Hissing and Taxing
Sunday, 10/14/2012 12:00
How the rich West risks failing in the gentle art of taxation...
The WEST is in crisis,
writes the Conservative MP for Clacton, Essex, Douglas Carswell at the Cobden Centre.
Our Big Government way of doing things does not work. It is no longer going to be possible to run a burgeoning welfare state on the back of a shrinking wealth-creating base.
For several generations, officialdom has been able to divert ever greater resources toward officialdom by concealing the costs of extra government.
How? Partly through unequal taxation, and partly by manipulating money.
Taxation is, in the words of Louis XIV's finance minister, Jean-Baptiste Colbert, the art of "plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing". Too much hissing, and the king might lose more than the extra revenue.
The introduction of so-called progressive taxation a century ago enabled the governing elite to extract more feathers from a minority of geese at any one time, confining the hissing to a few. Government has grown every decade since.
Since 1971 Western governments have lived beyond the tax base by manipulating the money, transfering wealth from the governed to the governing without many voters even noticing.
Indeed, Western finance ministers meet regularly in order to discuss the rate at which they internally devalue their currencies such that they might ensure the external consequences are manageable.
The trouble is that these pillars on which the Big Government model rests – unequal taxation and money manipulation – are starting to crumble.
The digital revolution will redefine money. Instead of having to live under monopoly money regimes, we will have currency competition. Governments simply won't be able to keep on debasing the currency at our expense.
In the digital economy of the future, taxes will, as I argue in my new book – The End of Politics and the Birth of iDemocracy (2012, Biteback) – need to be much flatter. A consequence of flatter taxes is that even quite modest attempts at plucking us for more taxes will be met with a great deal more hissing.
The digital revolution will reinvigorate the West, lifting us out of our Big Government induced stupor.
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