Tag: tax

New at Cato, Tax Day Edition

tax-dayHere are a couple of dishes Cato Institute scholars cooked up for Tax Day:

  • Writing for National Review Online, Chris Edwards warns against the dangers of rapidly increasing government spending:

    When filling out your tax forms, you might want to think for a second about where all that money is going. After federal spending roughly doubled in the Bush years, it is growing by leaps and bounds under President Obama. What’s more, the federal government is increasing the scope of its activities — it is intervening in many areas that used to be left to state and local governments, businesses, charities, and individuals.

    There are now a staggering 1,804 subsidy programs in the federal budget. Hundreds of programs were added this decade, and the recent stimulus bill added even more. The result is that we are in the midst of the largest federal gold rush at taxpayer expense since the 1960s.

  • At Townhall, Dan Mitchell rails against the current tax code:

    Beginning as a simple two-page form in 1913, the internal revenue code has morphed into a complex nightmare that simultaneously hinders compliance by honest people and rewards cheating by Washington insiders and other dishonest people.

    But that is just the tip of the iceberg. The tax code also penalizes economic growth, distorts taxpayer behavior, undermines American competitiveness, invites corruption and promotes inefficiency.

  • At CNSNews.com, Edwards argues that policymakers should give Americans the low and simple tax code that they deserve.
  • Also, don’t miss the new Cato video that reveals how troubling the American tax system really is.

A Poll for Tax Day

The latest poll to ask the question “would you prefer a more active government with more services and higher taxes or a smaller government with fewer services and lower taxes?” found that 66 percent prefer smaller government and lower taxes, to only 25 percent who prefer a “more active government” with more services.

Note that the poll doesn’t even say “larger government”; Rasmussen has actually made the wording more favorable toward big government.

As I’ve noted before, the usual “smaller government” question, as asked by CBS and other pollsters, is incomplete. It offers respondents a benefit of larger government – “more services” – but it doesn’t mention that the cost of “larger government with more services” is higher taxes. The question ought to give both the cost and the benefit for each option.

That’s what the Rasmussen poll does. And it shows that people prefer lower taxes to more government services.

Pirates as Proto-Governments? You Bet!

I have to confess I don’t understand why Roger Pilon and Ilya Shapiro are criticizing our colleagues Ben Friedman and Peter Van Doren below.  At the risk of being cast as yet another cog in the insidious piratofascist fifth column, I’d like to defend Ben and Peter.

Roger and Ilya reproach Ben and Peter for likening pirates to “pseudo-governments” and mount an impassioned defense of the nation-state as deserving a place in a different category from pirates.

On the distinction between the two, they write: “A tax, at least in principle, and most often in practice, is a charge for a service rendered –- not necessarily a wanted or an evenly distributed service, to be sure…”  To be sure, indeed!  There’s a term for charging people for an unevenly distributed and unwanted service.  It’s called racketeering.  Their description of taxation could apply quite well to a mafia.

Roger and Ilya would prefer to keep pirates and governments in two discrete categories but provide little reason why other than the above.  But if they dislike the analogy, their problem is not with Ben or Peter or Noam Chomsky or St. Augustine, but rather with a body of well-developed academic literature.  In particular, one of the preeminent scholars of the formation of national states, the late Charles Tilly, wrote a famous book titled Coercion, Capital, and European States that would help color in the gaps for them.  The short version is that European elites came to form national states as a means for protecting their fiefdoms from other proto-states, which frequently had predatory aims, and that this process sometimes had the incidental effect of protecting the populaces that lived under state jurisdiction and could be used as means for making war against the neighbors.

Tilly also wrote a well-known essay titled “War Making and State Making As Organized Crime” that makes the following claim: “Banditry, piracy, gangland rivalry, policing, and war making all belong on the same continuum.” Tilly went on:

In retrospect, the pacification, cooptation, or elimination of fractious rivals to the sovereign seems an awesome, noble, prescient enterprise, destined to bring peace to a people; yet it followed almost ineluctably from the logic of expanding power. If a power holder was to gain from the provision of protection, his competitors had to yield. As economic historian Frederic Lane put it twenty-five years ago, governments are in the business of selling protection … whether people want it or not.

Governments and pirates both “put the victim to a choice between two of his entitlements – his freedom and his property.”  In the literature on state formation, this isn’t a controversial point.  I’m really surprised to see that it is for two libertarians.

Pirates as Tax Collectors?

[Co-authored with Ilya Shapiro.]

As we suspected, with world attention focused on the just-concluded piracy standoff, it was only a matter of time before someone would write something like this: “the right way to think about this problem is that pirates are imposing a tax on shipping in their area. They are a bit like a pseudo-government.” Perhaps the Mafia too –- “pay, or we break your legs” –- is like a pseudo-government.

The difference between a tax and extortion is not subtle, even if it seems to have escaped the cited authorities, including Noam Chomsky. A tax, at least in principle, and most often in practice, is a charge for a service rendered –- not necessarily a wanted or an evenly distributed service, to be sure, but most relevant here, protection from third-party pirates and other lawless predators, domestic and foreign. By contrast, a pirate’s shakedown puts the victim to a choice between two of his entitlements –- his freedom and his property. That distinction –- again, hardly subtle –- is what prompted us to leave the state of nature. Those who would like to return to that state will find it waiting for them on the horn of Africa.

Our Troubling Tax System

The U.S. tax code gets more complex every year. It violates civil liberties and, left unchanged, will leave the United States at a powerful competitive disadvantage in years to come, say Cato scholars in this new Cato video.

According to tax expert Chris Edwards, the tax system is growing at startling levels — there are now about 70,000 pages of tax regulations and $300 billion in compliance costs — and it’s only going to get worse.

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