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Nation Building and the Origin of Government, Period 5, Class 6, Thursday, 2-10

Alex wasn't late. She was on time. But it felt as though she was late, because she prided herself on being punctual.

Blame the bizarre monkey-creature who had been humping her leg at the Perk.

"So," she began, briskly, as she walked into the room. "Last week, we picked a currency. This week, we're going to talk about taxes. You can decide to not have any taxes, but then the government will be broke, and a government without any money is a government that can't fund itself and therefore can't do anything. So if you're going the no-tax route, either explain why you've chosen to dissolve the government, or how you intend to pay for anything your government intends to do."

She pulled her coat off as she talked, switching the cup she was holding from one hand to the other so she didn't spill it while she slipped her arms out. Once her coat was off, it was going to be tossed haphazardly on the seat behind her desk.

"There are a number of ways to assign taxes," she continued. "Income is a popular option. You tax a percentage of what everyone makes this year. A few difficulties: number one, people will hide income from you by being paid 'under the table.' Number two, this leads to inequity. Someone who inherits several million from their parents, and therefore doesn't need to work, also won't pay any taxes, as they have no income. Should inheritances be considered income? There are difficulties with that, as well."

Alex was now leaning against the front of her desk, and dunking a bag of tea into her cup. Other people drank coffee, when they were in a rush; other people weren't Alex.

"We can also tax purchases," she continued. "Assign, for example, six percent on top of the price of anything, and that money goes to the state. Of course, that means we're getting the same six percent from a gallon of milk as we are a deluxe yacht. Do we want to exempt necessities, like food? Clothing? Do we want to increase the tax on luxury items? If so, how do we determine what is a luxury, and what isn't? Do we also want to institute 'sin' taxes, on items we'd like to discourage the purchase of? Alcohol, or cigarettes, for example?

"We can assign taxes based on properties, as well, although that may disincline people to purchase property, and that's generally something the government likes to encourage. In that case, we can introduce exemptions directly into the code itself. For example, the United States tax code is an income tax base, but you can claim deductions if you have dependent children, or if you've given to charity, or even on the payment of a mortgage."

Alex sipped her tea -- a little too hot, and the flavor hadn't fully dispersed yet, but it still was much nicer than having no tea at all, this morning. "It's far more complicated than that," she said, "as well it should be, if we'd like for a system to be fair. And fairness will get the greatest compliance out of people. Although non-compliance will be another thorn in our side, so we'll need a department to sort out taxes and enforce their payment -- yet another department to fund, which is why we need taxes in the first place. So. Let's discuss taxes."

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What is it we're going to tax? Income? Purchases? Property? What should be exempt, and what shouldn't? How do we handle inheritances? How do we tax fairly, without placing an undue burden on the poor, or penalizing the rich?

Edited 2011-02-10 19:52 (UTC)

"Combined wealth," Sov replied. "That should make sense, shouldn't it? Because it's the combined wealth that people live from. And if everyone pays a percentage, unless they're really poor, in which case the government shouldn't take their money and make them starve."

Sov wasn't even completely sure how this worked in Karhide. It was one of those things which people complained about but which was never explained in detail.

"So we set a poverty line, and don't tax below it," she said. "Do we keep an income tax? And if so, are the poor to be exempt from that, as well?"

Squall thought about it. It was a thorny issue, and no matter what you decided to do, there would always be loopholes.

"No tax for the poor," Squall decided. "Income tax for the middle class. And a tax on total net worth for the wealthy." That... seemed fair, didn't it? "I'll assign someone smarter than me to pick percentages."

"How do we delineate between middle class and wealthy?" Alex said. "If there are loopholes for creative accounting -- someone getting themselves declared middle class so they don't have to pay taxes on their houses -- they'll do it."

Squall nodded. He was well aware of that -- people were greedy and cynical and wouldn't understand that taxes were for the good of the country. "Ramp the tax up gradually," he decided. "Start it at a certain percentage of the median income, maybe. And make the tax percentage bigger for wealthier people."

"And smaller for the poor, until the line where we eliminate it entirely," she said. "Doesn't that remove an incentive to accumulate wealth? What happens if a person discovers that they're better off turning down money to stay in a lower tax bracket?"

"It... doesn't work like that, does it?" Squall asked. "I'd get someone good at math to make sure it doesn't work like that. Besides, someone inclined to complain too much about taxes probably didn't get their wealth fairly anyway."

"People like keeping what they have," Alex said. "You'll need people to examine the loopholes, to make sure they can't be abused. And to be sure the ramp up isn't so sharp that people feel disinclined to create more wealth."

Re: Discussion - How We Tax - NAT06

whateverknight.livejournal.com - 2011-02-11 02:01 (UTC) - Expand

"In my world, we currently work on a system of tithes," Karla offered. "Tithes are paid quarterly, after the season has ended, and are based mostly on income and net worth, I think." She wasn't entirely sure, something to talk to her Steward about. When she got one. "It can be paid in either coins, goods, or services. The inhabitants of a village or city pay their tithes to their direct Queen, who then turns around and pays her tithes to her direct Queen on up to the Territory Queen."

