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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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Index

Pascal Salin

absolute democracy 194

absolute prices 147

added value 77–8, 80, 82–5, 113–14, 150

amortization of debts 103, 108

annual overall expenditures 104

average income 134–5, 138

balance of payments problem 175

banking reform 101

bankruptcy 204

Bastiat, Frédéric 32, 167

Bradley, Bill 42

Buchanan, James 164

budget deficit 14, 140–41, 163, 187, 206

capital

and consumption 47

and income 46–7, 49

overtaxation of 46–53, 59

return on 47, 60–61, 108, 128

taxation of 4, 61, 62–4, 70, 78, 83, 85, 110, 159, 169

transmission 68, 72

capital accumulation 51–4, 58, 59, 62–5, 68, 134, 139–41

rate of 98

tax obstacles 92

capital distribution 55

capital flight 157, 159–61

capital flows 158, 159

capital gain 83, 84, 109

capital gains tax 82–7, 90, 109–10

capital income tax 157

capitalism 165

avoiding crises 100–101

real cause of financial crises 93–100

capitalist 127, 128

capital returns tax 156

capital taxation 4, 62–4, 78, 83, 85, 159

Central Bank 94, 97, 100

lender of last resort of 98, 99

centralization 95, 197

civil law 182

closed society 55

see also open society

coercion 35, 37, 67, 88, 89, 142, 163, 166, 170–73, 177–8, 183, 185, 188

common market 162

comparative costs theory 125

competition 88, 101, 125–6, 129, 145, 149, 151, 153–4, 156, 158, 161–2, 170, 197, 199, 202

