issue 220 - June 1991
The New Right’s anti-tax crusade would have us believe that paying
taxes is the same as throwing money away. Neil Brooks
examines the delusion – and its political function.
In the ongoing battle to shape public opinion, the New Right has scored a subtle but significant victory with its annual invitation to celebrate Tax Freedom Day. In Canada, for example, the Fraser Institute, a right-wing think-tank, issues a press release in June of every year notifying Canadians of the approach of Tax Freedom Day. The idea was the brainchild of the business-sponsored Tax Foundation in the US and has been picked up by the Foundation’s counterparts in most industrialized nations.
Tax Freedom Day, they assert, marks the first day of the year on which citizens are free to spend their earnings as they please. The amount of their earnings up until that date equals their total tax bill for the year. In Canada, the Fraser Institute claimed Tax Freedom Day fell on 1 July in 1990 – thus implying that for half the year Canadian people are working and earning exclusively to pay tax.
This concept of ‘tax freedom’ subtly reinforces the idea that the public sector is a burden on citizens and limits their freedom. It helps to soften up the public for the New Right’s more direct attacks on the public sector. The notion completely obscures the fact that the public sector provides crucial services that benefit all of us and that we collectively agree in a democracy to pay tax for these services.
Schools, universities, libraries, hospitals, highways, and public parks and beaches would surely rank high on anyone’s list of valued and freedom-enhancing goods and services. Government expenditures in the form of old-age pensions, family allowances and social assistance not only enlarge the freedom of some members of society but are essential to their very survival.
The underlying assumption of Tax Freedom Day is that the Government simply throws away our tax dollars or pounds. It also suggests that people are not enhancing their freedom when they, through taxation, pay the price for these goods and services but only when they pay the price of the newest Nintendo game or the latest fashion accessory.
Tax Freedom Day is just one of the clever ways in which the rich and powerful gain control over popular thinking and inculcate otherwise unpalatable ideas. This control is essential in a democracy where technically the people have the power to elect politicians who could attack the prerogatives of wealth through legislation.
The most obvious way the rich control the agenda is through their almost total ownership of the mainstream media and the funding of research think-tanks. Their huge advertizing budgets not only allow certain lifestyles and images to be sold to the public but also provide a virtual veto over the presentation of alternative ideas in advertizing-dependent media.
Equally important is the ability of the rich and powerful to impose their vocabulary on the discussion of public issues. When people adopt the vocabulary of the powerful they unconsciously find themselves unable to imagine or even easily discuss alternatives. As the language of restraint and deficit-reduction became dominant in the late 1980s it became common for people to think in terms of the need to ‘tighten their belts’. There was no popular language with which to discuss the alternative: expanding the public sector by increasing social benefits or upgrading public facilities.
In most industrialized countries the public sector expanded rapidly in the 1960s and 1970s. There is little doubt this expansion increased the bargaining power of workers, reduced poverty, improved health care and education, and resulted in some progress in cleaning up the environment. Naturally taxes went up. In industrialized countries total tax revenue as a percentage of gross domestic product (GDP) rose, on average, from 26.7 per cent in 1965 to 36.6 per cent in 1984.
The backlash against this trend began in the early 1970s. By this time business interests – supported by conservative politicians and intellectuals – saw the activist state as a threat to their power and privileges. The opportunity for counter-attack was provided when deteriorating economic conditions due to oil-price shocks and stagflation led to public anxiety about the economics of the welfare state. It became clear that economic growth could no longer underwrite both high levels of corporate profit and the welfare state.
The counter-attack became a full-scale assault on every aspect of the activist and democratic state: corporate lobbyists argued that government spending, taxation and regulation caused economic decline and that government social programs created rather than solved social problems. State expansion had overloaded the political system with too many participants and demands, creating a ‘governability’ crisis in democracy.
Conservative governments responded to the business agenda by adopting the doctrine of monetarism, privatizing services, liberalizing trade, deregulating private industry, reducing social-security programs, curbing union power and even considering the imposition of constitutional limits on the power of democratically elected governments.
But the New Right’s big success story is tax. They have sought to discredit progressive taxation: the rich paying a larger percentage of their income than the poor. They have gone deeper in trying to convince the public that taxes themselves are an unjust confiscation of a citizen’s deserved earnings. The purchase of goods and services from the private sector, however, is simply an exercise of individual freedom. Phrases like ‘consumer sovereignty’ reinforce the myth of the all-powerful consumer.
The tax-paying citizen is portrayed as powerless and taxes inescapable and inevitable ‘impositions’. This language obscures the fact that voters through their choice of politicians do have some role in determining the level and distribution of tax. Although democracy could certainly be expanded to allow for more popular control, the use of notions like ‘the dollar votes of consumers’ by conservative economists turns common sense on its head. The democratic vote is reduced to buying and selling while revenue collection is a dictatorial act.
