We Can’t Make Things Better Without More Tax Revenue

Posted by himelfarb on May 1, 2018 · 16 Comments 

Here’s my latest, in CCPA’s Monitor on reconnecting taxes and the common good. https://www.policyalternatives.ca/publications/monitor/reconnecting-taxes-and-common-good

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16 Responses to “We Can’t Make Things Better Without More Tax Revenue”
  1. Robert White says:
    May 1, 2018 at 5:08 pm

    Corporate tax breaks really have no place in contemporary governance going forward into Quantitative Withdrawal finance regimes worldwide. Post-08 Quantitative Easing flooded the Global Financial System with intractable debt & deficit which supported top-tier banks & corporations for the last decade at a cost to main street CANADA and the USA. Promulgating finance regimes that offer corporate tax breaks in a Central Bank Quantitative Withdrawal finance regime is counterproductive for finance and business in so far as it creates instability in the overall population that leads to market instability & increased volatility.

    The Hegelian Death Spiral of the Great Financial Crisis-08 is a matter of decoherence of market functioning from a known state of market equilibrium to a collapse of that equilibrium resulting in continued collapse each and every business quarter as we are evidencing across North America & EU countries. Debt-to-GDP ratios are increasing worldwide which indicates unsustainability over time & longitudinally.

    Governments at all levels are all mired in debt traps that cannot be serviced by corporate tax break finance regimes. Politicians have not been updated on the upcoming instability that Quantitative Withdrawal has ushered in for the Western Economic System, and the US Republican Party seems to think they can get away with another tickertape parade & party on the taxpayers dime.

    When the USA is broaching $22 trillion in deficit it is clear that caution has been thrown to the wind in finance. Politically, that sort of tax planning sounds good in a sound bite, but along the long term perspective of borrowing it is merely addition to sovereign financial risk.

    Wholeheartedly agree with your assessment, Alex.

    P.S. I decided to quit the PC Party and I’m now a Liberal for the next four years.

    RW

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    • himelfarb says:
      May 1, 2018 at 5:12 pm

      Thanks for this Robert.

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    • Lynn Smith says:
      June 12, 2018 at 3:11 pm

      Alex,

      I so enjoy your articles. You constantly reframe the questions that are at the heart of a discussion, and so the discussion and ‘answers’ that follow are qualitatively different and always more insightful.

      I learn also through reading the comment sections of your blog as you are ‘followed’ by so many intelligent and thoughtful people – folks who have considered these hard issues with evidence and historical data – not just sound bites 🙂

      Thanks again
      Lynn

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      • Robert White says:
        June 12, 2018 at 5:44 pm

        Professor Himelfarb has been creatively inspiring students of Sociology for decades. He has an uncanny ability to get right to the heart of issues and always has IMO. Back in 1989, when he was my first Sociology professor, he creatively inspired hundreds of university students every week. His lectures were worth the trek to class every week. Today, he is an even wiser man given maturation and experience.

        When Himelfarb speaks, I listen intently.

        Thank you for the compliment on my comment. Himelfarb inspired the thinking for sure.

        cheers, RW

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  2. Mark Hammer says:
    May 1, 2018 at 6:46 pm

    In some respects governments brought this on themselves when they agreed, so many moons and generations ago, to take on debt in order to finance whatever the service or emergency of the day happened to be. The motivation to do so was not wrong. Not at all. The problem it created, however, was that it was sort of antithetical to taxation, insomuch as it fostered the false impession that services could be increased, or even maintained, without a corresponding shared tax burden.

    Personally, I don’t mind paying my full share of taxes, even if they go up. But I tend to be in the minority. The challenge is persuading all of those who grew up persuaded that taxes=bad, and debt=bad, simultaneously with services=good. I doubt the public or corporate desire for services will ever go away. We often respond with “Why doesn’t government DO something about X?”. We rarely sigh and declare “Ah well, I guess nothing could be done”, when facing medical emergencies, transit issues, obstacles to education, or any of a lengthy list of daily normalcies. Sadly, for many, resolving that gap often translates into cafeteria-style sensibilities and arguments about taxes. “I don’t use service X, so why should I have to pay taxes for it?”.

    But as you note, public misspending can completely undermine any minimal success in persuading people and corporations that taxes=services.

    Thanks for drawing my attention to Bauman. I’ll have to check out some of his work. The observation of a decline in a sense of the collective, and collective good, is an astute one. I guess the $64,000 question is where such a decline comes from. I’ve often said to colleagues that affluence is the best form of birth control; those who have more are often disinclined to share it or undermine its availability to them, and that includes having fewer children (and being a singleton makes for a lousy communist, as many have noted about China’s family policies). Does this extend to how citizens view their commitment to their nation and the collective? Do we undermine our sense of the collective by working so hard to raise the overall standard of living, that citizens become more possessive of what they consider to be “theirs”? That’s a disquieting thought. After all, what is the purpose of the collective, if not to raise and maintain the quality of life for all? I am not comforted by the idea that raising the standard leads us to turn our backs on the very mechanisms that provided it in the first place.

