The current tax rate as a proportion of net national income (according to the Adam Smith Institute) is 44%. See if you can guess what it was in
a) 1924 and
b) 1913.
Answer below the fold.
This week’s issue of the Economist contains an interesting calculation of national income. It gives the net national income for 1923 as £3,470,000,000, an increase of £330,000,000 on 1922. This increase is shown to have been a real increase and due not to a change in price level, for that was unchanged, but to an increase in production. This is estimated to have amounted to 95 per cent. of the 1923 figure, an increase of 9 points on 1922.
And
…The ratio of taxation to national income is also given. This is shown to have amounted to 18.8 per cent. in 1923, against 22.2 per cent. in 1922 and 7.1 per cent. in 1913. Comparison is made with the figures for the United States, where the ratio of taxation to income was 11.6 per cent. in 1923, against 12.1 per cent. in 1922 and 6.4 per cent. in 1913. In France last year the ratio was 16 per cent., or 2.8 per cent. less than in this country.
One of the unpleasant consequences of high tax rates is that it is cheap for the government to employ people and ruinously expensive for the ordinary citizen. It’s like communism by the back door.
@Roué le Jour: True, but are there any pleasant consequences of high tax rates? Other than for the small numbers of connected people who live of the state.
Another of the unpleasant consequences I see often in my business of building or renovating residential rental properties is the burgeoning cash economy here in Canada. If I must pay other than in cash I get charged 20%++ more.
An example that amuses me: Dimension lumber here in Canada is expensive, mostly because of a vast regulatory web that controls the timber lands, cutting the trees, sale of the logs, transportation of the logs, milling the logs, grading and selling the lumber, et endless cetera. Bureaucrats at every stage.
I have an acreage in BC which over the years grew too heavily forested. I hired a guy with a big excavator to knock over several hundred trees. For cash. He mentioned that another guy about 50 km away and set up a small private mill in the backwoods and might buy the larger logs. For cash of course. Or in kind, which is what I opted for. I paid cash to a log truck owner to run the logs up to the mill in the dark of night. Every log transported here must be marked with the registered number of the land it came from. I have no such number. I got back 2 truckloads of the dimension lumber I need to build the addition to our cottage that my wife wants. 2x4s, 2x6s etc.
Vastly inefficient and stupid but I saved $5K for about 3 hours of admin time.
For Britain, I guesstimated 10% for 1924 and 5% for 1913.
Getting the state to its current size has taken over a century. (Britain introduced unemployment insurance and the state old age pension back in 1909.) Shrinking it is probably going to take another century.
Or about nine minutes. Depends on whose plan we follow.
There have been many political thinkers remarking on the growth of the State, beginning with Ibn Khaldun if not before. I call it the Second Principle of Political Dynamics. (By analogy to the increase of entropy.)
Constitutionalism could be seen as an attempt to slow down the growth of the State. How to reverse this growth, is not yet a science, but clearly it has happened, now and then, gradually or abruptly; because here we are, still offered a wide choice at the local supermarket, and still able to write comments on Samizdata.
PS: It must also be noted that, a century ago, taking away 44% of people’s income would have led to extreme poverty for most people. 3 or more centuries ago, it would have led to people starving to death.
High taxes are made possible by widespread prosperity.
I think the figure for Britain 7.1% of the economy as government spending in 1913 is a bit of an underestimate – I do not believe it fully takes into account local government property taxes (and spending) and social security taxes (“contributions” – and spending).
6.4% of the economy for total Federal, State and local government spending in the United States in 1913 is also a bit on the low side – although it is not far out.
However, your point is a valid one – government has exploded in size.
In the United Kingdom this growth of government started in the 1870s, in the United States the growth of the size of government started later – about 1913, although regulations were growing before this.
Many years ago I worked out when government was at its low point in my home town, here in England, the result came out as 1874 – as we, unlike most places, did not establish a School Board under the Act of 1870 (till forced to do by the Act of 1891) – central government starts to grow in the United Kingdom in 1875 (both in terms of taxes and spending – and regulations).
Snorri is correct – it is (technology – and capital growth) prosperity that has allowed such a vast government to exist, not (as fools claim) the vast government spending (and endless regulations) that has led to the prosperity.
If it was not for the growth of government people would be vastly better off than they are now.
And, tragically, even modern technology can not sustain prosperity with government at its present vast size.
Living standards are going to crash.
The establishment elite know this very well – and they welcome it. They would prefer a population of poverty stricken semi-serfs.
