The Taxman Cometh

It seems obvous that everyone would be anti-tax. Actually, the anti-tax movement is a strange coalition of the haves and the have-nots. (This leaves out the have-somes, a category into which most of us fall.)

The haves like the anti-tax movement because the only option to taxes is debt. Debt needs to be financed and an investment that pays more than inflation is a great way to protect one’s wealth rather than risk it. (If you are rich enough, returns of 20% or 5% won’t make much difference in your lifestyle: losing 50%, however, might.) The haves love government debt because there are few investments so safe.

The have nots like the anti-tax movement because government spending does not so obviously benefit them. For instance, spending on advanced education might raise incomes but not for those in the little rural communities that lose their best and brightest to far away universities and even farther away companies. The fact that rural areas are heavily subsidized by urban areas in the form of transportation and agricultural subsidies (among others) is invisible to these folks: what is visible is the obvious wasteful spending on things that they can't relate to: things like obscure research, bailout of banks, sex education.

On my way to dinner tonight I found myself in the midst of a sea of anti-tax protesters. I heard one acknowledge another's sign, promoting fairtax.org, and then continued with "What I really want is no-tax.org."

The populist notion is that taxation is a form of extortion. But there is always extortion. Mexico’s tax rate is only 18.5%, but the weak government is no match for drug lords who extort the population at will. Communities always have someone stronger, someone with guns, able to enforce rules and “extort” money. Better to make those parties at least somewhat accountable through elections, laws, and some form of oversight. The resistance to taxation that assumes that a world without a government as one without extortion comes from a mindset that ignores history.

We’ll always have an anti-tax movement in this country. Given that it promotes deficit spending, though, it simply encourages more government spending than we’d otherwise need or want. When we don’t have to pay as we go, we spend too much. The real irony of the anti-tax movement is that it is fueled by the rage of the have-nots and yet it helps to finance the contentment of the haves. Funny how that works. You might think that this would just make the have nots angry, but I guess that their rage is already directed elsewhere.