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


Obama vs History: Taxing the Rich

If, as Sam Johnson and Bob Dylan maintain, “patriotism is the last refuge to which a scoundrel clings,” then taxing the rich is the first option of a faltering politician.  It doesn’t take a lot of planning; it’s easy to sound byte, and it makes good copy.  Journalist love tax stories because, since nobody likes taxes, they don’t need to waste a lot of time explaining economics to the iGeneration.  It’s either “tax breaks for wealthy friends [cronies in Canada]” or “making the rich pay their fair share.”  All journalists have to do is point to who’s getting screwed and go back to their Blackberries.  They don’t even have to look up.

When a faltering politician pulls the tax-the-rich rabbit out of his hat, he knows his days are numbered and he needs a ballot box bounce at the next election.  So when President Obama cranked up the teleprompter today, he wasn`t offering a bold strategy for economic recovery; he was starting his 2012 election campaign.

Actually, taxing the rich has a long and noble history.  It goes back to the days when Robin Hood and Maid Marian were playing Bonnie and Clyde with King John`s tax money.  In actual fact, though, Robin and his boys were a minor annoyance to King John; it was the rich northern barons who were the real problem.  John had been “making the [Saxon] rich pay their fair share” for years to cover the costs of his stupid wars.  Eventually, they got fed up with it.  In 1215, they raised an army, marched on London and finally cornered the King at a place called Runnymede.  Faced with involuntary abdication, King John signed the Magna Carta, a document that strictly limited the power of the monarchy.  The Divine Right of Kings was dead, western democracy was born and everybody (except John) went home happy,.  The Robin Hood story came centuries later and never really clarified just which rich Robin had been robbing.  Apparently, historically, taxing the rich has its disadvantages.

In the late 18th century, another British King, George III, was busy “making the [American] rich pay their fair share” to cover the cost of his stupid wars — and along the way maybe pay for their own defence.  This did not sit well with the local moneyed class of The Thirteen Colonies.  They got together in Philadelphia and decided to limit the power of the British king and the British Parliament — by getting rid of them.  On July 4th, 1776, they signed the Declaration of Independence, everybody went home to get their muskets, and the United States of America was born.  Meanwhile, George was left wondering if it was better to have taxed and lost than never to have taxed at all.

The modern version of “making the rich pay their fair share” first showed up in Britain, in 1909, when two wily Liberal politicians looked over to the left and saw the new Labour Party capturing the hearts and minds of British voters.  David Lloyd George and Winston Churchill decided it was time to redistribute the wealth of the Empire — and perhaps take a few votes away from the burgeoning socialist movement.  They concocted a People’s Budget which proposed an escalating Income tax, an Inheritance tax and a Land tax.  After a couple of years of political bickering and compromise, the budget passed.  Lloyd George described it thusly:

“This is a war Budget. It is for raising money to wage implacable warfare against poverty and squalidness. I cannot help hoping and believing that before this generation has passed away, we shall have advanced a great step towards that good time, when poverty, and the wretchedness and human degradation which always follows in its camp, will be as remote to the people of this country as the wolves which once infested its forests.”

Unfortunately, their scheme didn’t work.  Despite Lloyd George’s optimistic oratory, taxing the rich didn’t lift the poor out of poverty within that generation or even the next one.  It would take two World Wars and a worldwide Depression to eradicate the worst poverty from the slums of Great Britain, and even then not completely.  The only real result of the Liberal Party’s People’s Budget was within a generation the Liberal Party itself was wiped off the political map and is now “…as remote to the people of [Britain] as the wolves which once infested its

Today, President Obama is playing a losing game with history by introducing the Buffett Tax on millionaires.  He might get away with it for a while because most ordinary people truly believe that the rich aren’t really “paying their fair share.”  It’s a common myth that no amount of reasonable arguments have ever been able to dislodge.  Let me bore you with some numbers, though; these are figures from the American Treasury Department.  In 2005, the top 50% of American taxpayers paid approximately 94% of all taxes collected, while the bottom 50% paid the rest – a mere 6%.  Obama knows that politicking with these numbers is not very smart.  However, “making the rich pay their fair share” is a far more palatable catchphrase.  It’s probably the first sound byte of the 2012 presidential campaign.

Luckily, the minute Obama opened his mouth, this morning history was on our side.  Despite its tempting appearance, taxing the rich has never been the best political strategy for staying around the halls of power — especially not in the long term.

It’s starting to look like the White House might get a new tenant next year.