Essence of Taxation

Economics Political Theory
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1

So.
Whenever taxation of the wealthy is mentioned, invariably claims of socialism are flung around.
“Redistribution of wealth is wrong, unjust, and unfair!” everyone cries.
Question: There is another, even MORE massive redistribution that takes place hourly, daily, monthly, yearly.
The ridiculously large national debt and deficit spending by the federal government is the largest distribution of wealth in HISTORY, where we are, essentially, stealing the prosperity of future generations to fund present needs and desires.
Paying down this debt as qiuckly as possible is a means of preventing accruing intrest and greater future cost.
But in order to do that, you MUST RAISE TAXES. So why is the asssurance of an economically sounder tomorrow so hated amongst the vast majority of Americans?
Because it is TOMORROW, and not today. Ever the optomists, the American public assumes that some magical wand will wave away all debt and so we constantly live our lives care free without any regard to long term risk.
Hmmn. Reckless spending without regard to potential future risk… I’ve got a feeling we’ve heard of this recently…
COUGH! COUGH! BAILOUT! COUGH! COUGH!

Given the need to raise funds to pay off the debt, who should share the most burden for the aforementioned debt?
I would argue that the wealthiest members of society benefit most from that society, and therefore owe the larger share of debt.

Please keep in mind that I am NOT a Democrat, NOR a Republican, but an economist and a concerned, independent citizen [with some Libertarian leanings].

Consider: a person working in this country benefits from all the goods that a government provides (welfare aside, but we’ll get to that later). Whie he uses the power grid [which he pays for] and benefits from clean water [also, paid for], he also gains the benefits of clean air [not paid directly for], general health of the population [paid for by everyone else], the police and fire departments [again, non-discriminatory public good], and the legal system in general to enforce rights.
If the majority of things on this list were left out, then the person would certainly be lacking in quality of life and safety. However, the more WEALTH that a person has, the more that government protection is VALUED.
If I only had a net worth of $100, and the fall of the government would mean I lose, potentially, everything I own, then the worth of the presence of government is, losely, $100 times the risk of loss.

If I had a net worth of MILLIONS [such as several legislators…], then the VALUE of a functional government is that much greater.
In fact, since my wealth is [most frequently] built off of a consumer base of the less wealthy general public, than the value of my wealth is due to THEM - they are the reason I am able to amass wealth. In such a scenario, my risk is COMPOUNDED by the risk facing the general public, since IF THE MIDDLE CLASS FAILS, THE UPPER CLASS FAILS AS A RESULT.

Considering that the principal behind taxation is to fund government, then a richer person SHOULD be paying MORE proportionately than a poorer person. It is an economic expression of the value of a structured government that the larger share be paid by the wealthier.

Regarding welfare I will say little except that the support of those unable to work themselves increases the velocity of money among essential goods and services, since these people have almost no marginal savings rate.
Aside from the fact that, you know, it’s moral and mandated by basically EVERY religious code.
And aside from the fact that it prevents people from having to potentially criminal activities, contributing more to chaos in lawlessness. Again, the wealthier benefit more from not having to worry about being shot to death on the streets of Manhattan for their wallets.

Again, let me state that I am unaffiliated, but I am posting this in order to promote a general discussion. Please contribute any and all thoughts.

2

Who got us into debt in the first place? The government!

In an ideal situation people would have paid for the service they used. Those in favor for war in Iraq could have sent money to support that cause. If I want to set money aside in case I ever get unemployed, I can have a contract with a company that provides unemployment insurance.

Quite frankly, I don’t really give a rat’s a$$ about the debt that the government got itself into. I am tired of paying for crap I don’t use, pay for people who are lazy and fund projects that are in direct violation of my principles.

3

Please. I wasn’t talking about specifics - it was a general question on the social/economic/political contract.

I wasn’t talking about the war in particular, but you can’t evaluate use or payment of a public good - you don’t negotiate with a firehouse to put out your neighbors home, even though you benefit.

I’m not talking about debt - I am talking about the economic value of government for it’s individual constituents.

4

I wonder how many more times I will pull this article out today. [^o)]

This is also relevant.

5

Read: the role of government is to protect the wellbeing of its constituency.

This “government” is not a particular one - I am not talking about a specific action or role - I am merely discussing what the economic value to it’s citizens are.

