The Orwellian “tax is love” campaign

The Spinoff has been running a campaign on how tax is really about love. I propose they show they mean it, by paying 84% of their profits in tax, instead of 28%.

Anyway David Seymour responded to their campaign, which they also ran:

Where to start? How about the abuse of language. The key words he uses are not just a little misused, but used to convey the opposite of their usual meaning.

He says “tax is love”. The trusty Oxford English Dictionary says tax is “a compulsory contribution to state revenue…” And, in its more generic form “A strain or heavy demand.” Love, meanwhile, is “an intense feeling of deep affection, or a great interest and pleasure in something.”

This is the kind of doublespeak Orwell warned us about when The Party said freedom is slavery, war is peace, ignorance is strength. Duncan thinks deep affection can be compelled. Creepy.

Tax is love so hence anyone wanting to pay less tax is a villain.

He goes on to say that paying tax is a “contribution to the country”. This is lazy writing. Nobody can give money to “the country”. You can give money to the Inland Revenue Department (who used taxpayer money to fund Duncan’s article)

Yes the IRD is paying for this rubbish.

Tax is not love, it is violence. If you do not pay, then, after a series of letters, people will come and put you in a cage. When citizens do this it is extortion and kidnapping, but the state calls it tax.

Or in the case of Penny Bright, take your house away from you for unpaid taxes (rates).

We believe there is a case for ‘public goods’ to be funded by taxes. They are not just things that are “good for the public”, but that fit an economist’s definition: Public goods are non-rivalrous; one person’s consumption doesn’t take away from another’s. They are non-excludable. There is no way to exclude a person from access to such a good if it is produced at all. If everyone can have it without contributing to its cost, nobody will contribute and the good will not be produced. …

National defence is a public good. Once a nation is safe from foreign aggressors, it is safe for everybody who lives there. My living safely does not detract from you being safe. It is also difficult to exclude non-payers. People who refuse to fund the military still get protected by it so long as the invaders are kept at bay.

As Milton Friedman concluded, the violence inherent in tax collection is better than that of foreign thugs and bullies. The same can be said for domestic thugs and bullies. If the police catch a criminal, everyone is safe from her, whether or not they’ve contributed to the policeman’s salary.

So few people are against funding a national defence and the Police. Well outside the Green Party anyway.

There are other public goods. Before it became a pulpit for second-rate academics to lecture us all on our personal choices, public health was actually about public health. Installing sewer systems and rubbish collections stopped infectious disease in cities, benefiting payers and non-payers alike who might have been infected otherwise. There is a strong case to fund these kinds of services from compulsory revenues.

If you add up all of the government spending on law and order, defence, environmental protection, and something called ‘Core Government,’ you get to about $11 billion per year. That much money could be raised by a GST of 10%. But last year central and government spent about $76 billion dollars. What was the other $65 billion about?

A good question.

The rest is government spending on private goods. Things that are rivalrous (one person’s consumption takes from another’s) and excludable (it is practical to prevent non-payers from benefitting). What does that look like? Welfare spending made up $25 billion of that government bill: that’s cash transfers to individuals so they can buy private goods. Just over half of that was superannuation payments to over 65s; the balance Working for Families and various other benefits. About $29 billion was spent on health and education – private goods served up to specific individual. The balance was transport, arts, culture and heritage, and “economic and industrial services” mostly giving taxpayer money to private businesses.

The most favourable interpretation of welfare, health, and education spending is that the government is operating a nationwide insurance scheme. The government must operate it, the argument goes, because there will always be people who no private insurer would cover. About 60,000 babies will be born in New Zealand next year. Some of them will have congenital conditions such as Down syndrome, some will have parents unable or unwilling to fund them an education, others will have a catastrophic accident. Seeing as it could be any of us, we should all want the insurance at birth, but it won’t be there if the lucky ones can leave when they work out they don’t need it.

So few people against funding health, welfare and education. But that doesn’t mean all spending in those areas is good. It is silly to pay a pension to someone earning $250,000 a year and it is silly to spend $1.2 billion a year to give tertiary students a 100% fees subsidy.

Collecting a dollar of tax doesn’t just take a dollar from the person taxed, it deters them from doing things they might have done absent a tax. The best estimates tell us that every dollar the government raises in tax actually takes about $1.20 to $1.60 out of the economy due to forgone opportunities. For tax to make sense, every dollar the government spends has to be worth not just the dollar that’s taken directly, but the 20-60c of “deadweight loss” as well.

Also the administrative cost of collecting the tax.

Income tax was introduced in 1891 at 5% on only the very highest incomes. Now it is 10.5% on the lowest incomes and 33% on the highest. By the time Oliver Wendell Holmes Jr said “taxes are the price we pay for a free society” (in 1904), government spending in New Zealand was about one tenth of the economy. When the First Labour Government introduced the welfare state in 1935, government spending equated to a fifth of the economy. Today the government spends about a third of all money in the economy. When you allow for the incredible advances in technology since that time, the real resources applied by government per person per year are actually several times greater than when the welfare state began.

What is slightly encouraging is Labour and Greens pledged to keep government spending to under 30% of GDP.