Alphabet of Classical liberalism 6: Only taxes and death are certain

If you’ve never paid taxes before, it will happen to you one day. You may have heard Benjamin Franklin’s famous quote: “In this world, nothing can be said to be certain, except death and taxes.” He meant that we will always die and pay taxes. How does classical liberalism view taxes?

The Alphabet of Classical Liberalism was a successful small book focused on describing the basic principles of classical liberalism. It was first published by the F. A. Hayek Foundation Bratislava, Slovakia in 2001.

Now it comes in the form of animated videos prepared with the support of the Friedrich Naumann Foundation for Freedom.

The video introduces Adam (the namesake of the famous Adam Smith), a classical liberal and his worldview dealing with many of current problems.

We all have to pay taxes. Adam shows his opinion on the issue of taxes from the point of view of classical liberalism. While there are public solutions to societal problems, we cannot avoid taxes. However, common sense must also be kept in the area of ​​taxes, their collection and the determination of what kind of taxes to collect. Adam shows what he would prefer as a classical liberal in this area.

Alphabet of Classical liberalism: Only taxes and death are certain

Hi, I’m Adam and we’re going to talk about taxes today. Honestly, I don’t know anyone who would like to pay taxes. Taxes are a relatively well-known political and economic issue. What we are seeing is that the public sector provides a lot of services from the collected taxes. However, just a few people see the other side of the matter, which is pointed out by classical liberals.

Generally speaking, classical liberals support tax cuts and tax simplification. At the same time, however, they are calling for a reduction in state intervention in the economy. The logic is that it is the productivity of the people that makes us richer, not the existence of the state. If the state wants to tax, it should prove that it is for the benefit of the people. It should prove that the taxes collected and used for public services help increase people’s productivity while preserving their freedom and protecting their property.

Individuals and companies should be able to keep as much of the money they earn as possible. Public spending is always at the expense of private spending. Higher taxes deprive companies of the money needed to maintain and expand production and employ people or reduce incentives to work and making savings. On the other hand, lower taxes can be a strong incentive for further development of the economy, attracting foreign investors, and there will be less tax evasion.

Ultimately, the treasury also benefits from lower rates, since it collects more tax revenue from more tax entities who are attracted by lower rates.

Classical liberals reject the progressive tax advocated by its proponents by saying that the rich are simply obliged to pay more. After all, the rich pay more in absolute terms even at the same tax rate, as 10% of 100,000 euros is ten times more than 10% of 10,000 euros.

Classical liberals also reject inheritance tax (also known as “death tax”), gift tax, and dividend tax as unfair. These tax assets have already been taxed once. They are also bothered by the types of taxes where their revenue is almost equal to or even lower than the cost of collecting them.

Classical liberals support international tax competition, which pushes tax rates down and forces states to simplify tax systems. They are convinced that high taxes cause entrepreneurs to leave the country. Whereas low taxes support higher productivity and increase the living standards of all of us. As far as the subject of so-called tax havens goes, all that can be said is that they owe their existence to so-called tax hells — countries with an extremely high tax burden. Classical liberals reject tax harmonization within the EU because it would sooner or later result in high taxes for all.

That’s all on this subject. Next time … Well, we’ll see what I prepare for you next. But it will definitely be something interesting. See you again. Bye!

Matúš Pošvanc and František Chroustal

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