Chapter 6: Taxation, Fiscal Politics, and Political Pricing
Joseph Schumpeter (1918 ) asserted that “the budget is the skeleton of the state stripped of all misleading ideologies.” Behind the budget we find politics in its myriad forms, including conflict, compromise, and eristic posturing, along with some calm, rational examination of options. Within theories of political economy and public finance, budgeting has been largely presented as an activity within a homogeneous and harmonious society, which, of course, is the only possibility within analytical frameworks based on representative agents or population averages. Sure, the standard presentation of the theory allows scope for heterogeneity of a limited type which by assumption gives people room to settle differences among themselves in mutually agreeable fashion. This standard presentation is surely more a feature of the ideological subtext of a particular type of model than it is a feature of the reality the model seeks to address. In this respect, it has sometimes been asserted that the domain of market activity begins when political interest in the activity in question vanishes. Market activity describes processes of societal organization in which people relate to one another through the legal principles we recognize as private property and liberty of contract. These principles mean that, if there are people who dislike the actions you undertake, they forbear from interfering with you all the same. If you open a retail store, existing operators of retail stores will not try to stop you. If you decide to grow tobacco and produce cigarettes, other people will not try to prevent...
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