"Tithe in the classical sense?" Alex asked. "A straight 10%? Is that of earnings, or of total wealth? Are the poor exempt?"

"The straight 10 percent," Karla agreed. "I think it's of earnings? But income from investments count for that, too. And things like rent from owning other properties and things like that."

She...really didn't know much about it, actually. Hmmm.

"The very poorest are exempt, as they often don't have income to tax and taking what little they have is unfair, though most of the poor choose to pay off their tithes through work."

"Has there ever been consideration of changing the percentages?" Alex asked. "Eight percent for the poor who aren't exempt, twelve for the wealthiest? It lacks the straightforward math, but it increases the burden on those who have more discretionary income."

"Where I'm from," Alexander offered, "people work hard for what they have. To add extra restraints on those things by taxing them just seems unjust."

"Are you talking about luxury taxes, or sales taxes altogether?" Alex asked. "The former aren't intended to punish the wealthy, but to ask them to support more of the burden than the poor."

"If I am understanding them," Alexander said carefully, "I don't believe any taxes, luxury or otherwise, should be necessary. A government should not depend on its people to carry them; they should be carrying the people."

"A government without any funds isn't a government at all," Alex countered. "If we'd like to have public education, roads, a police force, or any activities carried out by the government, we'll need money to do it. Tax is how a government funds itself, so that it can carry the people. If you're arguing for less government intervention, that's fine, and it's a popular cause among some people. But at the far end of the spectrum where there's no money whatsoever, there's also no government."

"A government can procure funds other ways than taxing the people," Alexander offered. "And I've established in previous classes that I am not fond of too much government intervention in general. There are other forms of payment other than currency, as well, and the sorts of governments I am accustomed to tend to be meritocracies. Public education, for example, takes the form of people willing to teach, and we repay them for their services with protection, perhaps lodging or surplus goods offered by the people in support of their government...by choice, not by government mandate."

Re: Discussion - How We Tax - NAT06

glasses-justice.livejournal.com - 2011-02-11 01:56 (UTC) - Expand

Re: Discussion - How We Tax - NAT06

daventryprince.livejournal.com - 2011-02-11 02:13 (UTC) - Expand

"I'm curious," Katniss said, listening to Alexander's views. "Do you really think that people will just work for the love of government? Not a single person would resent that opinion?"

Because she had some practical experience here, and she deeply resented the way her district worked for the Capitol, and the way she, personally, had acted as a sacrifice for that same government, just by their mandate.

Alexander gave a faint smile to that. "I believe that, if the government is good, then, yes, they will. Of course, there cannot be perfect unity, but if there is an evil or something bad, it will be rooted out, because one will only stand for such things for so long. Should my government get to the point where I am resented to the point of needing to be uprooted, then I quite suspect I will be getting what I deserve. If the government works for the people, then what reason would the people have not to return the favor?"

"I think there's a different between 'evil' and 'unrest,'" Katniss said, shaking her head. "Perhaps some will think there's a way for you to improve, or that they wish they were compensated in ways other than feeling good about working for their government. I'm not quite following where anyone's income would come from -- employees of the government, yourself, your advisers. These people have families who can't live on their goodwill."

"Well, no," Alexander agreed, "but the community provides for themselves. A farmer needs cloth, and so he gives the tailor food; the tailor needs food, and so he gives the farmer cloth. If there is an issue or something that should change, I would trust my citizens to tell me, or to at least catch wind of the unrest...I must apologize. I know the world I come from is very small and quaint and so my views might be in line with that, but I have trouble comprehending why there would be unrest if the government is working with the people to ensure that everything they need is provided and everyone works together. Should someone feel they are being slighted or, for whatever reason, does not want to contribute what is expected of them, then that must be handled when it occurs, based on their particular case."

Re: Discussion - How We Tax - NAT06

thegirl-onfire.livejournal.com - 2011-02-11 03:36 (UTC) - Expand

Re: Discussion - How We Tax - NAT06

daventryprince.livejournal.com - 2011-02-11 17:14 (UTC) - Expand

"Luxury," Katniss said simply. "People should be taxed fairly, though those who fall below an established poverty level, and who have a certain number of children or invalid people depending on them may be exempt. The rich shouldn't be penalized -- they've worked hard for their riches -- but it could be a set percentage." She made a slight face, and added, "This is something to be worked out by one of my advisers, I think. One good at math."

"A few lawyers can't hurt," Alex added. "People trained to look for exclusions and loopholes, and ways to exploit them. Would you tax income, purchases, holdings, or all of the above?"

"Income, to start," Katniss said thoughtfully. "I also think luxury items, or property? Again, percentage-wise -- nicer houses, that sort of thing, will garner more tax, whereas those who can't afford much won't have to pay much."

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