Tag: Tax

Taxation: The First 10,000 Years — Part 3

Although it’s relatively new and still not universally accepted, you don’t need a PhD in political science to understand the concept of taxation without representation.  It’s quite simple, really.  All you have to do is remember taxpayers are people.  Yes, corporations pay taxes, but that’s a whole different bunny rabbit.  Believe me; the corporate world is well represented in government circles.  I’m talking about the fundamental building blocks of democracy – ordinary people.  To understand taxation without representation, you find an average person, and as Deep Throat said to Woodward and Bernstein, “Follow the money.”  Here’s how it works.

Jane is an ordinary person.  She works for an ordinary company and earns pretty good money.  She has a car, lives in a tidy one bedroom apartment and has a boyfriend named Joe.  She takes the bus to work because gas and parking are expensive, and she’s trying her best to be green.  Jane is not particularly political or socially active, but she votes, knows the issues, did the Find A Cure Fun Run and volunteers Thursday night at her mother’s After School Drop-in Centre.  You could pass Jane on the street forty times and never know she was there.  Jane pays her taxes.  Actually, aside from income tax once a year and big item sales tax, Jane isn’t even aware she’s paying taxes; she just does it.  It’s part of Jane’s ordinary life.

The reason Jane gives the government her money is to provide for the common good.  However, should Jane desire a few things from her government — like more buses in the rain or perhaps a streetlight or two, so she doesn’t break her neck walking in the dark — chances are good she won’t get them.  Why?  Nobody’s on her side.  If she was an endangered goat, she’d have at least twelve different environmental lobby groups working for her.  If she was a rubbish disposal technician (or whatever garbage men are calling themselves these days) she’d have a powerful Public Service Union to rely on.  If she were a cultural event, she could get public funding, etc. etc.  Unfortunately, since Jane is none of the above, she’s on her own.  Jane has been abandoned by the people who are supposed to serve her.

The bottom line is Jane can’t hurt her government and powerful activist group can.  Social and political activists are no longer a bunch of like-minded citizens who have temporarily banded together to get their message out.  They are now permanent.  They have bricks and mortar office buildings, high octane lawyers and tons of money to throw around.  They don`t necessarily buy politicians; they don`t have to.  They can produce opinion polls, social and scientific research papers, press releases and enough media time to browbeat the politicos into line.  Meanwhile, all Jane has at her disposal is a nasty email or telephone call.  Furthermore, many activist groups are nonprofit and not only pay little or no actual tax but are also in line to receive government funding (which, by the way, is Jane’s money.)

It’s the same with Public Service Unions.  Over the years, they have been able to negotiate some pretty healthy contracts with the various levels of government.  In general, Public Service workers earn higher wages, receive more benefits and have better pension plans than the average private sector worker, and the gap is increasing.  This is because Public Service Workers control services essential to a modern society.  Even a minor disruption in garbage collection, transit service, education or health inspection can have disastrous results.  Politicians know this, so it’s better to throw money at union problems than risk angering its membership.  Union displeasure wields power far beyond its sheer numbers.  Once again, this special interest group has a lot more influence on government than Jane does, even though Jane is paying the bill.  It’s more than ironic that in many cases, Jane’s public service employees are earning more money than she is and certainly have a better pension plan.

Our democracy faces a unique situation.  Ordinary people are becoming disconnected from the government that is supposed to serve them because their voices are a mere whisper compared to the noise that 24/7 special interest groups can generate.  Jane’s problem is that streetlights aren’t sexy.  They don’t produce headlines; social questions and moral dilemmas do.  As activists push politicians further and further away from the nuts and bolts of government, ordinary people find their needs going begging.  Yet they are increasingly being asked to foot the bill.

In a nutshell, representation without taxation is no different from its colonial counterpoint, taxation without representation.  It just doesn’t have a revolution – yet.

