Attention Conservation Notice: This begins with a note about Alabama politics, then discusses equitable taxation in general, mentioning Winston Churchill.
Today the Alabama legislature’s Republicans are expected to rally (for the fourth time this session) around the medieval principle of “might makes right” — especially its fiscal corollary: that the state should tax heads, but wealth should be tax-exempt.
In brief, taxes are for little people. So the state tax on groceries will survive another challenge today, in order that a state income tax shelter for the super-rich can be saved. (Prior posts are here, here, and here.)
This is an ancient principle that keeps democracy in check: Peasants pay taxes. Castles are exempt. Corporations are modern-day castles.
Not that this principle has never been challenged. We’ve just passed the 100th anniversary of the 1909 “People’s Budget,” a historic effort in Britain to redistribute wealth by taxing the value of land and aiding the destitute with social welfare programs. (Hat tip to LVTBlog.) This popular budget, backed by both liberals and conservatives, stalled in the House of Lords. After some political battle royal, the Lords traded their support of the budget for a repeal of the land tax. They could accept a progressive income tax, but their landed property had to remain exempt.
Winston Churchill, that conservative icon adored by so many Americans, was a determined champion of both the People’s Budget and the tax refoms — measures that would send our modern American conservatives into fever-dreams of “socialist” tyranny. Here’s Churchill:
Formerly the only question of the tax-gatherer was, “How much have you got?” We ask that question still, and there is a general feeling, recognised as just by all parties, that the rate of taxation should be greater for large incomes than for small. As to how much greater, parties are no doubt in dispute. But now a new question has arisen. We do not only ask today, “How much have you got?” We also ask, “How did you get it?”
- Did you earn it by yourself, or has it just been left you by others?
- Was it gained by processes which are in themselves beneficial to the community in general, or was it gained by processes which have done no good to any one, but only harm?
- Was it gained by the enterprise and capacity necessary to found a business, or merely by squeezing and bleeding the owner and founder of the business?
- Was it gained by supplying the capital which industry needs, or by denying, except at an extortionate price, the land which industry requires?
- Was it derived from active reproductive processes, or merely by squatting on some piece of necessary land till enterprise and labour, and national interests and municipal interests, had to buy you out at fifty times the agricultural value?
- Was it gained from opening new minerals to the service of man, or by drawing a mining royalty from the toil and adventure of others?
Was it gained by the curious process of using political influence to convert an annual licence into a practical freehold and thereby pocketing a monopoly value which properly belongs to the State — how did you get it?
For our own society, which always smiles on those who buy low and sell high, Churchill’s genuinely conservative perspective on taxation is a challenging one. What we call “fiscal conservatism” (and even our “liberal” politicians pay lip service to it) is really just a bundle of confused libertarian orthodoxies.
- We mustn’t tax corporations, because they’ll pass the cost on to consumers, or fire American workers, or flee to a foreign tax haven, or all of the above.
- We mustn’t tax land according to its value, because then some poor “widder woman” in Florida will be presented with an unpayable tax bill, and rather than providing her with a targeted exemption, we must spare everyone who owns valuable land.
- We mustn’t increase total government revenue, even as the population grows, because government wastes money and will always waste money.
If we combine all our maxims on taxing and spending into a coherent picture, it describes a system in which:
- Taxes are paid by people who lack the means to make someone else pay them instead.
- Public spending grows by means of a process invisible to the public (or only visible upon completion).
- Politicians only take responsibility for spending cuts.
Not only does this system protect wealth; it also curbs democratic disruptions by stimulating public cynicism. We waver between political consumerism (choosing between packaged candidates) and impotent throw-’em-all-out rages, which change nothing.
Updated to specify British provenance of the 1909 budget.