Sure, not everybody agrees with every tax but the same is true for prices of private goods and services. Someone paying rent on an overpriced apartment in a tight rental market may think the price highway robbery but they have little choice but to pay. Business is described as straining under the ‘burden’ of taxes but a single mother on welfare who can barely feed and clothe her family is never described as a victim of the price burden. No one talks about the average number of days a worker must put in to support their employer. It would be easy to calculate the number of days that one has to work before ‘essential needs’ are satisfied. For many of the working poor this Price Freedom Day would never arrive.
The Right would have it that individual enterprise expressed through the market has the highest moral value. Yet the contribution that any one person makes to society is invariably the result of an incalculable number of social influences and experiences – someone nurtured them, others encouraged and assisted them, others passed their experience on to them, others prepared the groundwork for them. A spectacularly popular author will make a good deal of money only because thousands of others have worked for years to raise the level of adult literacy. Income and wealth are largely accidents of family of birth, country of origin, or the good luck of remaining able-bodied and working for a firm that remains profitable. Large earnings are often simply a measure of one’s willingness to pander to the rich.
The notion that taxes confiscate people’s legitimate earnings bestowed by the neutral and natural action of market forces is highly suspect. In real economic markets, the distribution of rewards are the product of social convention, discrimination and monopoly power.
While taxes are heavily criticized by the right, a whole range of laws that limit corporate liability, ensure bank savings, or ban strikes are somehow never criticized as unwarranted interference. They are seen as necessary to protect existing property rights even if they redistribute wealth and power to the wealthy and powerful. But the right to property too often has its origins in the use of brute force that frequently victimized colonized or indigenous people. This logic is neatly captured by Carl Sandburg’s poem ‘The People, Yes’.
‘Get off this estate.
Because its mine.
Where did you get it?
From my father.
Where did he get it?
From his father.
And where did he get it?
He fought for it.
Well, I’ll fight you for it.’
So income redistribution through the tax system is no more arbitrary than any of the myriad of government regulations that protect property or enforce contracts. Tax law does not redistribute earnings any more than the basic laws that govern the so-called free market place – to the benefit of some and the loss of others.
Yet business interests continue to launch almost daily attacks in the press against public policies such as unemployment insurance, social security and public housing. The press never dismisses these attacks on the grounds that they are trying to ‘soak the poor’. But what happens if someone suggests that the concentration of income and wealth threatens political freedoms and that the tax system should be slightly more progressive? The cacophony of accusations that one is creating discord, hampering constructive dialogue, or simply wanting to ‘soak the rich’ is deafening. One is ‘measured and reasoned’ dialogue, the other class war. Take George Bush’s response to mildly populist tax reforms proposed by the Democrats during the 1988 presidential campaign. Bush found himself ‘disturbed, as I’ve witnessed my opponent’s campaign … at the increasing appeals to class conflict’.
Taxes are an important policy instrument in a regulatory state. The business-inspired phobia about taxes constrains a people’s ability to construct a communitarian, participatory and democratic state. The alternative to a welfare – and tax – state is one where citizens are unable to express collective preferences and are reduced to isolated consumers exploited by market prices.
Business would have us believe that individuals can express themselves best as consumers. But we have two distinct roles: one as consumers and the other as citizens. As consumers we make judgments about how best to satisfy our own well-being. But as citizens, we make judgments about what is right or good or appropriate for the kind of society we live in. By distorting the way we talk about and view taxes, business is trying to ensure that its limited view of government is accepted by everyone else. If they are successful, those who hold wealth and power in our society will remain secure in their control.
Neil Brooks teaches tax law and policy at Osgoode Hall Law School in Toronto. He would like to thank Linda McQuaig for editorial assistance.
ANGELINA SANCHEZ. The Brazilian single mother and activist invited to the Conference to provide ‘balance’ and ‘a voice for the voiceless’. She knew she was a token gesture but she sure wasn’t gonna let them get away with that – she had a quick mind and a quick temper. Several witnesses reported her getting into a violent argument with Rakowski about the effects of expenditure taxes on the poor in Third World economies.
She had only recently become an activist in the Workers’ Party – very strong in the Saõ Paulo slum where she lived. Cuts in social spending and food subsidies insisted on by the IMF had started her investigating all the shady ways Brazil’s fat cats got out of paying their fair share: rigging the tax rules, not reporting income and sending their profits abroad into international banks. Then those banks lent the money back to Brazil and now the poor – her ageing mother, her kids – were having to suffer to pay them back. And here was Rakowski defending the idea – Brazil had to ‘pay its way’! Sanchez had the strain of being an activist while at the same time raising two children by herself. No time, no money and not a lot of hope – could she finally have cracked on that hotel balcony?