between currencies 200–201

decentralization of taxes and 197

with states 200–203

competitive disadvantage 147

compulsory public insurance systems 143

conditions of competition 153, 154

condominium regulation 180

confiscation of property 73

constitutional principles 194–6

consumption 50, 83, 105, 106, 108, 110, 113, 115, 117, 159

capital and 47

and overall expenditure tax 102–10

and savings 51, 106, 110, 159

VAT on 113–15, 117

see also savings

contracts 120, 121, 127, 128, 178–9, 181–3

co-ownership contract 181

corporate income tax 157, 191

corporate profit tax 122, 123, 158–9

cost of labor 122

courts 202

credit policy 97, 99, 100

credits 96

distribution 94, 97

expansion of 97, 99

crises

avoiding 100–101

economic 1, 2, 10, 14, 92, 93, 100, 163, 205

real cause of 169

financial 92

real cause of 93–100

decentralization 197, 198

declarative tax 105, 111

De Concini, Dennis 42

demand for public goods 182

democracy 16, 31, 188, 202

absolute 194

institutions of 30

paradoxes of 180

representative 177–83, 187, 189

democratic bias 186

discrimination 31, 37, 50, 51, 71–2, 89, 152

tax 158–62

disguised tax 88

distribution of incomes 31, 38, 53–4, 65

distribution of wealth 54, 67, 166

economic crisis 1, 2, 10, 14, 92, 93, 100, 163, 205

real cause of 169

economic growth 63, 77, 169

economic growth rate 10, 14, 206

economic instability 93, 95, 98, 128

economic integration 151, 201

economic policy 13, 27, 30, 168

economic policy goals 163

economic science 165

economic theory 20–22, 25–6, 29, 44, 118, 124, 133, 146, 206

employees contributions 121

employer contributions 121

employers 121

Engels, Friedrich 43

equality 19, 27, 28, 36–7, 43, 44, 60, 70

equality of sacrifice 20, 21, 23, 24, 30, 33

equalizing policy 27

equity capital 93–6

Estonia, flat tax in 42–3

European integration 145, 159

European single market

non-discriminatory taxes see non-discriminatory taxes

tax discriminations 158–62

“the Eurosclerosis” 95

exchange rate 129, 154, 155

expenditure categories 103

export tax 151

external balance policy 175

external security 189

fair distribution 24, 157

family solidarity 24, 141, 166, 193

family taxation 141–2

Federal Constitution of Switzerland 195

Feldstein, Martin 141

financial crises 92

real cause of 93–100

financing by taxation 9

financing of defense services 33

firms

taxation of 120–30

tax burden in households and 123–5

as tax collector 120–23

flat tax 42–3

formal equality 36, 37

freedom of choice 34, 36–47, 190–93, 201

Friedman, Milton 47, 164

Gephardt, Richard 42

global competitiveness 125–6

Hall, Robert 42

harmful taxes 25

harmonization 146, 147, 155

tax 150, 153, 156–62

Hayek, Friedrich 32, 40, 63, 70, 164, 168, 170, 201

head tax 34, 41

health insurance 8–9, 36–8, 120–21, 136

hidden progressiveness 33–40

hidden taxes 87–9

Hitler, Adolf 180

households, tax burden in firms and 123–5

human capital 47, 49, 54, 58, 59, 61, 63, 72

human history 73

import tax 151

income

and capital 46–7, 49

definition of 47, 49, 50

income tax 8, 28, 48–50, 52, 58, 78, 83, 84, 87, 105, 110, 139, 190–91

arbitrary 48, 52

defects of 51

harmful distortions 52

harmonization of 159

and overall expenditure tax 116

overtaxation of capital 46–53

progressiveness of 53

rate of 2, 41, 42, 61

reduction of 13, 14

and VAT 80–81, 114–16, 152, 157

and wealth tax 52, 58, 61

individual choice 190–94

inequalities 24, 27, 28, 33, 36, 38, 53, 69, 71, 72, 79, 119

inflation 89–91, 95, 98, 99, 114, 140, 141, 200

inflationary policies 89

inflation tax 89–90, 138, 141, 200, 201

inheritance taxes 61, 66, 68–70, 73–4, 87, 109–10, 141

discriminatory 71–2

justification of 67, 71, 73, 74

rate 72

redistribution 72

wealth tax and 66

iniquitous tax 77–80

initial contract 178–81

institutional reform 186

insurance

health 8–9, 36–8, 120–21, 136

privatization of 137

and risks 133–8, 143–4

interest rate 169

intermediate consumption 113

internal security 189

internal trade 152

international trade 151, 152

principles 145–8

Kasten, Robert 42

Kemp, Jack 42

Keynesianism 10

Kirzner, Israel 164

Laar, Mart 42

Laffer curve 11–14, 25, 62

law of decreasing marginal utility 21

law of one price 148, 154

legitimacy 33, 178–80, 182

property rights 69, 73

level of satisfaction 51

limits to state 170–73

limits to taxation 186–90, 195

liquidity 89

mandatory social insurance system 143

mandatory solidarity 166–7

marginal utility 20–21, 28–9

market failures 133, 163

Marx, Karl 43

Mitterrand, François 10

modern financial system 95, 97

characteristics 94

modern monetary system 95, 97

characteristics 94

monetary crises 99–100

monetary incomes 52, 56, 58

monetary monopoly 200

monetary policy 90, 94, 95, 97–100, 129, 175

monetary reforms 100–101

monetary returns 50, 55, 71, 107

see also non-monetary returns

money

credit and 97

inflation and 114

production 94, 97, 99, 171, 200–201

purchasing power of 89

role of 134

monolithic solidarity policy 192

monopolies 25, 35, 67, 171–3, 184, 192, 202

of money production 200–201

public 8, 24, 36, 37, 88, 136–7, 141, 170, 202

moral hazard 99, 100, 133–8

national income 24, 25, 40

natural monopolies 175

non-discriminatory taxes 148

capital income 156, 157

corporate income 157

corporate profits 158–9

on imports and export 151

income tax 152, 157

VAT 149–57

non-human capital 54, 59, 60, 63, 64, 72, 87

see also human capital

non-monetary incomes 52, 56, 58

see also monetary incomes

non-monetary returns 50, 107, 110

non-retroactivity 196, 198–9

open society 55, 164

“optimum allocation” 156

overall expenditure tax 64, 102–11, 119, 139, 160, 190, 191

income tax and 116

principle of 102, 109, 118

and VAT 113–18

overtaxation

of capital 46–53, 59

of savings 52–3, 110, 112, 114, 116, 119, 159, 160

parent–child relationship 73

parliamentarianism 194

“pay-as-you-go” systems 140–41

payroll taxes 121, 122

pension system 139–40

permanent income 134

policy market 182

political market 174, 182

poll tax 7–9, 16, 19, 20, 37, 39, 41, 42, 77

Ponzi scheme 141

power separation 187

powers organization 186–90

private insurer 136

private monopoly 170

see also public monopolies

privatization 37, 137

privilege savings 111–12

productive capital 55–7, 105

productive incentives 14, 19, 20, 25, 41, 205, 206

destruction of 6–11

“productivist” ideology 106

progressiveness

arguments for 19–24

effects of 25–30

hidden 33–40

progressive taxes 18, 20–24, 29–32, 39, 43, 66, 110, 116, 117, 142, 180

progressive tax rates 20, 158

property rights 24, 31, 68–70, 73, 93, 95, 98, 165–7, 178, 180–82, 194, 195, 203

proportional taxes 8, 19–20, 35, 39–40, 42, 44, 152

prosperity 31, 92, 95, 101, 102, 165, 166

public deficit 14, 15, 96, 169

public expenditures 6, 9, 15, 19, 20, 35, 36, 123, 124, 152, 156, 157, 160, 169, 184, 187, 188, 190, 191, 197–8, 206

public goods 6, 13, 16, 33–6, 39–40, 44, 116, 149, 150, 170–73, 176, 177, 181–2, 184, 185

