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. 


  1. Amen, Brother. The notion that taxation is theft is BS. The problem with taxes has always been that the sovereign used them to fight wars or to enrich himself and the nobility. Nothing for the tax payer. Bismarck was the first to use tax money for the benefit of the people to keep them happy while he fought his wars. America seems to have forgotten that lesson. People want something back for "their" tax dollars.

    1. Well, it is of course complicated. Taxation often HAS been (and in many places still is) really just the powerful appropriating stuff from the powerless. Indeed, to the extent that the super rich are able to avoid paying taxes (while enjoying various bailouts and subsidies), that's often the cases today even in Western putative democracies.

      But I don't agree that Bismarck was by any means the first to use tax money for the benefit of the people. The very example I started this essay with is of ancient Rome, whence we also get the trope "bread and circuses", referring to spending money from the public purse to keep the masses content and amused so they don't rebel. And Rome certainly wasn't the first civilization to expect its citizens to contribute in what today we'd probably call taxes.

      But as for tax theory today, I would argue that taxpayers DO get something for their tax dollars: namely, the use of their dollars in the first place. We should think of income tax, at least (and possible sales taxes, though I have some other thoughts about those), as a user fee on money. Treat money as a utility just like electricity or gas or internet, and charge a fee for its use. The difference is that it should be progressive: no bulk discounts for using more money, because bulk discounts are measured IN dollars in the first place. The more money you use, the more powerful and useful it is per dollar used, and thus the higher premium it should command.

      I blogged about this argument before you started reading.

  2. Currency is indeed something that every Society needs, what that currency will be can vary, tho' most Societies today use some kind of Money rather than a bartering system or using other objects rather than paper notes and coins. Ultimately, the Money is only really worth what the Sovereign says it is, in reality, it's just paper and metal and could be rendered worthless at any point in time. I think you explained Taxation well tho', it is a User fee. The problem I have with our current Taxation system is that the Elite rarely pay even a small fraction of their fair share of it and so Society at large and the Nation is bilked out of what they should have paid into the System as it stands. I never mind paying my fair share at all, I understand what it represents and what it funds, most of which Society does benefit from in various ways. The fact our IRS would dog me for Sixty Bucks I already paid and they misapplied, when the Billionaire Boys Club is paying less than 1% of their income in Taxes is what makes me angry.

    1. That is very much the problem I am trying to address with the argument about bulk discounts, as well as the other advantages to the use of money over barter, which become ever greater the more money you use. At the subsistence level, money is only barely competitive with barter. When you earn enough to start saving, the fact that money doesn't rot like grain makes it a bit more useful. And when you can afford things like insurances or mortgages, it becomes more useful still. And for the highest end users of money, money itself becomes the means of production: you can earn a comfortable income entirely by using your money to make more money.

      That is another reason why I argue for more progressive income taxes. It's preposterous that the highest marginal income tax bracket kicks in at only about a half a million in income, and it's essentially a flat tax from there on up. Someone making half a billion pays the same tax rate as someone making one tenth of one percent as much.