Economics Dictionary of ArgumentsHome
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| Taxation: Taxation is the process by which governments collect money from individuals and businesses to fund public expenditures and services. Levied based on income, profits, property, or goods and services, taxes serve as a primary revenue source for governments, enabling the provision of infrastructure, healthcare, education, defense, and other public services. See also Government budget._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Murray N. Rothbard on Taxation - Dictionary of Arguments
Rothbard III 913 Taxation/Rothbard: Taxation (…) takes from producers and gives to others. Any increase in taxation swells the resources, the incomes, and usually the numbers of those living off the producers, while diminishing the production base from which these others are drawing their sustenance. >Government spending/Rothbard, >Government Budget/Rothbard, >Interventions/Rothbard. Clearly, this is eventually a self-defeating process: there is a limit beyond which the top-heavy burden can no longer be carried by the diminishing stock of producers. Incentives: Narrower limits are also imposed by the disincentive effects of taxation. Marginal utility: The greater the amount of taxes imposed on the producers - the taxpayers - the Iower the marginal utility of work will be, for the returns from work are forcibly diminished, and the greater the marginal utility of leisure forgone. >Labour/Rothbard. Not only that: the greater will be the incentive to shift from the ranks of the burdened taxpayers to the ranks of the tax-consumers, either as full-time bureaucrats or as those subsidized by the government. >Bureaucracy/Rothbard. As a result, production will diminish even further, as people retreat to leisure or scramble harder to join the ranks of the privileged tax-consumers.(1) >Income tax/Rothbard, >Government spending/Rothbard, >Government Budget/Rothbard, >Interventions/Rothbard, >Neutral taxation/Rothbard, >Neutral taxation/Economic theories, >Cost principle/Rothbard, >Benefit principle/Rothbard, >Excise tax/Rothbard, >Income tax/Rothbard, >Tax shifting/Rothbard. Rothbard III 933 Taxes: (…) tax has been ultimately levied on the incomes of original factors, and the money transferred from their hands to the government. >Factors of production/Rothbard. Government budget: The income of the government and of those subsidized by the government has been increased at the expense of the tax producers, and therefore consumption and investment demands on the market have been shifted from the producers to the expropriators by the amount of the tax. Money value/prices: As a consequence, the value of the monetary unit will remain unchanged (barring a difference in demands for money between the taxpayers and the tax-consumers), but the array of prices will shift in accordance with the shift in demands. Example: Thus, if the market has been spending heavily on clothing, and the government uses the revenue mostly for the purchase of arms, there will be a fall in the price of clothes and a rise in the price of arms, and a tendency for nonspecific factors to shift out of the production of clothing and into the production of armaments. Factor incomes: As a result, there will not finally be, as might be assumed, a proportional 20-percent fall in all original factor incomes as the result of a 20-percent general sales tax. Gains and losses: Specific factors in industries that have lost business from the shift from private to governmental demand will lose proportionately more in income; specific factors in industries gaining in demand will lose proportionately less - some may gain so much as to gain absolutely from the change. Marginal productivity: Nonspecific factors will not be affected as much proportionately, but they too will lose and gain according to the difference that the concrete shift in demand makes in their marginal value productivity. Effect on consumption: (…) the general sales tax is a conspicuous example of failure to tax consumption. The sales tax is commonly supposed to penalize consumption, rather than income or capital. Yet we find that the sales tax reduces, not just consumption, but the incomes of original factors. The general sales tax is therefore an income tax, albeit a rather haphazard one. Politics: a) Many "right-wing" economists have advocated general sales taxation, as opposed to income taxation, on the grounds that the former taxes consumption but not savings-investment; b) many "left-wing" economists have opposed sales taxation for the same reason. RothbardVs: Both are mistaken; the sales tax is an income tax, though of a more haphazard and uncertain incidence. The major effect of the general sales tax will be that of the income tax - to reduce the consumption and the saving-invest- ment of the tax payers.(2) Investments: In fact, since (…) the income tax by its nature falls more heavily on savings-investment than on consumption, we reach the paradoxical and important conclusion that a tax on consumption will fall more heavily on savings-investment than on consumption in its ultimate incidence. Rothbard III 937 Taxation/purchasing power/inflation/Rothbard: [there is a] very common view that, in a business boom, the government should increase taxation "in order to sop up excess purchasing power," and thereby halt the inflation and stabilize the economy. RothbardVs: (…) let us note the oddity of assuming that a tax is somehow less of a social cost, less of a burden, than a price. Rothbard: By what reasoning are [buyers] better off, now that taxes have been increased by precisely the amount that their monetary funds have dwindled? In short, the "tax price" has gone up in order that the prices of other goods may decline. Why is a voluntary price, paid willingly by buyers and accepted by sellers, somehow "bad" or burdensome for the buyers, while at the same time a "price" levied compulsorily on the same buyers for dubious governmental services for which they have not demonstrated a need is somehow "good"? Why are high prices burdensome and high taxes not? >Inflation, >Government spending/Rothbard. 1. In the less developed countries, where a money economy is still emerging from barter, any given amount of taxation will have a still more drastic effect: for it will make monetary incomes much less worthwhile and will shift people's efforts from trying to make money back to untaxed barter arrangements. Taxation can therefore decisively retard development from a barter to a monetary economy, or even reverse the process. See C. Lowell Harriss, "Public Finance" in Bernard F. Haley, ed.,A Survey of Contemporary Economics (Homewood, 111.: Richard D. Irwin, 1952), p. 264. For a practical application, see P.T. Bauer, "The Economic Development of Nigeria," Journal of Political Economy, October, 1955, pp. 400 ff. If any government taxes in kind, there is then no span of time between taxation and the extraction of physical resources from the private sector. Both take place in the same act. 2. Mr. Frank Chodorov, in his The Income Tax - Root of All Evil (New York: Devin-Adair, 1954), fails to indicate what other type of tax would be "better" from a free-market point ofview, than the income tax. It is clear from our discussion that there are few taxes indeed that will not be as bad as the income tax from the viewpoint of the free market. Certainly sales or excise taxation will not fill the bill. Mr. Chodorov, furthermore, is surely wrong when he terms income and inheritance taxes unique denials of the right of individual property. Any tax whatever infringes on property right, and there is nothing in an "indirect tax" which makes the infringement any less clear. It is true that an income tax forces the subject to keep records and disclose his personal dealings, thus imposing a further loss in his utility. The sales tax, however, also forces record-keeping; the difference again is one of degree rather than of kind, since here the directness covers only retail storekeepers instead of the bulk of the population._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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