 

Taxation: The First 10,000 Years — Part 2

As we’ve already seen (Taxation: The First 10,000 Years) taxation as been around as long as humans have gathered in groups of more than one.  It is one of the two absolute certainties of life.   Not only that, but, throughout most of history, the financial arrangement between the taxer and taxee has remained the same.  In essence, I, the taxer will determine how much tax you will pay and when; you, the taxee, will pay it.  Also, I, the aforementioned taxer, will spend the money any way I please, and you, the aforementioned taxee, will shut up about it and go back to work.  It wasn’t an optimal system, but it served us well for thousands of years.  In that time, there has only been one fundamental change to the tax structure — but it was a biggie.  Around 250 years ago, a bunch of wealthy Virginia famers got together with a crew of Boston lawyers and compared notes.  They took a look at their W2s (or the colonial equivalent) and said, “Hey!  Wait a minute!  That’s our money.  We’re not getting half the good stuff we’re paying for.  What’s the deal?  Come on, George!  Treat us right or give us back our sixpence.”  They convinced the local populace that taxation without representation was tyranny, a novel idea at the time, but one whose time had apparently come.  After the revolution, the American experiment with democracy and taxation with representation caught on.  For the next 200 plus years, it was the ideal (with a few notable exceptions) that most societies strove for.  That was then; this is now.

For the last several years, we have been going through another fundamental change in our tax structure.  We are slowly turning taxation with representation into representation without taxation.  This metamorphosis hasn’t been as abrupt as the American Revolution but it is taking just as firm a hold on most western societies.  The will of the people to determine just how and why their money is spent is being eroded to the point that representative democracy itself is at stake.

You don’t have to look any further than last year’s Occupy Whatever! movement.   This fair weather protest, with its Eat the Rich branding slogan, shifted our society back into a class warfare skid.  The influence of several thousand vocal protesters vastly outdistanced their financial ability to pay for the changes they sought.  Now, eight months later, on the verge of another protest season, taxing the rich has become a mantra in most government circles.  Agree or disagree with the Occupy Movement; their ability to set the political agenda is a game changer.  Yet their contribution, in terms of sheer numbers alone, is minimal.

It works the same with non-profit organizations.  They are increasingly using the money they raise not just to fund their organization and the work they do but also to directly influence lawmakers for legislation favourable to their cause.  The National Rifle Association is a perfect example of this; so, too, is ACORN, regardless of what they’re calling themselves this week, or the Keystone Pipeline lobby which is trying to leverage both sides of the political spectrum.  But that’s the point: single issue politics, fueled by tax-deductible donations, have found a way to punch far above their weight class in the halls of power.  The problem is these one trick ponies aren’t interested in the common good; they simply want to protect their particular interests.  That’s why they’re called special interest groups, and their influence is growing.  Lobbyists in America now outnumber lawmakers!

This is happening all over the western world.  In Canada, the Fraser Institute, a declared conservative think tank produces right wing policy papers while denying any political agenda.  Tides, a Canadian subsidiary of an American environmental group, has focused its vast resources on local elections, targeting candidates unfavourable to its cause.  Both of these groups enjoy tax exempt status!  In France, vocal and violent farmers have parlayed their small numbers into enough power to receive far more in agricultural subsidies than they ever pay in taxes.  This financial support is not only paid for by the general public, but it is also keeping food prices artificially high.  The ripple effect of this incedible arrangement is being felt throughout the European Union, and to a lesser extent the entire world.  Also across Europe, public service unions, whose wages and benefits are paid for by tax revenues, are increasingly waging war against austerity measures meant to stave off national bankruptcy.   Again, one-issue politics are trumping the common good.

As this new idea of representation without taxation gains credibility in our society, the results will be disastrous.  With no financial stake in the game, who will care how much money is spent or on what?  Waste means nothing when somebody else is picking up the check.  Even as we speak, we’ve already mortgaged our children and grandchildren to maintain a non-renewable lifestyle.  And all those pet projects of all those groups with loud voices and serious financial backing are taking precedence over the mundane work of government.  Sewers aren’t sexy.

This is a new tyranny, built on the ubiquitous special interest group.  Like the splendid kings of old, they don’t care where the money comes from.  They want their monuments built.  They see it as their right to have what they want, when they want it.  And, like those splendid kings, they will bankrupt our society with their excesses.

