Opinions Worth Sharing

Folly and Fiscal Wisdom

Photo: Andrea Piacquadio on Pexels

Jose Manuel Suárez Mier*

I was thinking of writing today about the presidential outburst regarding the leader of the Bank of Mexico, whom he will exchange for “an economist with a social dimension,” but my dear friend Isaac Katz has already written, and better, everything that I would have wanted to say in his column of El Economista.**

That is why I will respond to readers who questioned what I meant in my previous text by stating the importance of taxes in history and how they had changed while the tax appetite remained insatiable.

A book has just been published***relating that the history of taxes shows that the subject is not necessarily arid and tells strange or horrible but always fascinating passages that help to understand today’s tax issues.

https://press.princeton.edu/books/hardcover/9780691199542/rebellion-rascals-and-revenue

The accounts of the alluded text span several millennia, from the Sumerian clay tablets, Herodotus and the land tax, and Caligula’s tax reduction, to the slippery practices revealed by the Panama Papers, the tax bypass options provided by blockchain and Bitcoin, and the tax landscape in the post-pandemic.

Rulers of the past who lacked income taxes devised ways to ease the tax burden on the poor, not out of altruism but to make them subsist, and how the legendary Boston Tea Party rebellion was caused by a tax cut rather than a rise as believed.

Image: Peter Spiro on iStock

The authors show the similarity of the taxes on the use of coal that are proposed today to reduce polluting emissions and mitigate global warming, with the tax imposed by Peter the Great of Russia on the use of beards, which resulted in saving the lives of his nobility.

The unintended consequences of the tax are illustrated by the British Crown’s levy on the huts of the Sierra Leoneans, causing an armed uprising that was put down by burning the huts and literally wiping out the tax base.

Many lessons are derived from the infamous English tax on windows between 1696 and 1851, emulated in many other countries, which replaced the tax on chimneys that forced inspectors to enter houses, while windows are easily counted from the outside.

Photo: Leah Kelley on Pexels

Like all economic phenomena, taxes generate incentives, and the response to the window was to wall up the non-essential ones. On the rural roads, old houses with bricked-up windows are still found today.

This text has rich passages on the crucial issue of who pays taxes, which would have been useful to Donald Trump, who insisted that his tariffs on imports from China were paid by the Chinese when consumers paid them in his country.

Taxes are not causes of rebellion or revolutions, but they are usually the last straw for popular discontent that has been brewing for some time and that explodes when taxes are raised, as we see today in Colombia.

Photo: Ricardo Arce on Unsplash

Required reading for tax reformers.

*Consultant in economics and strategy in Washington DC and professor at universities in Mexico and the US. Email: aquelarre.economico@gmail.com.

**https://www.eleconomista.com.mx/opinion/Economista-con-dimension-social-20210524-0033.html

*** [1] Michael Keen y Joel Slemrod, Rebellion, Rascals, and Revenue: Tax Follies and Wisdom through the Ages!  Princeton University Press, 2021.

This column is also published in Spanish on May 28, 2021, in the Excélsior newspaperbased in México City.