Thursday, February 17, 2011

No representation without taxation?

Originally published on Los Thunderlads, 14 November 2010:

Years and years ago, I read this essay by British Libertarian J. C. Lester someplace online. The credit here says 2001; either my memory is deceiving me or that date is in error, as I distinctly recall reading it on a computer I last used in 1997. Anyway, it’s old. Lester argues that people who receive more money from the state than they pay in taxes should not be allowed to vote:

Why should people who are not taxpayers be allowed to vote money away from those who are? If we must have state services, it should at least be for those who pay for them to vote for which services they want and how much they wish to pay. To allow those providing, or living off, the services to vote is like allowing a shopkeeper to vote on what you must buy from him, or a beggar to vote on what you must give him.

This would exclude state employees, people living on public benefit, and the destitute from voting. And not only them:

So who does not pay taxes and so ought not to have an electoral vote? Judges, state-school teachers, all in local government, state policemen, all in the armed forces, all in prison, all in the NHS, all in the civil service, all employees of the BBC, all the unemployed, all in academia (except, perhaps, in the private University of Buckingham), some farmers, some solicitors, maybe some barristers, any employed in businesses that receive tax-subsidies in excess of their tax-payments, and MPs with insufficient taxed market-incomes to cover their salaries. I cannot list them all, but you see the size of the problem.

Indeed, the problem grows still further:

There are some who are on the periphery of net tax-receiving and whom it will not be possible to distinguish with certainty. These people receive most of their income from purchases by state institutions or state employees. The latter is especially hard to be sure of. For instance, those working for The Guardian and New Statesman & Society might just fit this category. But if it is too hard to prove then they might have to be given the benefit of the doubt. Though if the state sector shrinks, due to a new Taxpayer Democracy, then enterprises will decline to the extent that they necessarily depend on indirect state patronage.

I would say that this periphery is much larger even than Lester grants. What is a tax? Not only revenue that finds its way into government coffers, but any expenditure that we make solely because of government policy must be regarded as tax. So, if the tax code says that we may either write a check for x amount to the state or give y amount to a particular charity, and we choose to give y because it is a smaller amount than x, we have not simply avoided tax- we have simply paid an alternative tax. Those who receive more income from such an alternative tax would be as much disqualified from voting under Lester’s proposal as would those whom Lester identifies as state employees.

This group might be very large indeed. Consider the USA. Income American corporations receive is subject to a federal tax that averages a rate of 27%. Yet the Internal Revenue Service collects very few dollars from the largest American corporations. This is because the tax code provides many alternative ways of paying that tax. Among the expenditures that count toward paying federal tax are payroll expenses, including not only hourly wages, but also salaries and various other forms of compensation, including health insurance premiums. This fact goes a long way towards explaining why executives at American firms are paid so much more generously than are their counterparts in other countries. Companies compete to hire high-powered executives, they don’t compete to see who can send the biggest check to Uncle Sam. It also helps to explain why US health insurance costs spiral upward so much more rapidly than inflation. The employers pay the insurance bills, but they don’t pay with their own money.

Under Lester’s system, then, if your income comes from the health insurance business, your right to vote might be challenged. Likewise if you are a top corporate executive. If your pay is higher than the norm for people like you in other countries with different tax regimes, and the difference between your pay and theirs is greater than the total amount you pay in taxes, then you are a net recipient of tax and would therefore expect to be disenfranchised under the Lester plan.

Lester bases his argument on the idea that people should act for the sake of their own interests. If tax recipients no longer have the power to impose obligations on taxpayers, the resulting “Taxpayers’ Republic” will create the minimal state that he wishes to see. Here Lester shows that his goal is freedom from state bureaucracy. Some time ago, I posted an idea here that, because the main characteristic of modern society is a high level of bureaucratization, to us moderns “freedom” must mean either freedom from bureaucracy, freedom as a product of bureaucracy, or freedom as a way of operating within a bureaucracy. I call this little model “the three freedoms.” Lester’s proposal might very well curb state bureaucracy, but it’s hard to see how it would contain the power of corporate bureaucracies generated and raised to a high level of efficiency by the market.

A very different argument, reaching a similar conclusion, recently gained a flurry of attention. Pat Sajak, who for decades has hosted the US version of the popular TV game show Wheel of Fortune, suggested on his blog that public sector employees should not vote on matters that affect their departments. While Sajak’s conclusion is reminiscent of Lester’s, he proceeds from almost exactly the opposite premise. Sajak writes:

None of my family and friends is allowed to appear on Wheel of Fortune. Same goes for my kids’ teachers or the guys who rotate my tires. If there’s not a real conflict of interest, there is, at least, the appearance of one. On another level, Supreme Court Justice Elena Kagan has recused herself from nearly half the cases this session due to her time as solicitor general. In nearly all private and public endeavors, there are occasions in which it’s only fair and correct that a person or group be barred from participating because that party could directly and unevenly benefit from decisions made and policies adopted. So should state workers be able to vote in state elections on matters that would benefit them directly? The same question goes for federal workers in federal elections.

Sajak goes on to grant that other voters seek their own self-interest as well, but claims that the intensity of a public sector employee’s concern for his or her continued employment is likely to make his or her voting behavior qualitatively different than the behavior of a taxpayer who wants to reduce state spending. That taxpayer will have other interests that s/he might balance, while the state employee will not be likely to take anything else into consideration if his or her livelihood is immediately at stake.

While Lester wants to create a space free from state bureaucracy in which people will be at liberty to pursue their own interests, Sajak wants to ensure that state bureaucracy functions as an impersonal, disinterested mechanism that produces freedom for the people outside it by guaranteeing that the people inside it merely follow the rules of the mechanism. In terms of “the three freedoms,” Sajak wants the freedom that is a product of bureaucracy.

I would suggest that the “three freedoms” model might be useful in structuring a reply to both Lester and Sajak. Perhaps an agenda to support freedom in a modern society requires us to address all three of these freedoms at once. Sajak’s reform might enable the state to create greater freedom for its clients, thus promoting the freedom that bureaucracy produces. Let us suppose that Lester’s reform would reduce bureaucratization of both the public and private sectors, thus promoting the freedom that can exist where bureaucracy is held at bay. Clearly, however, either reform would label members of the state bureaucracy and of the other bureaucracies aligned with it as a servile class. That labeling would surely make those bureaucracies less likely to be places where people could work in freedom, which in turn would make society at large a more servile place.

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