The Tedious Tax Payers' Lament
Can we please stop crying about "Our Tax Payers' Money?"
Far too often when reading a perhaps otherwise interesting essay, this
horrible argument is made. Whatever the governments' wrong doing e.g:
police violence against protesters, or military adventures abroad, along
comes the lament of how can they do this with our tax dollars? Whether
it's the activities of corrupt politicians, or some other case of
perceived misuse money by the government, too often included is the tax
payers' lament. This is a really bad argument.
First of all, the argument is very flimsy politically. For instance,
would it be OK for the police to beat-up protesters if such activity was
not publicly funded? Would it be OK to bomb foreign countries if it did
not cost the "tax payer" anything? Probably not. For this reason alone,
lamenting that dubious actions by the State that were undertaken "With
Our Tax Dollars" is the wrong argument. Instead, it's much better to
argue against such activities by showing that they are wrong, harmful
and contrary to the public good, regardless of how such undertakings
were financed.
Further, the tax payers' lament is actually false. The Government does
not spend tax payers' money. The government does not collect taxes
because it needs this money to spend. All money, meaning here the
national currency of the country, originally comes from the government.
If the government did not spend or lend, there would be no such money in
the economy. The government creates money.
What's more is that workers do not really pay taxes in any economic
sense.
When labour is sold as a commodity on the market its price is driven by
its replacement costs. This is clear to most people when it comes to
other commodities. For instance if the government enacted a tax on
tomatoes, nobody would be surprised that the price of tomatoes went up.
In most countries, the price of commodities like alcohol and tobacco is
substantially made up of taxes, yet nobody expects that the sellers of
these goods absorb the cost of such taxes in reduced profits, everybody
knows they are passed-on in the prices paid.
The same is true for wages. Wages are nothing more than the price of
labour on the market, and in a capitalist market economy, they are
likewise driven towards their replacement costs. In other words, if your
taxes were lowered, then your real wages would likewise fall, either by
the labour market driving wages down, or by the availability of extra
money in the hands of workers driving prices up. Everything else being
equal, the inflation-adjusted wage would remain the same. Therefore, the
workers do not really pay taxes in any meaningful sense, rather those
taxes are passed-on to the their bosses as part of the price of labour.
Now, going back to the example of the workers taxes being reduced and
yet wages remaining stable, in the case that for instance there were
legal or structural barriers to wages being accordingly reduced by the
labour market. I have noted above that the extra money available would
drive up the prices of the things workers pay for. This is the real
reason that the government requires taxes. Not to fund it's own
spending, but to control prices.
However this is not just a simple function of the amount of money the
government creates, how money is spent is far more relevant than how
much the government spends. More money only means higher prices when
there is little or no excess capacity in the production of that which is
purchased. In other words, only when the amount produced and sold does
not or cannot increase in proportion with the increase in the supply of
money.
Money spent on consumer goods is likely to drive the prices of those
goods up. This is almost always the case with workers' spending, since
workers do not generally finance productive capacity directly, but
compete against each other to purchase available goods.
Money spent on investments in production is less likely to drive prices
up. Government spending can mobilize underutilized economic capacity,
especially unemployed labour, and increase the productivity of labour by
way of eduction and other public investments, thus at the same time
creating more money, but also more goods to spend money on. Therefore,
not increasing prices, but increasing the size of the economy.
There are no fixed limits on how much money the government can create.
The governments and its central bank's ability to lend or spend is
limited only by law and policy. Therefore, all lending and spending is
undertaken in order to achieve some public aim. Spending and lending is
a social choice, a choice of what aims to undertake and what aims not to
undertake. We are not limited by any scarcity of tax dollars as to how
many protestors we want to beat-up or how many countries we want to
bomb, or for that matter, how many students we want educate or how many
people we want to provide with medical care, we can only be limited by
law and policy, and ultimately, by the productive capacity of our
society. In other we are limited only by social choices as to how to
employ our productive capacity.
We have a right to say we do not approve of bad choices because we have
a right to participate in the social choices made by our society, not
because it is "our" tax money. The idea that our right to comment or
dissent comes from the fact that we have paid taxes is a fundamentally
undemocratic argument. Do people that pay more taxes have more right to
say what social choices we make? No! We have a democratic right to
dissent and that does not come from the amount of taxes we may have
paid.
So please, pretty please, drop the tax payers' lament. The government
doesn't really spend tax dollars, workers don't really pay taxes, and
most importantly, our right to criticize the government does not derive
from how much tax we've paid, but from our democratic right to
participate in social choices and to hold our government accountable to
the public good.
I'll be at Stammtisch tonight around 9pm as usual, please come!
http://bit.ly/buchhandlung
--
Dmyri Kleiner
Venture Communist
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