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Tax Tyranny

Pascal Salin

Tax Tyranny does not aim to give a description of existing tax systems, rather it provides readers with the intellectual instruments which enable them to understand the role of taxation in the workings of economic systems and to evaluate the fairness of taxes.
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Chapter 9: Choosing one’s life

Pascal Salin

Extract

Politicians claim that they supply citizens with more insurance against various risks and more solidarity, thanks to the use of taxes and social contributions. But they mainly consider the existing status of individuals (or categories of individuals), while human actions take care of time: Individuals learn from their past and try to determine their future as they desire. This time dimension is unknown to politicians so that the state is in fact a bad insurer and a bad distributor of solidarity. Thus the redistribution of resources, for instance between those who work and those who are “unemployed”, or between those who have a job and those who are retired is not optimal, it does not correspond to what people would prefer if ever they were free to choose. And state interventionism is not the best way to diminish “moral hazard” in insurance activities. Being unable to evaluate correctly the characteristics of each individual – for instance the variability of their activities, the risks they may endure, their relations with other individuals, their targets over time, etc. – politicians use collectivist approaches by putting citizens into arbitrary social categories. Their policies may also reinforce the overtaxation of savings (for instance by imposing a “pay-as-you-go” retirement system, instead of a capitalization system).

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