public investment 11–15

public monopolies 8, 24, 36, 37, 88, 141, 170, 202

to insure life risks 136–7

public revenues 11–13, 62, 160, 206

purchasing power 81, 89

quotient familial system 142

Rabushka, Alvin 42

Rand, Ayn 164

Rawls, John 27

Reagan, Ronald 13, 14, 42

economic policy 13

redistribution 20, 23, 31, 39, 55, 59, 72, 74

redistribution policy 74, 115

redistribution services 40

regulations 88, 126, 153, 169

representative democracy 177–83, 187, 189

resistance to taxation 183–6

retirement policies 139

retroactivity 196, 198–9

return on capital 47, 108, 128

rate of 60–61

Ricardian model of international specialization 148–57

Ricardo, David 125, 146

risks 26, 58, 77, 96, 98, 99, 128, 129, 181, 198, 206

of bankruptcy 93, 97

insurance and 133–8, 143–4

and solidarity 131–5, 189

see also solidarity

risk taker 26, 128

Rothbard, Murray 113

savings 8, 52–3, 95–100, 102, 103, 105, 106, 111, 113, 159

collectivization of 140, 141

consumption and 51, 106, 110, 159

overall expenditure tax 102–11

and VAT 113–18

overtaxation of 110, 112, 114, 116, 119, 159–60

privilege 111–12

state interventionism on 98

scarcity of savings 96, 97

selling price 80, 114, 117, 118, 122, 123, 129, 148

separation of powers 187

shocks 93–4, 128

Siaens, Alain 82

Simon, Julian 63

single tax 77–80, 116

Smith, Adam 146

social contract 184–6

social contributions 81, 82, 120–23, 130, 135, 143

social equality 29

social insurance 128, 135, 143

social justice 31

social policy 31

social security contributions 10, 11, 14, 16, 38

social security system 8

solidarity 20, 23–4, 31, 38, 39, 132, 136, 143, 166, 189, 190, 192, 193, 197

family 24, 141, 166, 193

risks and 131–5

state as a bad distributor of 138–44

speculative intention 85–6

spoliatory taxation 60–62

spontaneous order 168

stabilization policy 169

state claims 166–70

state decisions 167, 169

state intervention 39, 93, 95–9, 126, 150, 168, 176

state roles 168–9, 178

states

as a bad distributor of solidarity 138–44

as a bad insurer 136–8

against civil society 164–5

competing with 200–203

constitutional principles 194–6

limits of 170–73

state size 172–5

supply-side economics 10–11

taxation 1–4

arbitrary 57–8

of capital 4, 61, 70, 78, 83, 85, 110, 159, 169

general remarks 62–4

effect of 25–30

family 141–2

financing by 9

of firms 124, 126

of inheritance 68–70

limiting 186–90

progressiveness see progressiveness

and regulations 88–9, 153

resisting 183–6

role in savings 95

spoliatory 60–62

transparency of 15–16

tax barriers 151

tax burden 2, 62, 77, 87, 88, 118, 121, 122, 128, 129, 157, 186, 188, 191, 201

firms and households 123–5

tax cascade 76–7

capital gains tax 82–7

hidden taxes 87–91

inflation tax 87–91

single tax as iniquitous tax 77–80

VAT, role of 80–82

tax collection costs 127

tax competition 161, 162

tax constitutions 186–7, 194, 195

tax coordination 160

tax decisions 18, 36, 160

tax discriminations, harmonizing 158–62

tax evasion 58, 68, 77, 79, 152, 160–62, 183–5, 204

tax exemption 11, 67, 112, 142

tax fraud 58, 77, 79, 152, 183–5

tax harmonization 150, 153, 156–62

tax illusion 123

tax justice 49, 53, 54, 58, 79

tax legislation 52, 84–6, 141, 157

tax parliament 188, 189

taxpayers

annual resources 103

taxes closer to 196–9

tax policy 14, 27, 28, 95

tax rate

harmonization of 147, 153, 158

lowering 11–15

progressive 20

VAT 115, 147–9, 152–5, 159

tax reform 1–4, 100–101, 112, 150, 159, 186, 205, 206

tax regulations 126

tax resistance 183–6

tax revenues 11–14, 57, 78, 81, 91, 126, 159, 191, 206

tax risks 128

tax shifts 122–4, 129

tax “shock” 128

tax system 111–12, 131, 150, 158–61, 178

tax transparency 15–16

theory of permanent income 47

trade

internal 152

international 145–8, 151, 152

on markets 77

trade flight 159

transmission of goods 73

Treaty of Rome provisions 201

tribal thinking 166

Tullock, Gordon 164

tyranny 179, 181, 182

undifferentiated purchasing power 89

unemployment 1–2, 10, 14, 43, 95, 122, 132, 134, 206

unfair taxes 38

unproductive capital 55, 56–8

value-added tax (VAT) 76, 83, 84, 155, 190, 191

on consumption 113–15, 117

creation of 149–51

differentiation of rates 115–17, 147–50, 153–4

export system at zero rate 150, 151

harmonization of 153, 158–9

and income tax 80–81, 114–16, 152, 157

and overall expenditure tax 113–18

role 80–82

veto right 179

voluntary financing 9

voluntary retirement system 139

von Mises, Ludwig 164

wage earners 122, 123, 130

wealth tax 46, 48, 49, 51, 53–60, 63, 66

arbitrary characteristic 58

effect of 61–2

income tax and 52, 58, 61

and inheritance taxes 66

justification of 55

rate 60–61

working tool 57