Monday 28 June 2021

Render unto Caesar

     There is a passage in the Gospel of Matthew in which some Pharisees ask Jesus whether it is right to pay taxes, and he asks them to identify whose head is pictured on a coin. It's Caesar, of course, and Jesus famously tells them therefor to render unto Caesar that which is Caesar's.

    Now, Matthew frames this as Jesus cleverly avoiding a trap. As he tells it, the Pharisees were trying to trick Jesus into saying something that would get him in trouble with the authorities, and he just outsmarted them. Personally, I don't pretend to know what the historical Jesus actually meant here or whether this episode every actually occurred, but there is a pretty important point that "Render unto Caesar" makes about the nature of money: it belongs to the sovereign.

    I mean that very literally. Not merely that the coinage might display a likeness of Her Majesty, but that the money system itself is created and maintained by the state and its laws, and that the value of money only has meaning within that system. This is especially true with fiat money, but it was still the case for the most part with precious metal coinage, because even though precious metals have some intrinsic value (in that they can be used to make goods people want), most people only use them for trade, i.e. because they know everyone else will accept them as valuable, so in practice the value of those coins is a result of social convention. And insofar as the sovereign state should be understood as representing the people of that society generally, the state is the entity with ownership/responsibility over the money system. 

    Think of it like the chips you use in a casino. They are provided by the casino for use according to their rules, within the system of games they operate. And within that system, you can use them to play the games, or transfer them to other people if you want, or use them pretty much however you like. But all the value they have derives completely from the fact that everyone understands they can be cashed in for "real" money as you leave the casino. Maybe you're allowed to take them with you when you leave, maybe they're cancelled when you do, but the only value they have is within the casino, and because it is understood that the casino operators will redeem them for "real" money as you leave.

    Similarly, within the economic system of the sovereign state, its currency is "yours" to play all the various games we call markets, to facilitate various transactions, to settle debts in tort or contract, and otherwise participate in the economic life of the society. But just like the casino tokens, the dollars you're transacting with are in a very real sense the property of the society generally, subject to the rules that society makes just like the rules of the various casino games you might play with casino tokens. 

    And among the rules that society can make for the use of its currency tokens is the rule that you have to pay taxes. Those taxes can, in principle, be 100%, because ultimately the state owns all of them, but of course that would utterly defeat the purpose of issuing the tokens in the first place because no one would accept them in trade knowing they would all be confiscated immediately. So in practice, a responsible government will need to design its taxation policy in such a way to preserve the function of the tokens, to keep the games playable and rewarding. 

    So the upshot of all this is that there is a right way and a wrong way to advocate for tax policy. Complaining that the gubmint shouldn't be allowed to take MY money dammit is the wrong way, because it's all the gubmint's money. The right way is to argue that this or that tax rate is better policy, because it better serves the interests of society in some way or other. You might argue that tax rates should be low to encourage private enterprise. You might argue they should be higher to fight inflation. You might argue they should be progressive to limit inequality. And we can have those debates. But your property rights to "your" money do not and should not enter into it, because it's ultimately not your money in the final sense.