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Tax Against Tyranny

by KENNETH COUESBOUC

The governments of the world can be seen as belonging to either of two categories. There are those that depend on taxes for their spending and there are those that do not. And the extent of its dependence on taxes will largely determine the form of a particular government.

The collection of taxes has never been popular. And introducing new taxes has more than once brought down a government, or led to revolt and even revolution. Taxing the nation means taking a part of the wealth produced. But the part appropriated should not be excessive, as overtaxing inhibits investments and growth. So that a short term gain from an increase in the tax rate contradicts the long term gain due to increased wealth being taxed at the same rate.

The necessary “fine tuning” of the tax rate and the consensual disapproval of taxes in general often result in governments having to pay their budget deficits with borrowed money. This inveterate borrowing in turn allows governments, in a bid to restore lost popularity, to cut taxes for certain strategic sectors of society. However, borrowing relies on the lender’s confidence in the borrower’s future capacity to pay. This also applies to government borrowing but, as the limits of debt are poorly defined (1), the lender’s reaction often comes too late, after the limits are passed.

Deciding who bears the burden of financing the state is a fundamental function of parliamentary representation. The question of who is taxed, how and how much is (or should be) a subject of great importance in electoral debates. On a par with law and order, education and welfare, war and peace, that is with all the different ways of spending what is reaped. Fair taxation is essential to the notion of res publica, the idea of a commonwealth shared by all citizens. And so, refusing taxation has proved to be the most effective, perhaps the only way of opposing tyranny. Unless, of course, the tyrant ensures that refusal is impossible.

Communist regimes managed to eliminate taxation by a total control of production, exchange and finance, with government expenditures as an integral part of the process. The highly centralised planning put in place by the communists was inherent to the mechanical age. Coal and steel are best produced in a planed and centralised manner.

For this reason, the totalitarian economies were fairly successful for a while, but they were totally unable to adapt to the electronic age. The decentralised nature of electronic software production, the garage start-ups and the high school entrepreneurs quietly pushed state control of production into the landfills of history. Initiative and inventiveness can neither be planned nor extorted.

The top down control of bureaucratic tyranny could not survive in a changed environment. But military tyranny is as thriving as ever, because warlords only need guns and ammunition to maintain their dominion. The rest can be procured by force. And, in the same way, tyrants are able to rule by might, when they do not depend on civil society for their incomes. An army can buy the arms it needs to impose its will thanks to “blood” diamonds, coltan, copper, oil, etc.

If the Burmese generals stopped receiving royalties for gas, oil and timber, they would fade away almost over night. But, as no one wants to give up their consumption of gas, oil and tropical timber, it just won’t happen (2). And, to make tyranny even easier, Burma is ethnically divided. So the army just looks after its own and can oppress or neglect the other inhabitants. In the same way, dozens of corrupt cliques are in power all around the world, funded by the royalties they receive.

Beginning with the Magna Carta, English history is a tale of rulers submitting to the will of the people in exchange for badly needed cash. And, to a large extent, it was George III’s need of money and Lord North’s intransigence that led to the Declaration of Independence and the birth of the United States of America. While, in France, Louis XVI’s empty coffers obliged him to assemble the Three Estates that deposed and then beheaded him.

These nations are justly proud of their rebellious past and of their forefathers’ brave stands against tyranny. But what of to-day? What pressure can be brought to bear by the taxpayers on a government that grants rebates and borrows all it needs on the world’s currency markets? Powerless at home and hooked to minerals and fossil fuels abroad, what remains of our heritage?

KENNETH COUESBOUC can be reached at: kencouesbouc@yahoo.fr

Notes

1. The capacity to repay depends on excess income, the part that is over and above the cost of the necessities of life. When incomes are stable, increased borrowing means reduced spending on necessities. But it is always difficult to assess how far the reduction can go.

2. During the Cold War, dictators were funded to put down the reds or the imperialist puppets, depending on which side was paying. Nowadays, funding is essentially commercial, with a few exceptions due to the War on Terror. And events in Iraq have demonstrated once again that it is easier and cheaper to payroll a tyrant than to subdue a nation.

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