So, really, NEITHER article is relevant - we aren’t discussing the role of government, but it’s value.

6

How can its value be discussed to the exclusion of its role, since it is precisely its role that might or might not be valued?

The articles are relevant to your claim regarding public goods, though.

7

Because in the absence of government, there is an inherent risk of loss for the individual - this is in the post.

What the government actually DOES to protect/provide for its constituency here is immaterial.

Whether or not the government IS actually protecting in reality is, similarly, immaterial.

Given:

a) that Government’s role is to protect the consituency [in whatever manner]

b) that the absence of governent carries the risk of loss for the constituency [really, just follows from a)]

c) that taxation is a payment based on the value of the services rendered by government [regardless of whether YOU think it is stealing]

Then:

d) the ECONOMIC value of the service of government can be determined by the exposure to risk of the individual multiplied by the value of the loss.

e.g.: 25% chance of losing all $100 = $25 economic value of the service of government.

8

Sigh. Let me see then what I can do with the OP.

No. That’s a mere guess. Value is subjective and is only demonstrated in action, i.e. by preferring a good over my $100, in a voluntary transaction.

I suggest you use “wealth” or "market value"instead of value, because the two concepts are not the same. This does not solve the problem that valuation is subjective.

Why not charge user fees instead? Market prices are not determined by one’s ability to pay, but by demand (i.e. subjective valuation) and supply (again, subjective valuation.)

Argumentum ad populum/ad verecundiam.

And since the wealthy are profit-oriented, they will realize this and do so out of their own pockets. Else, they do not value this “service”.

I also want to know, how is a greater “velocity” a good thing in a time when the US risks lapsing into high levels of inflation?

9

I would actually prefer that the national debt be fully repudiated.

You really ought to look into the idea that the state is fundamentally predatory and that all of it’s services could (and should) be provided on the free market. This is the view that most people on this site have, so the discussion is stifled when you assume that we accept all of your premises; in fact, with many of them we believe the polar opposite. The articles John provided are indeed very relevant.

10

I’m sorry to be impolite towards you Igor83185, but I cannot help but think your presence here is a veiled attack on austrian economics. If this is truly the case I am hereby “calling you out on it”.

You begin by posing a question, or proposing a discussion, with premises you know we disagree on, and then you just wait for the first one to “trigger your trap” and say something along the lines of:

and here:

The trouble is, when it comes to economics and the question falls on government (both its role and value) no amount of dodging the issue can hide the fact that to be pro or anti is a value judgement. In any case, to refer to social contract theory really invalidates any hope for you to simply assert you premise, since this very subject is a major contention point. In fact I have never seen, read or heard any one being able to defend it rigorously.

11

Jon’s already done it, but why not.

Nobody should, those immoral enough to lend money to the biggest criminal organisation in the world should the suffer the consequences.I’ve never read it, but Rothbard recommends Chodorov’s Don’t Buy Government Bonds on this subject (or at least I think it’s on this subject).

Two fallacies jump out at me immediately. First of all you conflate the state with society, which is completely false. In fact, the opposite is true the state is a highly anti social institution thriving on conflict as opposed to voluntary arrangments. The second is that it simply isn’t true that the wealthy benefit the most from society, in a free market it is the opposite, people can only become wealthy because others value their contributions. It only follows from there that people benefit from them most and hence, it is the poor that benefit most from society.

Of course, it is true that often the rich benefit most from the state. But this is entirely different than saying that the rich benefit most from society.

Once again, that simply isn’t true. To begin with a poor person is more likely to live in an area of high crime, thus whereas if production was private they would pay more for it, whereas as it currently stands the rich to. Moreover, in a free society with privately competing provides of defence and arbitration the poor would be in the worst position to pay for it, hence they benefit most from it being socialised.

In addition to what I just said, and as Jon has pointed out, see Hoppe.

How is that true? You can’t tell that the rich will value the government more, in addition to what I said above it may well be likely that the rich resent being taxed (ignoring those that use the state for their own benefit) 40% whereas the poor enjoy the benefits they received (even if they’re unknowingly robbed) meaning that in fact, the poor value it most highly.

Care to state why it’s moral?

