Sep 022009

In this post, I asked myself (and anyone else who wanted to answer) whether the absence of tax was the presence of subsidy. This was in relation to private schools, who, as part of their designation as charities, are not taxed in the manner of profit-making institutions.

My half-hearted answer was that, in a polity where nearly every activity or transaction is taxed, the absence of taxation is de facto a subsidy (even if not de jure).

I realise now that this answer did not go deep enough. For in viewing the absence of taxation as subsidy, whether as intention or simply unintended effect, one is making a deeper underlying assumption, and that is that the state owns all wealth.

If the state owns all wealth, then in choosing not to appropriate some of it from a particular body, the state is in essence making a gift of it – which would in fact be a subsidy.

This assumption is gigantically invidious, as it underpins every argument redistributionists and opponents of ‘privilege’ make about the state’s choice to reduce or remove taxation on particular bodies or transactions. And I speculate that most people do not, as I did not, even notice the presence of that assumption. We are letting them get away with it. And before long, it will no longer be an assumption that nobody notices; it will be a general principle that is taken for granted. Perhaps it already is.

Why, oh why, do we libertarians continue to allow our opponents to dictate the terms of debate in this way?

  3 Responses to “Tax and subsidy, part 2”

  1. There was a discussion about this on Samizdata recently; they call it the “meta-context” . You may have missed it due to your nuptials (congratulations by the way!)
    What to do about it I don’t know, apart from starting with ourselves and correcting ourselves whenever we get caught in these mental traps. I’m as guilty of it as you are!

  2. Not really on topic, but does this sound familiar? On why there was a rebellion deposing James II in 1688 –

    “James turned out to be a revolutionary, Mr. Pincus suggests, working to transform England’s ¬≠government into a centralized bureaucracy.”

  3. That doesn’t sound too off-track, I think. The English in the time of James’s father, Charles I, had to a certain extent already rejected absolutism, even if, in the end, they decided it was both possible and preferable to have a monarch who wasn’t absolute. And the religious element probably folds into this: absolutism and Roman Catholicism, being also heavily centralised and bureaucratic, would have been mutually reinforcing. I would not, however, characterise James as a ‘revolutionary’ for this; rather, he was part of a long line of English monarchs, going back at least to Henry VII, who had worked to centralise control, believing at first that this was the best way to prevent the sort of civil conflict that had been such a feature of the 15th century, and then that it was the best way to achieve stability in a rapidly changing economic landscape. Did the English throw out James II because of this, though? Probably not. We underestimate the religious question if we assume it was simply a matter of toleration vs. persecution, because it was also a question of sovereignty: when the monarch was a Roman Catholic, he was not the ultimate authority; he was beholden to the needs and wishes of the pope. Whenever the interests of the English people and the interests of the pope were in conflict, the monarch was paralysed – this was especially a problem once England had become a Protestant country. So a Catholic king, however tolerant he might have been, was always a potential danger to the interests of his Protestant subjects.

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