A Tax On Harmful Tax Proposals

Member of the Academic Council of Libertad y Progreso.
PhD in Administration from the Catholic University of La Plata and Professor of Economics at the Faculty of Law and Social Sciences of the UBA. His research has been collected internationally and he has published books and scientific and outreach articles. He has served as Rector of ESEADE and as a consultant for the University of Manchester, Konrad Adenauer Stiftung, OAS, IDB and G7Group, Inc. He has received awards and scholarships, including the Eisenhower Exchange Fellowship and the Freedom Project of the John Templeton Foundation.

INFOBAE – In 1789 Benjamin Franklin wrote in a letter to Jean-Baptiste Leroy a phrase that would later go down in history: “In this world nothing is certain except death and taxes”.

It is often said that they are the “genuine” means of financing state expenditures. And it is so, because sooner or later a good part of the other methods end up being taxes or are taxes in disguise. In addition, it happens that even when taxes are directed to a certain group or sector, we also end up paying all of them. This is also the case with the so-called wealth tax. It is a “politically correct” tax because it seems to punish the rich and favor the poor; and without political cost, since those who pay add very few votes and we can tell everyone else that they do not pay and perhaps benefit somewhat from that tax. This second is a more than fanciful assumption, of course. Hence, that money paid by the super-rich reaches the super-poor, it has to go through politics, which charges a toll many times higher than collection.

On the other hand, you have to know a basic principle of any tax: it is like glyphosate, on what it falls, it kills it. Unless it is a genetically modified seed (such as the salaries of civil servants). In other words, if a wealth tax is established, there will be less wealth…, and if more wealth is not generated, there will be more poverty, the natural state of the human being. This is how the tax on the rich will end up affecting the poor.

The principle that the tax kills what it finds where it falls is so old that it is not surprising to find it in classic works, even in non-economics texts. Such is the case with Jonathan Swift’s classic, Gulliver’s Travels (1726). The author already had this very clear and shows it with the teachers that Gulliver meets on his trip, when visiting the Academy on the island of Lagado, where there are discussions on this topic:

“I attended a very heated debate between two professors about the most convenient and effective way to raise money without oppressing taxpayers. The first held that the fairest method would be to put a tribute on the vices and idiocies of each individual; a jury of neighbors would be in charge of setting the amount in the most objective way possible. The second held the entirely opposite opinion; He wanted each person to pay tribute to the physical and spiritual qualities they were proud of; the higher esteem one had, the higher the tax would be; the amount would be set by each one. The highest tax would fall on the men who were most successful with women and would vary according to the number and nature of the favors received. The calculation would be fixed by the declarations of the interested party. Intelligence, courage, and courtesy were also subject to severe tribute; it was collected in the same way: the amount depended on the taxpayer’s own declarations. Honor, justice, prudence and knowledge would be totally exempt from taxes, because they are such unique qualifications that no one values ​​them either in oneself or in others.

Women would pay tribute for their beauty and elegance in clothing, granting them the same male privilege: that of setting the amount themselves. But constancy, chastity, common sense and kindness were not on the scale, because they would not cover the collection costs”.

The debate is sobering in two respects. First, teachers try to find a tax that does not oppress taxpayers. In truth, this is not possible, since it is a forced levy, necessary to maintain the expenses of the State. Therefore, there can be no discussion of taxes without discussion of expenses.

Second, both teachers are guided by a correct criterion, that is, when you apply a tax on something, you get less of it. One of them wants to impose taxes on vices, with the aim that there are fewer. The other, in reality, does not have a different opinion since he tries to place a tax on the qualities that each one considers to have, with the aim of reducing pedantry and conceit.

In our harsh reality, taxes are often applied to productive activities and therefore we get less of it. Even tax levels are so high that certain activities are forced to cease.

What if we put a very high tax on harmful proposals to raise taxes?

  • Professor of Economics, UBA; Academic Council, Fundación Libertad y Progreso