Death, taxes … and democracy
Tax is in the news again. The Australian government is pondering a range of tax reforms, and Prime Minister Turnbull says many options are on the table. It brings to mind Benjamin Franklin’s famous quote: "In this world nothing can be said to be certain, except death and taxes."
People sometimes complain about the level of tax they pay but, on the other hand, we all want and expect effective delivery of government goods and services.
The biggest portion of Australian government revenues from taxation are spent on social security and welfare (approximately $154 billion), followed by health (approx. $69 billion) and education (approx. $32 billion). Defence receives about $26 billion. The principal sources of tax revenue are personal income tax ($194 billion), company and resource rent tax ($71 billion) and sales tax ($62 billion). Non-tax revenue amounts to around $25 billion.
It may surprise those who complain about taxation that the issue has been central to some of humanity’s greatest revolutions: revolts that have pushed society forward in terms of democracy.
‘No taxation without representation’
In 13th century England, the barons rose up against King John because they were fed up with being taxed arbitrarily and sometimes ruinously. They demanded a say and, through clauses 12 and 14 of the Magna Carta, overturned the notion that the king’s power to tax was boundless. In agreeing to the Magna Carta in 1215, the king accepted (in theory) that he had to obtain ‘the common counsel of the kingdom’ before levying certain taxes.
The English people again struggled against monarchical authority in the civil wars of the mid-17th century when King Charles I refused to be bound by the decisions of the Parliament on matters relating to taxation. His execution in 1649 marked the beginning of the end of the era of ‘divine kings’ and, ultimately, led to the Bill of Rights of 1689.
The slogan ‘No taxation without representation’ resonated a century later in the American colonists’ revolt against the British Cabinet and King George III. The colonists objected to paying taxes that went to England when they had no representation in the British parliament. This revolution resulted in the overthrow of colonial rule and the establishment of an independent democratic republic on July 4th 1776.
In Australia, the slogan was also raised by the miners at Ballarat, Victoria, who established the Eureka Stockade in 1854. The license fee that the miners were forced to pay to the colonial government was a form of taxation and yet they had no representation in Victoria’s colonial parliament. The Stockade was defeated violently but in the longer term the struggle established a much broader suffrage. In November 1857 the Victorian parliament became the first in Australia to grant universal suffrage to white males.
The ‘social contract’
Taxation is part of the social contract between rulers and ruled. The ‘social contract’ developed as a theory during the Enlightenment, when the moral and political nature of government, law and society was being questioned by thinkers like Thomas Hobbes, John Locke, and Jean-Jacques Rousseau.
Hobbes had a negative view of human beings’ capacity to live together and favoured a social contract based on the rule of a powerful leader. Locke believed in a social contract to guarantee life, liberty and property, with the government’s role to protect society and facilitate individual and societal progress. Rousseau was similar to Locke in that he did not have a grim view of human beings, and opposed the power and privilege of the monarchs.
The social contract imposes obligations on both parties: citizens are expected to pay taxes, regardless of their degree of support for the government and, in exchange, governments are expected to provide public goods and services.
So, in the bigger picture, taxation is an important part of democracy. People have every right to complain and protest about taxation and if we do not like the way the governing party is taxing us, or distributing the revenues from taxes, we can always vote for a different party.