Ah, the election is over and we can return to more mundane things like, what is the proper level of taxation the state should demand of its citizens, individual and corporate?
It seems that the question has a hidden assumption, which is that there is a level of taxation above which the state should not pass due to untoward consequences for our national economic well-being. While it might be said that a totally confiscatory scheme would surely be bad, as bad and anarchic in its own way as an end to taxation, this idea that there is a "natural" level of taxation that limits what the people's representatives in the Legislature can or should do is nonsensical. Economic activity is a human activity. It is the sum total of the choices, conscious and unconscious, wise and foolish, and has so many moving parts as to be beyond serious comprehension except in some vague sketch. Taxation in all its forms - sales taxes and income taxes; value-added taxes and capital gains taxes; windfall profits taxes and wealth taxes and tax-deferrable certificates and accounts - is only a small part of the whole scheme of economic activity. It should be noted, as it was long ago by this guy named Keynes, that the money taken out of the private sector through confiscatory taxation in whatever form it may take does not disappear. It re-enters in the form of infrastructure investment and teacher's salaries; research grants to scientists, which is another way of saying a paycheck and money to buy supplies and keep labs open; corporations like CPB and TVA, which are not holes in to which money is poured but corporations that produce products, pay employees, have overhead costs to be met, etc., etc. Even the dread welfare payments, which are known as "transfer payments" in the lingo, show the way this works most directly, by providing individuals who do not, for whatever reason, have the ability to earn a living, have enough money to purchase goods and services they need.
In other words, the entire issue of taxation, if considered solely from the perspective that sees the government as rapacious, taking from hard-working individuals and hiding it in a series of bell jars buried on the Ellipse misses the other half of the equation. The money taken in by the government then goes back out to keep government functioning.
Now, it is true that too much taken in would, indeed, stifle economic activity to the point that the exchange of goods and services would cease. On the other hand, that amount - the definition of "too much" - is not some sacred number, the pi of the economy, to which we must adhere or face losing our economic souls. Our current economic downturn would seem to indicate we need to do two things at once - reduce the tax burden on those hit most hard by the immediacy and suddenness of what has happened in the past two months; and yet both reduce our public expenditures and find sources of revenue to replace those lost by the tax relief offered to those who most likely wouldn't be able to meet their tax bills anyway. This is a delicate balancing act indeed, and I doubt it will be done right the first, second, or even third time. Because it seeks a middle that is always - by always, I mean minute by minute - shifting, we cannot determine what would be the right level of taxation. All we can do is guess, and trust that our guess is the right one.
See, that's the beautiful thing about democracy. If we screw up, we can keep trying things until we get them right. Even if we get them right for one day, or one year, or a couple years, it might turn out to be not as right later on, forcing another round of trying to figure out what is the new right answer to this question. As long as we refuse to consider the idea that there is some "natural" tax level, whether dictated by God, or by the Constitution to which we must adhere.
The person who put this question to me added that we should end spending on "unconstitutional items" or some such thing. I guess I want to know what these might be, in his best Constitutional-scholarly opinion.
Virtual Tin Cup
