Calhoun: The Burdens and Benefits of Taxation and Expenditures

Chapter 4 BINARY INTERVENTION: TAXATION

As Calhoun brilliantly pointed out (see chapter 2 above), there are two groups of individuals in society: the taxpayers and the tax consumers—those who are burdened by taxes and those who benefit.

Who is burdened by taxation?

  • The direct or immediate answer is: those who pay taxes. We shall postpone the questions of the shifting of tax burdens to a later section.

Who benefits from taxation?

  • It is clear that the primary beneficiaries are those who live full-time off the proceeds, e.g., the politicians and the bureaucracy.These are the full-time rulers. 
    • It should be clear that regardless of legal forms, the bureaucrats pay no taxes; they consume taxes.
  • Additional beneficiaries of government revenue are those in society subsidized by the government; these are the part-time rulers.
    • Generally, a State cannot win the passive support of a majority unless it supplements its full-time employees, i.e., its members, with subsidized adherents.
  • The hiring of bureaucrats and the subsidizing of others are essential in order to win active support from a large group of the populace. Once a State can cement a large group of active adherents to its cause, it can count on the ignorance and apathy of the remainder of the public to win passive adherence from a majority and to reduce any active opposition to a bare minimum.
  • The problem of the diffusion of expenditures and benefits is, however, more complicated when the government spends money for its various activities and enterprises. In this case, it acts always as a consumer of resources (e.g., military expenditures, public works, etc.), and it puts tax money into circulation by spending it on factors of production.

Excerpt from: Man, Economy, and State with Power and Market – Page 1151-1152 – Murray Rothbard – Free PDF Download from Mises.org

 

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John C. Calhoun