Thought of the Day: What’s in a Tax?

What’s in a tax?

Divested of all misleading associations and stripped of any false labels, what does a tax truly represent?

Tax History Policy Interest Taxation
Tax Policy

In these last several months, Huddleston Tax Weekly has covered a wide range of topics. We’ve looked at tax measures from eras far removed from our own: we’ve examined the Tea Act which fueled our revolutionary fervor; we looked at the tax acts passed by the Confederacy in its struggle against the North; we even covered the geld, a medieval tax which provides a glimpse into the formation of the English nation. We’ve also touched on topical issues, such as Apple’s EU tax bill and the tax instituted in Vancouver designed to stabilize the real estate market. Our treatment of these many issues has vastly increased our understanding of the role of taxes in history and in our current society.

If there were a single lesson to be drawn from all of the many issues we have covered in these recent months, the lesson would be: tax policy is shaped by the competing interests of distinct groups. Taxes are not developed through a completely rational process in which the interests of every relevant group are considered carefully; in a very real sense, taxes are developed through a competitive process, and the end result usually involves certain groups having a more favored position than others. This is not the most pleasant revelation, but it is one which accurately reflects reality. It may do more to serve the ego of our society to suppose that tax policy is strictly the outcome of reasoned, sensible debate among lawmakers, but this does not mean that such a supposition is any reflection of the truth.

Of course, there are undoubtedly plenty of other lessons to be drawn from the issues we have discussed, and in future installments of Huddleston Tax Weekly we will do our best to cover these lessons. But for now, it is important to understand what taxes represent at a very basic level. Behind all the number crunching, the box checking, the empty bureaucracy, the abstruse terminology and the lofty rhetoric, a tax is a tool utilized to further the interests of a particular group. A tax can be created for any number of reasons: a tax may be used to generate funds for war; a tax may be implemented in order to stabilize a specific market; or a tax may be forcibly imposed by an occupying entity, as was the case with the geld. But no matter what the reason is for its creation, it is clear that any given tax is an extension of a specific interest group.

Image credit: Reza

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