Teaching people to ignore personal responsibility, that theft is acceptable as means to an end and creating class conflict is hardly a way to prevent people from criminal activities. And that’s without mentioning the ineffectiveness of state provided defence services.

As for the velocity of money, disregarding the fact that it’s a myth (money is never “in circulation” it is always in somebody’s possession) why is that a good thing? In the long term velocity of money can only increase with an increase in production. Yet, as AE demonstrates any form of taxation will lower the time preference rate and create disincentives to work and to save.

12

First off - an Apology:

  1. This should, in retrospect, have been posted in the discussion forum, not posited as a question.

  2. This should also not have started quite so late at night.

  3. Being a repost of mine from a different political forum with a good number of religious participants, I should have edited my post before placing it here. Sorry if this has frustrated Y’all. I really should have omitted the entire portion re:government debt, which, I agree, shold never have existed in the first place.

Clarification:

By the use of the terms taxation and government, I am not necessarily referring to Government and Taxation. Those terms were/are place holders for general concepts which I mentioned throughout the post.

‘Government:’ can be replaced with security-force. Any organization, private or public, that provides security/safety for the wealth of its constituency, from internal and external dangers.

‘Taxation:’ then becomes the fee paid for the service, which has a distinct economic value commensurate with risk, as I mentioned before: wealthier individuals have a higher economic value of this “security system” - be it private or public. Their risk is commensurately higher, compounded by a tiered economic structure and by their wealth making them a more desireable “target” for negative action.

I apologize if it seemed that I was picking a fight, but my question holds regardless of a private or public security force, and whether you call it “taxation” or “user fees.”

13

Well you seem to be basically saying that the empirical reality of what governments do is irrelevant. I don’t find it irrelevant at all, it’s entirely relevant and fundamental to a discussion on political philosophy. I think you’ll find that most people here are libertarian anarchists who see the empirical reality of government in purely negative terms, so you’re going to continually hit a brick wall.

14

No need to apologise, perhaps you could restate the question in a more succinct form though?

15

Where a constituency is protected from internal/external danger or loss of wealth by a regional force, be it public or private, can the economic “value” of that service be determined to be the vaue of potential loss multiplied by the individual’s exposure to risk?

Consequently, those who have a larger amount of wealth are exposed to more risk - their potential for loss is greater.

Therefore, the economic value placed on said security would be higher.

Similarly, those with a larger share of wealth often (though not always) have their wealth rooted in consumerism - market desire for their provided goods and services. Since their wealth is based on the consumerism of others, and these are also exposed to the same risk due to loss of security, then those with a larger share of wealth should have an exponentially higher exposure to risk than lower level consumers.

Ergo, the value of security is MUCH higher for the wealthier segments of the population.

Shouldn’t they, concurrently, contribute more of their income towards the payment of said security service?

16

Are you trying to say that if your “net worth is $100,000” your “insurance premium” to have your wealth protected should be higher than my premium since my “net worth” is only 50,000?

17

I am saying that in a service that provides indiscriminantly to a region, the VALUE of the service is higher for one who possesses more “net worth” - the man with the more expensive house stands to lose more wealth should it catch fire.

From a market standpoint - if the security provider could discriminate, wouldn’t he charge more to those who are wealthier (and wouldn’t the wealthier choose to pay because the value of the service is more)?

18

The goal of the government to keep and and expand its power. All the “public service” crap is just BS for the “constituency” when they violate the rights of the said “constituency”. Taxes violate our right to private property. If I hold a gun to your head and steal your money, would it be a “protection”? No. It would be a crime, even if I give all the money to help the poor. Now, if the government steals your property, it’s called a protection. Yeah, I can see how they care about my well being.

19

That’s why I rephrased the question to exclude the terms government and taxation. I am asking a question and the majority of responses I receive are nitpicks about semantics: If i have a private localized security force I can call it a “government” and that doesn’t automatically make it “evil.”

Is a voluntary, fully represented republic evil? Where every citizen consents to participate and decisions are made on actual majority vote by the populus? [discussing voting ignorance aside, assuming that those that vote, care, and therefore bother to self-educate].

But neither of these are questions I was actually asking, Natalie.

20

If we go on the gold standard the value of greenbacks will fall. Then we can pay off the national debt easily. If worthless paper money was loaned then worthless paper money can be repaid.