I came across this quote on Facebook by a person whom I won’t name – since it was on a closed group – and it was written in response to an item about tax as a cost. The idea that tax is a cost struck this person (who I don’t think was trolling, but just holding collectivist views) as bizarre:
“Taxes are redistributed throughout the economy. Taxes provide public services and government spending that consumes goods/services and pay public sector wages that fuel business success which in turn, creates further tax revenue. You’re mistaken – Tax is not a cost – It drives nigh on 50% of our entire economy! Right wingers continually fail to notice this incontrovertible economic fact.”
The idea that taxes cut into existing productive activity, and that as a cost, will be passed on to consumers (such as the financial transaction tax passing on costs to bank clients, shareholders, etc) doesn’t occur. No, taxes are part of that wonderful magic money tree. Why stop at a pathetic 50 per cent? Why not tax the lot? Give it all to the State, so those clever people can spray it around and make us richer, except of course the money has that odd way of disappearing from our paychecks……..Sorry, excuse me, time for my pills.
You do have to wonder what a century or more of compulsory education has wrought.
Twas not always thus, education was very well run for a considerable time. It failed after the 1944 Education Act making it “free”. At my entrance to a Grammar School, my Father in a a lowly position, paid something of the order of 7shillings and sixpence I think or thereabouts, memory a bit shaky now. I did get a full set of text and exercise books and a good education, but then the staff were very good at their job. When the new Act began the following year, students all came from the same area of town not mixed as previously. Exit some discipline and it was downhill from then!
The notion that tax is not a cost is not a failure of education so much as something that is positively understood, perhaps from a deliberate inculcation of ignorance of economics.
If taxes are neutral, then they can be lowered with no ill-effects. If taxes are not neutral, then they have consequences.
To tax is to impoverish, otherwise there would be no point in redistributing property via taxation. Taxing is swapping property for poverty. To redistribute taxes is to enrich those unable or unwilling to receive property via peaceful gift or exchange.
I don’t think you can blame free education – you can blame those who set the curricula in free education though.
What collectivists don’t realise is that the “spread cost” argument only works once, when you’ve got multiple items that are each “spreading the cost” then they all add up, fiscal death by a thousand cuts.
The whole theory about fuelling the economy misses one vital point, that under a “spread cost” method, those paying taxes do not necessarily benefit from all the expenses paid by those taxes, as they don’t get to choose what to pay for and what not to. And whilst many public services, such as roads, defence, etc, can be considered legitimate costs to all business that need to be consumed regardless of taxation, the lawyer for the hook handed terrorist, or the single unemployed parent of a dozen kids, or some piece of fecal matter being displayed as art, none of these can in any way be considered a necessary cost to doing business, or to doing anything for that matter, but they are still expected to be paid for, in full, as the terrorist, work shy mum, or sh*t-artist certainly wont be contributing.
Perhaps I take extreme examples, but I’m sure that expensive projects such as HS2, or Scottish/Welsh wind farms, or Opik Lembit’s 50″ plasma television, have large amounts of taxpayers getting nothing out of them.
My own local government will quite readily fleece us to pay for vanity projects such as a music festival that I wont visit because I’m the wrong culture, but they’ll be happy to abandon genuine community plans such as green waste collection (even though I wont get a refund). The collectivist just doesn’t get it, to them you consume or benefit everything produced by tax paid services by virtue of them being “public” services, therefore it is “fair”, they simply do not understand individual needs and wants, which is what an economy _is_, not some mystical fantasy world existing in some leftist’s tiny imagination of what it should be.
The collectivist mindset is such that they cannot conceive a world without government control, even though logically such a world must have existed (and thrived) back in the time before government, because free trade came first.
Got any spare pills?
By this standard, nothing is a cost. The money always goes to paying somebody for doing something, and money moving around is responsible for virtually 100% of the economy.
But there really is no such thing as ‘free education’ (or ‘free’ anything, for that matter) â see ‘taxes’ above.
Not really: it’s not a bug, but a feature of the system: if Those Who Set the Curricula don’t teach that “free” education is good, there will be no “free” education, and as a result at least some of TWStC will be out of job.
As Alsadius says, not wages, not rent, not the cost of raw materials, not anything would qualify as a cost, since these “costs” find their way into people’s pockets for them to spend, keeping the commercial merry-go-round spinning. Indeed these “costs” find their way back to the real economy even quicker than taxes do – cutting out the middleman.
JP’s correspondent seems to have conceived “cost” as something like “dead loss to society a a whole” – say a great storm or plague of locusts that destroys wealth and property. Though as Bastiat pointed out, there will always be those mathematically challenged enough to assert value in the breaking of a window.
Back on Planet Earth meanwhile, an increase in wages will cause buyers of labour to buy less of it. But it will also cause sellers of labour to supply more of it.