Friday: How the New Tax Structure Works

 

Taxation: The First 10,000 Years

When I was a kid, there were troops of old farts kicking around, whose sole purpose was to make a nuisance of themselves and dispense wisdom in the form of colourful homilies.  Any time anyone under the age of 40 screwed up, they would lean back like balding owls and pronounce: “There’s many a slip ‘tween the cup and the lip” or “A fool and his money are soon parted” or some other such nonsense.  My favourite was “There are only two things certain in this life: death and taxes.”  I always treated that one with “roll your eyes” respect because, as a student, I didn’t notice (or care) what taxes I paid (there simply weren’t that many.)  Furthermore, my youth came with a prepackaged shield of immortality that protected me from the Grim Reaper (who was only an ugly rumour anyway.)  In other words, both concepts were foreign to me.  In my world, people were supposed to pay their fair share of taxes.  After all, I did, and if they were unfortunate enough to get old and die, it was their own damn fault.  Luckily, these days we don’t let our old people hang out with us anymore.  We warehouse them in seniors’ facilities where they can wither away as they see fit and keep their smartass remarks to themselves.

The idea of death is easy to understand; all you have to do is live long enough, and it will come find you.  Taxes, however, are more complicated.   They are beautiful in their simplicity but downright grotesque in their execution.  In essence, taxation means, as a society, we are going to gather our money together to buy things we can’t afford individually.  Sometimes these things are tangible items like roads and boats and buildings, and sometimes they’re conceptual — like education, security and health care.  Regardless, we use taxation to pay for the common good.  The complication comes, not from what is the common good (I think we all agree on that) but how we get there from here.  This question has plagued most societies since before Kofu the Egyptian decided he needed a bigger tomb than his dad and somebody was going to have to pick up the tab for it.  In those days, however, it was pretty easy to figure out who did the paying.  Basically, when the pharaoh said it was tax time, you threw in your pennies or the next voice you heard was the guy with the whip, hollering “Pull.”  After all, pyramids don’t build themselves.  My point is, for most of history, it was the local Pooh-bah who decided what constituted the common good, and taxation without representation was a universally accepted concept.

This arrangement worked for thousands of years.  There were some bumps in the road — like Robin Hood and the Magna Carta, peasant revolts and the English parliament — but in general, people shut their mouths and paid their taxes.  The money disappeared into wars, royal mistresses and monuments and society thrived.  Unfortunately (or fortunately) this all came to a screaming halt in 1763.  This is an extremely tangled bit of history, but here’s the Twitter version.

Immediately following the Seven Years War (which many consider the first genuine World War) Britain found itself in dire straits financially.  They’d just beaten the crap out of the French … again, but they’d had to mortgage everything but the Tower of London to do it.  In a word, the Brits were broke.   They looked across the Atlantic at their American colonies and saw a bunch of fat and happy farmers with coin in their breeches.  It looked like a no brainer.  Parliament would tax the thirteen American colonies to pay for, not only their part in the recent war but also any future administration and protection.  To the English, this was a win/win situation; to the Americans, it was highway robbery.  Actually, the Americans weren’t opposed to taxes as such (no more than usual, anyway.)  They were much more concerned with who got their mitts on the money.  As freeborn Englishmen, they wanted some colonial representation in Parliament to oversee the coin they were shipping across the Atlantic.  They had the radical idea that if they had to pony up the cash, they should at least have a say in how it was spent.  It was a new Golden Rule (If I provide the gold, I make the rules) brought on by reading too much Voltaire and Rousseau by candlelight.  Lord North’s government in London called this outrageous school of thought treason.  The Americans, not known for prolonged discussion even then, reached for their muskets.  As we all know, insurrection is only wrong if it fails.  The Americans didn’t fail, the thirteen British colonies became the United States of America and for the first time since Pericles was a pup, taxation with representation was more than just a philosopher’s fantasy.

The odd thing was this New World idea caught on.  Pretty soon, French peasants wanted a say in how their government was run and how their money was being spent.  Then it was Haiti and the nations of South America; then Greece, and pretty soon, people all over the world were demanding this new taxation with representation.  It was a worldwide phenomenon and the first and only fundamental change to the tax system — until now.

Wednesday: Contemporary Taxation: A Fundamental Change