@Snorri Godhi
How to reverse this growth, is not yet a science, but clearly it has happened, now and then, gradually or abruptly
There might be examples of this, though I am hard pressed to find any. And often attempts to do so, the French revolution or the Russian revolution for example, have lead to great bloodshed and dramatically increased tyranny.
There are some examples in British history such as the Magna Carta, the Glorious Revolution, The Petition of Right etc. and of course the American revolution. But they are rare indeed.
However, the reason the grocery stores are full or our ability to communicate on samizdata is unhindered has nothing to do with liberalizing of government. Rather it is the inexorable growth of the free market, especially in technology that has made this possible. In many senses the growth or our freedom is a battle royale between markets and technology dramatically improving all our lives, rich and poor alike, and government trying to reel it all in and capture all the benefits for themselves and their cronies while keeping the peasants from getting too uppity.
I am reminded of that scene from Game of Thrones where a minstrel is caught mocking the king, and the king offers him the choice to keep his fingers or his tongue. The idea that you or I, ignorant peasants that we are, should have a voice to criticise the high and mighty is one that they will resist with unrestrained fire. The audacity that the minstrel should have words about the prince that are not worshipful and adoring is such a cancer to good order in their opinions.
@bobby b
Or about nine minutes. Depends on whose plan we follow.
If we made you king you still couldn’t fix it in nine minutes. The problems in the US are so deeply structural that fixing them, were we to have the will, would take a very long time. Just as an example, one of the biggest costs of the federal government is social security and medicare. This is something a huge amount of the population depends on — and they legitimately should since they paid into it for fifty years. Problem is that all that money they paid in? The government stole it and pissed it away on crap. There is no easy answer to this. Similarly the interest on the debt is utterly vast. For sure the government can default on the debt but the consequences of that would be cataclysmic, possibly worse than being stuck with the debt.
There are plans that were King BobbyB to put in place would no doubt greatly improve things, and maybe in thirty years we might be in much better shape. However, BobbyB isn’t going to be king, because most people think that King BobbyB’s ideas (such as taking responsibility for oneself, not spending more than you have, not getting sucked into fantasy science to make his friends and supporters rich and everyone else poor), those ideas of King BobbyB are very unpopular in America. They might like him in the Dakotas, but in New York and Washington King BobbyB’s head would very quickly be on a pike.
A plan that is impossible to implement is not an actual plan. The problem is not the politicians, loathsome though they may be, the problem is that most of what are considered indisputable axioms of government by the population as a whole are enough in themselves to bring us all to ruin. The problem is the people not the leaders.
You give me too much credit. I didn’t say I could fix the state in nine minutes.
I said I could shrink it in nine minutes.
(Thinking in terms of missile flight times from somewhere offshore of Atlantic City to DC.)
The time for gradual reform has cone – and gone.
It is too late for reform now – the American, and other Western, economic life is going to collapse in 2025.
Nothing can stop that now – and it will occur regardless of who is declared elected.
The question now is NOT “how can economic collapse be avoided”, it can no longer be avoided. The question is “how will those in power respond to economic collapse”.
Will economic collapse be used as an excuse for international “governance” – for digital money and other tyranny, for the totalitarian control of the lives of ordinary people.
If Harris/Walz are declared elected the answer to this question will be “yes” – there will be tyranny, on an international basis.
The international establishment are not even trying to hide this any more. And a couple of appointments to the Supreme Court will kill off the Bill of Rights.
Paul Marks:
1913 US data (from Historical Statistics of the United States 1789-1945).
US gov’t spending
Federal ……………… 724,511,963
State & local ………. 1,751,000,000
Total ……………… 2,475,511,963
Income* …………… 28,391,000,000
* “Realized Private Production Income”
Gov’t percentage …………… 8.75%
NOTE: I tried to format this to align the numbers. But the font is proportional, so it is impossible. And “You can use these HTML tags” shows nothing.
Thanks to Rich Rostrom for recalling attention to this discussion.
Fraser:
I am not hard pressed to find examples, because i have thought about this long+hard.
The fall of the Roman Empire
Every fall of a Chinese Dynasty
Various falls of Islamic empires due to conquest by nomadic tribes (mostly varieties of Turks, i believe)
OK, all of the above inflicted even more pain than the French Revolution.
But they did result in a lighter burden of government.
The proof is that e.g. Chinese dynasties collapsed when the tax burden became too heavy. If they collapsed when the tax burden became too heavy, the burden must have been lighter at inception
And even in France, the burden of government was apparently lighter in 1913 than before the French Revolution.
— And then we have the collapse of fascism in 1944, and the collapse of communism (in Europe) in 1989/1991.
Other examples that come to mind are the battle of Legnano, the battle of Morgarten, and the Dutch Revolt.