Typical of modern thinking on finance, is an editorial which appeared in the Montreal Gazette of February 16, 1962. It is entitled, "Taxers And Taxed Can Both Win".
Commenting on the tax burden which is steadily becoming more and more difficult to bear, the Gazetite says:
"The existing old tax theories are not working out well. They have made taxation a, bur- den and even a penalty. What is worse, they are failing to produce enough revenue, so that federal Government and the provinces are facing deficits. Something new is needed. And what that is, is becoming clearer: "It is coming to be realized that the basis of tax revenue is incomes that can be taxed; and this base can be broadened only by encouraging as many people and companies as possible to produce taxable incomes:"
Remark that what the Gazette, and presumably all orthodox and "right-thinking economists, finds most alarming about this tax situation, is not the "burden" which it imposes on the individual and families, not the "penalty" which it inflicts, but the fact that the tax collectors are not able to wring all the money from the citizen that they want! Note, too, that what the Gazette (and our economists) want is more taxable income: Not more purchasing power for the individual and for families, but more revenue which can be siphoned out of the citizen as quickly as possible.
But the economists have a new plan to make this possible. It is what the Gazette fondly terms, "dynamic" taxation! It consists of reducing taxes for a while to encourage production and an increase in revenues for companies and individual, tax payers. Of course, this is going to be a bit of a hardship for the tax collectors. But the Gazette urges them to be of good-heart and keep up their spirits by contemplating the rich harvest they are soon to reap.
Says the Gazette: "And it (a brief by the Chamber of Commerce commending this new plan) proposed that if deficits were created instead by deliberately lowering taxes, there would be the reasonable expectation, that the stimulus given to new effort would, in due course, provide a higher yield for the tax collector"
Just make the bait a little more tempting and you'll catch a bigger fish!
Continues the Gazette: This new theory of taxation is not one of conflict between tax-payers and governments, with one group trying to urge their interests at the expense of the other. It is rather a theory that would ultimately enable both the taxpayers and the governments to have more, by encouraging the production of more for both to have."
It must be made clear here that when these economists speak of greater production in order to increase taxable incomes, they are not speaking of greater production for home consumption. They are looking towards the export market.
It is quite obvious to them, as it is to any layman who will look about him, that the production system is producing or is able to produce, more than enough goods and services than the home population can use. If people are going in want it is not because of a lack of goods, it is because there is a lack of purchasing power. Advertisers spend millions every year trying to coax people to buy all sorts of goods. So let's not talk about production increases for the home market.
The vast army of unemployed also belies any statement that we are not producing enough for home consumption. These idle workers were laid off from the production line. If production must be increased in order to provide new taxable incomes, why were these men laid off?
If existing surpluses are to be disposed of, if new production is to be furnished to the end that an increase in taxable income be achieved, then markets for goods must be found abroad. We must export. And the whole tenor of recent propaganda, vis-a-vis production, has been that we must, at any cost, sell our goods abroad.
The theory of exporting is shortsighted and futile. Shortsighted because at best it provides only a temporary palliative to unemployment and depressed incomes. It is temporary because the march of industrialization is rapidly bringing hitherto "primitive" countries into the field of the export war.
We shall soon be unable to sell our goods to underdeveloped nations. In fact, we shall be fortunate if we are able to compete with them in the trade market. One has only to consider the case of Japan which is rapidly proving to be the menace to former top-dogs in the export market, like the U.S.A. and Britain.
So any talk of exporting in order to provide taxable revenues, while it may sound sweet and logical, means nothing, in the light of the march of progress.
The purpose of production is not to provide incomes but to provide goods to meet the needs of the population. As long as the production can keep astride of the needs, then there should be no question about providing the necessary purchasing power so that each citizen may have his just share of such production.
Taxation by the governments has, under the existing system, but one purpose, to provide the governments with the means of meeting the public needs of the population. If the people can provide surpluses of goods, and all the manpower necessary, then why should we have to send our goods, which we need here at home, abroad?
The people do not exist to be taxed by the government. Production does not exist in order to provide taxable incomes for the governments. Taxation, today, in the light of modern production, is nothing else than legalized robbery of the people.
It must be seen, in this light of production and of production's purpose, in order that the complete fallacy of any form of taxation, let alone "dynamic taxation", may become evident.
The solution to the problem of governments' needs is not to be found in increasing taxation abroad: it is to be found in the providing of a revenue, in keeping with a country's ability to produce, which revenue will be made available to each citizen, regardless of whether or not he is employed in the production system. Such a similar form of credit is to be made available to governments for their needs — again, in keeping with a country's ability to produce. With such advance of dividends and interest-free credits, there can be no question of new taxation.