10 March 2011

Mechanisms of the thieving state, Part 1

Amilcare Puviani (1854-1907) was the grandfather of Public Choice who first expounded the "Fiscal Illusion" theory of state spending, which states that because the burden of indirect taxation is not fully perceived by taxpayers, public demand for "manna from heaven" increases, making it easy for politicians to increase the amount of money they appropriate for the aggrandizement of their sphere of action. A simplified summary of Puviani's insight produces the following 8-point system of institutional theft:

  • Indirect taxes (VAT) to hide them in the price of goods.
  • Prefer direct taxes collected in small increments over time (National Insurance) over yearly collection (Income Tax).
  • Inflation, to steal from the past.
  • Borrowing, to steal from the future.
  • Increase tax complexity and use general spending categories in any budgets to conceal corruption and the wastefulness of state expenditure.
  • Never repeal taxes introduced as a temporary measure when the emergency passes (50% income tax). 
  • Selective taxes designed to victimize unpopular groups (Bankers). 
  • Individual components of the state apparat to encourage protest and threaten to cut popular monopoly services if taxes are reduced.

Hat-tip: the Cato Institute's David Boaz


  1. When asked in class, many of my black female students at Philadelphia Community College, opined that the Federal Government ought to provide them with personal automobiles since they has "a lot of money.". They were amazed to be told that their instructor (me) paid 35% of his salary in taxes in order for 1. their children to be educated, 2. for there to be police and firemen to answer their needs along with 3. emergency medical care, and
    little things like 4. welfare payments!This seemed very strange and new to them.

  2. They has a lot of money, though, hasn't they?