The last century has seen government proliferate to unprecedented levels. The state now owns as much of a worker's labour as a feudal lord, says Dominic Frisby.
In ancient Athens many taxes were voluntary. At the other extreme, in authoritarian or totalitarian societies, such as Soviet Russia or North Korea, people have virtually no ownership of their labour, their produce or their profit. Government takes it all. The developed world today sits somewhere in between. Excluding inflation, itself a form of tax, roughly 45% of everything the typical Briton earns is taken in taxes. In France, the figure is an eye-watering 57% no wonder they're rioting. In the US it's 38%.
These high levels of taxation are a recent development. At the turn of the 20th century, taxes played a much less prominent role in our lives and government spending was much lower. In western Europe, tax was around 10% of GDP in 1900, a figure that goes all the way back to ancient Mesopotamia and the very first tithe.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
The "ratchet effect"
Before 1914 income taxes were only paid by the very highest earners. Even as late as 1941 ordinary Americans paid no income taxes. The 1942 Revenue Act changed that. Time magazine called it "the biggest piece of machinery ever designed to separate dollars from citizens".
High tax rates endured after the wars partly because governments had incurred many new obligations, from debt and rebuilding to looking after the victims. But they also stayed in place because politicians the world over hoping to win popularity in the present, designed programmes that committed governments to large spending programmes in the future.
A politician who promises better roads, or schools, or welfare, is incurring obligations that cannot easily be abrogated. The more money is promised, the bigger the government grows and thanks to the world wars, the tax structures were now in place to meet those promises. The obligations facing today's taxpayers are the result of decisions sometimes made as much as 100 years ago. Those trying to win today's election take note: promises made today will impose similar obligations years into the future.
Thus did government spread from traditional areas the army, the police, infrastructure into other areas of the economy, notably education, welfare and healthcare. Today taxation permeates everything we do. There is barely an activity that does not involve it in some way. As a result, almost wherever you are in the developed world, the most expensive purchase you ever make in your life is not your house, but your government.
For a typical British middle-class professional, the lifetime bill totals £3.6m considerably more than the typical house. You will spend a full 20 years of your life or more in obligatory service to the state. On a time basis, the state owns as much of your labour as the feudal lord did that of the medieval serf, who gave half his working week to farm the land of his lord in exchange for his protection.
In exchange, you receive the protection of the state and its services: defence, healthcare, education and so on. You have no choice. If you want to earn a living, you must work for the state as well as yourself. We are not as free as we may think we are.
A civilised society?
The social democrat sees taxes as a way to equalise society: to redistribute wealth, to provide equal access to education and welfare and to balance out the distortions of the market economy. The libertarian says tax is theft. Both are right. Without taxation, there can be no government: one leads to the other. Thus, though usually obscurely, tax is at the heart of just about every political argument: what should the government spend money on? How much should it spend? Who pays? And how?
Daylight Robbery How Tax Shaped The Past And Will Change The Futureis available at Amazon and all good bookstores with the audiobook, read by Dominic, onAudibleand elsewhere. If you want a signed copy,you can order one here.
Dominic Frisby (“mercurially witty” – the Spectator) is the world’s only financial writer and comedian. He is MoneyWeek’s main commentator on gold, commodities, currencies and cryptocurrencies. He is the author of the books Bitcoin: the Future of Money? and Life After The State. He also co-wrote the documentary Four Horsemen, and presents the chat show, Stuff That Interests Me.
His show 2016 Let’s Talk About Tax was a huge hit at the Edinburgh Festival and Penguin Random House have since commissioned him to write a book on the subject – Daylight Robbery – the past, present and future of tax will be published later this year. His 2018 Edinburgh Festival show, Dominic Frisby's Financial Gameshow, won rave reviews. Dominic was educated at St Paul's School, Manchester University and the Webber-Douglas Academy Of Dramatic Art.
You can follow him on Twitter @dominicfrisby
Energy price cap to fall 12.3% from April - what it means for your energy bills
Ofgem, the energy regulator has set its latest price cap which will see energy bill drop by 12.3% this spring. Here's what to expect from April
By Henry Sandercock Last updated
The end of China’s boom
Like the US, China too got fat on fake money. Now, China's doom is not far away.
By Bill Bonner Published