The illusion that private enterprise built our road network and extended the navigable sections of our four great rivers is because at many and various points between 1089 and 1750 the aristocracy managed to get the Crown and Parliament to grant them, or selectively grant them, the right to profit directly from their public works via tolls. Initially this was almost all on bridges: usually this was in a time of war and or economic difficulty and it almost always followed a bill from the Crown to Parliament to permit the charging of tolls on Crown-maintained roads. These provisions were often, though not always, taken down again, only to be brought back a generation or so later. Tolls in place in the eighteenth century tended to survive into the twentieth, when real centralised infrastructural planning got off the ground.

The first massive program of private-enterprise transport infrastructure was the canal system, and even that was very heavily government-sponsored. The railway system is probably the first real one; and look how that turned out.

On a side-note; one of the things people forget about the British aristocracy is that over the centuries they spent a remarkable amount of time, money and energy building the infrastructure that created the starting conditions for the industrial revolution, even down to moving craft skills into depressed areas of the country by planned town plantation. They were doing it through entirely unenlightened self-interest at first, but it did become a habit, and while there are many and various examples of bad lords in English history, there is also a tradition of public service which the Victorians capitalised on extremely effectively.

“Please confirm that you would be happy for the level of infant mortality (to take only one indicator) to return to what it was then.”

Mike, that’s got more to do with the wonders of science and medicine then the welfare state.

Do you want to choos another one?

Lilliput @58:

You’re being more than slightly disingenuous. The wonders of science and medicine were entirely unavailable to peasants, factory workers or anyone else who wasn’t top-end middle class at that time. The vast majority of the difference to infant mortality happens not between 1960 and today, when medical technology in that field really took a huge forward leap, but between 1880 and 1970, which is the period during which what medicine already knew became broadly available.

Education is similar; the rich have only ever attempted systematic education for their own children. Charity and religious schools had their own issues and there were never enough of them. To get the educated populace required for an informed electorate, no model other than state-driven education has worked to date on any kind of scale.

“that’s got more to do with the wonders of science and medicine”

Try ‘sanitation’.

@57 excellent piece.

I’ve just got back from Haiti. Hence, I know *exactly* what the road system looks like in a minarchist state, and have never been happier to pay my taxes in exchange for living in the UK’s statist-ish world…

OK – John – I take it back – I’ll go and do some research but can you elaborate on this:

“Charity and religious schools had their own issues and there were never enough of them”

I wonder why Britain went from the above to the welfare state?

We progressed from religious and charity schools to the ‘welfare state’ to, among other things, get rid of secondary school fees, give girls greater access to secondary education, allow disadvantaged kids to go to independent schools if they were smart enough through the system of grants, and for community colleges for adult re-training.

Why, what was your answer to that absurdly worded question?

Lilliput @62:

“Charity and religious schools had their own issues and there were never enough of them”

I wonder why Britain went from the above to the welfare state?

Well, there’s several parts to the answer but it starts with ‘they didn’t, exactly’. You seem to believe that the religious schools were not part of the state.

We have an established church, and the vast majority of such foundations and schools were owned and run by that church. It was an implementation of welfare via the religious arm of the state. Those which weren’t Anglican were Catholic; not state-controlled, yet just as engaged with that mechanism, in that they were specifically counter-cultural.

The Universities required all teachers to be ordained ministers in the Anglican church until well into the Victorian era. The impediment that proved to the development of secular scholarship in the Early Modern era was immense: the King had to found a Royal Society to get round it, and the first serious educational establishment that was outside of religious, and therefore state, hands was the University of London.

The grand Victorian philanthropists did their best but there were never going to be enough of them: and the initial assumption of education in this country was that it was a privilege of class. There was no perceived need to educate the populace until the double-whammy of an accidental democracy and an entirely unexpected industrial revolution. Suddenly, the ancient infrastructure which we’d creaked along with since the Cathedral schools of the high middle ages just wasn’t good enough. This gave birth to Arnold’s revolution in education at Rugby, and from then on it was just a matter of high-minded [1] liberalism extending the concept of education to all. The church could in no way have afforded that, so the state continued the same program through its secular arm, to the vast enrichment of modern society and scholarship.

It has become increasingly clear that religious organisations can’t be trusted with a functioning state education system. In order to function in an information age society every citizen needs to be provided with an information-age education. Any parent who chooses an alternative can have it, and pay for the blinkering of their kid, but every kid in the country should have access to good teaching. Without it, all we do is break our own economy again in ten years. You can’t put the internet back in the lab; you have to plan for the future instead of harking to a mythical Golden Age of Victorian education.

[1] If paternalistic.

Dave – it was just a question I didn’t know the answer to – no need to be facetious!

Its interesting as I am just reading a blog from one of these religious Americans that are throwing the tea parties and they are saying that they don’t understand why they should pay more in federal taxes to an incompetant government where local charities – both religious and secular do a better job. When I asked the same question to them – why did it/does it need to change if they are doing such a good job, the answer was that there is more control in having one centralised authority running everything. This made me wonder if it was just all about power.

John, I’ve just looked at the top 100 schools in England and the majority seem to be religious – no? I don’t know why they work – but they patently do?

Lilliput: would you define Cheltenham College as a religious foundation? Because it is.

You are not comparing like for like: we were discussing why it is bad to leave the entire education establishment of your country in the hands of private and religious interests, and the answer is that only some will be educated, and what they are told will get further and further from the truth.

John – I understand. Not all schools should be run by private or religious institutions – if parents want that for teir children – they have to pay extra. Isn’t that the way it already is?

Lilliput: and your point is, exactly?

You asked why the state moved away from an entirely private, religiously-funded education infrastructure, with the equivalent in healthcare being the Charitable Hospitals, and towards a welfare state. I answered you.

Hmmm. And soon after writing that, I find a convenient link which deals with the subject in its modern incarnation.

Government is to big, the rights of the people are to small, and when liberals and conservatives protest together, i.e. The Tea Party, The socialist protest against the people.