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    • himelfarb says:
      May 1, 2018 at 7:18 pm

      Not sure I agree with your analysis. Taxes were much higher when deficit spending was in vogue and people kept voting for parties that raised taxes. One difference was we were building services then rather than dismantling them.

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      • Mark Hammer says:
        May 2, 2018 at 5:03 pm

        I will defer to your generally greater knowledge in this area. That said, it’s an empirical question. I’d love to see survey data for questions like:
        “I would be willing to pay more in taxes for those services I value”
        “How much more (in dollars or in %) would you be willing to pay in taxes for this?”
        “I would be willing to pay more in taxes for services that may not be important to me but benefit the largest segment of the populace.”
        “How much more (in dollars or in %) would you be willing to pay in taxes for this?”
        “I would be willing to forfeit services if it resulted in tax cuts for myself”
        “I would be willing to forfeit services if it resulted in tax cuts for others”
        “I would be willing to forfeit services if it resulted in tax cuts for small businesses”

        Additionally, the relationship between government tendencies to use deficit spending, and public voting patterns, is an intriguing, and I think varying, one. It seems these days that tax-cuts are the glistening carrot waved in front of the voters, and deficits are the whip used to beat one’s political opponent. That’s the impression. Like I say, an empirical question.

        Conceivably, it may have been different in terms and decades gone by. Conceivably, the seemingly higher public profile of economists these days, and the constant onslaught of business and economic outlook opinions and reports, has fostered greater sensitivity about such matters, and the idea of deficit spending seems more ominous. As well, debt accumulates, and the role of successive deficits in that cumulative debt may have become a bigger bone of contention over time. Laid over this is whether voters have a clear sense, and recollection, of how their taxes have changed over time, if at all. It’s all too easy to forget the details of the past and think that things have gotten worse, hence requiring a more radical “solution”.

        The public is fickle, and forgetful, and often fickle *because* they are forgetful. Count me among them, much to my shame.

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      • himelfarb says:
        May 2, 2018 at 5:13 pm

        Most of that data is available. Most Canadians indicate they are prepared to pay more taxes if two conditions are met: that everyone pays their fair share and that the revenues go to good purpose and are not wasted. Unfortunately most don’t think those conditions are being met. That’s the interesting question – why do they believe our tax system is unfair and that tax revenues are too often abused or misused and what are the remedies. I’m convinced that the years of making our tax system less progressive, the largely taken-for-grantedness re the public goods and services we enjoy but previous generations built, and forty years of assault on government exaggerating waste and inefficiency, and above all years of austerity during which government seemed to be backing away from serving the many – these are the factors at play.

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  3. Mark Hammer says:
    May 2, 2018 at 5:05 pm

    oops, did I say I agreed with your general thesis? I do.

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  4. Larry Katz says:
    May 3, 2018 at 4:33 am

    Thanks, Alex. Well said. So important.

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  5. himelfarb says:
    June 12, 2018 at 9:51 pm

    Lynn and Robert, thanks so much for your kind comments and I’m delighted that you discovered each other on this site.

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  6. Robert White says:
    June 13, 2018 at 3:09 pm

    Professor Emeritus Bauman is an interesting theorist in terms of historiography. He was denied full professorship just as Freud was initially, and he aligned with the heterodoxy of Karl Marx which makes him macroeconomically heterodox in terms of Economics proper. His enduring collectivist thesis of a gradual degradation of the superstructure of democracy is apt given the work of another European Sociologist/Economist named Vilfredo Pareto who characterized democracy as being self destructive towards it’s own ends via the distribution of wealth in advanced democracies. Pareto Law of Wealth Distribution posits skew in terms of the overall distribution of wealth in all societies. The destructive aspect of the distribution of wealth comes from the hoarding of wealth and the inclination to hoard wealth due to the positive functionality of wealth accumulation over time for those that have wealth. What is not articulated in the literature is that the Pareto Law of Wealth Distribution holds in all societies until they fail outright on the economic front.

    European Central Bank Working Paper Series No 1692/July 2014

    How Fat is the Top Tail of the Wealth Distribution

    Click to access ecbwp1692.pdf

    In addition, if we borrow from Professor Emeritus Hyman Minsky on the Power Law of Normal Distributions we can see that distributions with ‘Fat Tails’ are unstable distributions that run the risk of collapse and Six Sigma Crash Events that are statistically rare events that are difficult to predict with accuracy.

    Clearly, from a perspective of Central Limit Theorem, Probability Theory, and Minsky’s Power Law we can see that the answer to Bauman’s thesis can be found with an inverse Pareto Law that counteracts the degradation of democracy as a superstructure before it is destroyed outright by wealth concentration in the hands of minority elites.

    RW

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