An increase in taxes on labour income, however, will cause sellers of labour to supply less of it, without encouraging buyers of labour to buy more of it. I know which looks more like a plague of locusts to me.
Tax redistribution grows the economy. This principle solves so much. If your swimming pool is only half full, just tax the water from the deep end and redistribute it to the shallow end. Voila! Full pool!
Call for Dr. Bastiat (not pills).
Let us be thankful for Facebook where such words may pile up like the piles on former “organic” French farms; topped by a rooster, the only fellow who knows where he stands, and has a taste for his position.
Following up on Alsadius: by this standard, theft is not a cost. OK, it’s a cost for the victim, but that is exactly compensated by the gain to the thief. It’s not a cost to society as a whole.
Jonathan might suggest to the author of the quote sending me 50K pounds: it doesn’t cost anything to society as a whole, so why not?
Of course, we know that there are negative second-order effects from theft: incentives to earn money are reduced, incentives to steal are increased, and costs of protecting one’s property are increased; but hopefully the author of the quote won’t realize this until the 50K are in my bank account.
It is true that there won’t be a Keynesian multiplier from my receiving the 50K pounds. There are reasons to believe, however, that there is no such multiplier from government spending, either.
PS: Alisa, good points!
Alisa,
I am not convinced that any system needs to be self-propogating, speaking as someone who spends a lot of time trying to remove areas of his work from existence (and have built a decent career out of doing so). I think the issue is actually a sort of guild mentality where people see themselves as in one job for life and therefore defend that job as it exists. As I am in career number three and haven’t even hit middle age (optomistically) I suspect I am much happier to see jobs and entire ways of life as transient and something that do not need defending. If you think you will be a teacher in a bog-standard comprehensive for ever then (apart from being part of most problems – you should be aiming to be a teacher in a good comprehensive at least…) then you are likely to defend bog-standard comprehensives.
But think of all those resources that are destroyed by all those taxes running through the pipeline! Man is a parasite, taxes are its blood!
Anyway, Mussolini fascism out of the mouths of babes isn’t terribly surprising.
Watchman, I never said that any system is or must be self-propagating – I am saying that a system based on compulsion (instead of mutual consent) will be, by default. For example, an education system based on compulsion (taxes, mandatory attendance, etc.) will necessarily devolve from a meritocratic one to one favoring employees whose first priority is to support the compulsor (i.e. the government). So eventually the system would attract inadequate and bad teachers, with good ones staying away or becoming bad teachers with time, conforming to the system. Pipers and tunes and payments thereof, and all that.
I have come to believe that the fact that the State will only accept its official money in payment of taxes is the only thing that props up that money’s value other than convenience.
In the perfect world of tax-collecting, we will all be tax-collectors hard at work collecting taxes off each other for the benefit of the government.
We live in the illusory world of a capitalist system with the benefits of a communist system (free education, health care, social security, etc.) when, in fact, we live in a socialist state. The only thing lacking is a PM with the correct tag. This monster can only produce a functionally illiterate populace, example of which is that person who sang the praises of taxes.
I see “to tax is not to burden”.
The left are redefining the English language again.
As for “tax finances government and government is about half the economy”.
That is correct – if one accepts the demented GDP stuff which defines extra government spending as extra productive activity.
As for the idea that government wages and welfare benefits stimulate private business……
Keynesianism – the general idea that John Keynes took from Major Douglas and a whole series of monetary cranks.
But that would NOT be government spending financed by taxation (not even Keynes was that demented).
That would be government spending financed by extra money created from nothing.
As for people who do not understand economics……
One might ask them how the United States became the largest economy in the world – which already was BEFORE the First World War – when it has the LOWEST taxation and government spending of any major power.
One might also ask them why Switzerland is so much more prosperous than Britain – when its taxes and government spending are lower
“Sweden”.
Actually Sweden often had lower, yes lower, taxation than Britain – for example in both World Wars.
Keynesians may think of war as “stimulating” – rational people know that capital consumption is a bad thing.
The left really are potty.
For example there was the “middle way” cult of the 1930s – the start of the Swedish cult.
A glance at the facts, by these supposedly “empirical” economists, would have shown them that Swedish taxation was actually lower (yes lower)than British taxation in the period.
Partly because of the lack of a vast First World War debt.
Although the Swedish export boom to Nazi Germany did not exactly harm them either……
But Paul.
“You didn’t build that”.
đ
Modern Western education systems are little more than feeder factories of socialist consent. Their mandatory nature (e.g. Germany and increasingly the UK) reflects the role they play in manufacturing consent and dumbing down that which the government wants less of, namely free thinking individuals.
The time will come that the institutions need to be burned down so they can rebuilt again without the Gramscian Marxists in occupation. How else do you get rid of an infestation of lice?
