Taxation and the Attack on the Affirmative State


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Chapter 18 Taxation and the attack on the Affirmative State Draft 1.0 April 2009 What makes a society democratic is not simply that political officials are elected in a properly democratic manner, although that is obviously important. A democratic society is also one in which people have the power through their political institutions to make collective decisions over matters of public concern. Democracy is thus a question of the scope of public authority, not simply of the way that authority is exercised. A society is less democratic when the public domain is severely narrowed, and decisions with large collective ramifications are made privately. This implies, as we argued in chapter 16, that we can make a meaningful distinction between matters of public concern and private matters. This is certainly a difficult and hotly contested task, but whatever else “public” might mean, it includes the provision of a wide range of public goods and the regulation of the market in ways that minimize its negative externalities. To do these things, the state needs resources. In a capitalist society in which most of the economy is organized through privately owned enterprises and most income is earned through market activity, the way this is accomplished is through taxation. This chapter explores the problem of taxation and the uses to which taxes are put by the democratic state. Taxation might seem to be a dry, technical topic, of concern mainly to specialists. This would be a mistake. Taxation is at the very core of how a democratic capitalist society like the United States works. It raises fundamental questions about the prospects for democracy and the conditions for fairness in societies in which so much power is vested in private property and the market. We will begin by exploring different ways of theoretically understanding the idea of taxation and the problem of what it means for a tax system to be “fair.” We will then look at taxation in the United States, examining a number of myths about the tax system. The chapter will conclude with a discussion of anti-tax politics and the assault on the affirmative state. I. WHAT IS TAXATION? There are two sharply different ways of thinking about taxation: (1) Taxation as the public taking resources from the private, and (2) Taxation as the division of the economic pie between private and public shares. In the first of these the economic pie is produced by private firms and individuals, and then the state comes in and coercively takes part of this pie for public purposes. In the second, the economic pie is the result of complex cooperation among people in both public and private spheres and then a set of rules are established to divide the pie between different purposes. Taxation as the Public Taking from the Private. This is the most common view. Here is how it goes. People work and earn an income through various activities. Some get their income in the form of a wage. Some get their income ...

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