Monday, 6 September 2010

The tax blunder and what it tells you about our money system

Austrian economists have generally been outside the mainstream, because they don't tell the politicians what they want to hear, and stick resolutely to the concept of sound money. John Maynard Keynes on the contrary was clasped to the bepustuled bosom of big government ever since he came up with a pseudo-economic justification for running up massive debts and inflating the currency. Funnily enough, this was what governments loved to do, and people will always believe a lie if it's what they want to be true.

The alternative, which to the short-term view of a politician is unpalatable to say the least, is to raise the necessary money through taxation, but people are much more aware of what they pay in taxes than they are of the surreptitious devaluation of their money through inflation, and as Keynes pointed out, we're all dead in the long run, so fuck it.

The people are generally unhappy when government openly takes their money away by raising taxes, and may even resist. The last major revolt - if that's not overdoing it to call it so - was over the poll tax. As Murray Rothbard noted, Thatcher's mistake was failing to introduce the new tax at a minimal level. Once in place, it could be raised with much less opposition. But by bringing it in at the level her government did, it hit the pockets of a lot of people at the same time, causing the revolt.

The current government may be about to provide another illustration of why governments in general prefer inflation to raising taxation, by cocking up the tax codes of some millions of people, and then trying to 'make good' this mistake by clawing back the missed moolah in the current year. As the Mail notes, there is a legal case for resistance to such a measure, and with safety in numbers the peasants may soon be trying to locate their rusted and cobweb-strewn pitchforks to drive off the hated revenue men.

At this stage, no one's sure who will be affected. I don't know if I'll be leading the charge or cheering from the sidelines, but I sure as hell know what side I'm on.

May the spirit of Wat Tyler arise!

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