I seem to have missed the memo where I am meant to teach this about taxes in my classes. My mate, the Economics teacher, definitely missed it because he teaches the exact opposite.
You need a scapegoat, and it’ll do nicely.
In practice belief in left-wing economics is falling, and falling rapidly. In much of the world even the left-wing parties are drifting right,and parties like UKIP are rising, and popular Communist parties are evaporating. Don’t confuse the current mania for Corbynomics for anything other than a mania that will pass quickly enough.
What has changed is that we are more exposed to ideas that we don’t agree with. News used to come from a single family newspaper, and politics might be discussed at work. Now news comes from 20 different sites and people we barely know comment on social media.
Most teachers most of the time just teach their subject. Anyway, in general students pretty much ignore anything the teachers try to impart which is beyond the academic stuff. All those years of sex education and drug education has had basically no effect, for that reason. Yet the passing comments about economic policy have changed a generation?
Amusingly the Soviets did actively force this sort of teaching about economics down the throats of Poles and East Germans. All told it was ineffective even at that level.
I may have posted this before on Samizdata, but it seens appropriate here:
‘Incontrovertible.’ They keep using that word …
Little more than short hand for “Stop thinking for yourself and think, behave and act as we tell you”.
Fascism, Communism…all just different flavours of the same mouldy jam.
I wonder what the relationship is between people who think that taxes are not a cost and people who think profit is a cost.
Convertible vs inconvertible.
I’d be willing to bet that the person who made that patently inane remark possesses an IQ roughly equal or perhaps even above that of the USA on average.
And these people vote, mind you.
Alisa, no link for inconvertible.
If the link could be converted into a thread or article, it would contradict itself! What do you think inconvertible means?
The Sainted WFB described it as “sending a dollar to Washington, where it spends an expensive nighto on the town”. or more succinctly “spending a dollar to give a bum a quarter”.
The quote about taxes is just another form of the broken window fallacy, isn’t it?
Then the poor should benefit greatly by the increase of VAT to 100% for all items.
After all the massive increase in economic activity should see their piece of the economic ‘pie” spiral…somewhere.
A lot of this idiocy springs from the new leftist concept of “fairness’, where even if you are living with all your necessities (and some luxuries) fully paid by working people the fact someone else has millions makes you ‘poor”.
We have an inverted tax incentive system! Tax those on the lowest wages the most (90%?), and the highest get no taxes, thus giving the poor a mighty reason to get rich!
It’s not rocket science!
UKIP?
UKIP just declared that savings from getting out of the E.U. should not be devoted to reducing taxation (they had previously promised to get rid of Inheritance Tax) but should be devoted to INCREASING GOVERNMENT SECTOR WAGES instead.
I felt a sudden wave of sympathy for E.U. membership – for the first time in my adult life.
Antoine Clarke would be amused.
A rise in free market belief around the world?
I see so Rand Paul is not on about 3% in the polls?
Who else is even talking about reduced government spending?
Donald Trump has just promised health care (and everything else) “free” for everyone.
These is no hope – none.
Not this side of a collapse anyway.
Oh darn it…
This is just another illustration of the enduring truth of Bastiat’s maxim that “The state is the great fictitious entity by which everyone seeks to live at the expense of everyone else.” It is, after all, classic Keynesian doctrine.
The commenter’s specific point is just stupid: of course taxes are a “cost” to the entity paying them, even if somehow they eventually provide some indirect (albeit unquantifiable) benefits to it. But (as I interpret it, anyway) his larger point is that taxes on the whole are beneficial to society. And this is the theory which must be constantly refuted. It can never be better, from a macroeconomic perspective, to send money to the central government for redistribution to others (“spending a dollar to give a bum a quarter”, as JC put it) than for people to spend their own money as they see fit. The transaction costs of such redistribution are always a complete waste of wealth, to say nothing of the economically distortive effects of such activities. This is not to say that there aren’t necessary expenses of government (for those of us who are minarchists, anyway), or that everything government spends money on is a total waste, but it must be kept firmly in mind that all such expenditures are net costs to society, destructive of wealth. And yes, that applies to infrastructure projects as well (roads and bridges, etc.), which invariably cost far more than they would have if built by private interests.
Government does only one thing well (although not necessarily efficiently, thank goodness!): destroying things. It does not create, it does not build, it does not elevate or inspire (unless you count inspiring cupidity). It is a necessary evil, but an evil nonetheless, and must be kept as small as possible. Funneling large amounts of tax revenues through it is ultimately destructive, however beneficial specific individual projects might appear to be.
What Laird said. I think we can be charitable and suppose that ‘cost’ is not really what was meant. Probably ‘waste’ is what was meant. And that is why he is wrong, because government is wasteful, not because he does not understand ‘cost’.