The Joys of Paying — and Not Paying — Taxes

From a column by John Plender in “The Financial Times” (September 11)

…In the U.S., Warren Buffett, the Sage of Omaha, has complained that he pays much less tax, as a percentage of his income, than his employees and wants the government to ask the rich for more – a revolt in reverse. The people who are genuinely revolting against higher taxes are the hotheads of the Tea Party movement. Unlike the originators of the Boston Tea Party, who wanted no taxation without representation, these bourgeois revolutionaries object to taxation with representation and are bothered neither by the highest degree of income inequality since the 1920s nor by the absurd bonuses paid to greedy bankers….

Today, in contrast [to tax rebellions triggering the 14th century Peasants Revolt and the 18th century French Revolution], tax revolts are largely silent. The rich can respond to high taxes by working less. (Few do.) They can spirit away their money to Switzerland. They can engage in legal tax avoidance. Or, in extremis, people and corporations can evacuate to more benign tax jurisdictions. The point about all these forms of revolt is that the consequences are almost impossible to quantify….

The population of southern Europe is notoriously reluctant to pay tax, so governments have to borrow from the voters instead. As a result, public sector debt as a percentage of gross domestic product has ballooned beyond sustainable levels, most notably in Italy where the debt stock is now more than 100% of GDP. The silent tax revolt through evasion could end up contributing to a chaotic reshaping of the eurozone. The lesson of history is never to underestimate the power of tax dissidents to change the course of history.