About a century ago a group of brilliant Italian scholars set out to study the nature of the state and its monetary affairs. One of them, Amilcare Puviani, tried to answer this question: If a government were trying to squeeze as much money as possible out of its population, what would it do? He came up with eleven strategies that such a government would employ. They’re worth examining:
1. The use of indirect rather than direct taxes, so that the tax is hidden in the price of goods
2. Inflation, by which the state reduces the value of everyone else’s currency
3. Borrowing, so as to postpone the necessary taxation
4. Gift and luxury taxes, where the tax accompanies the receipt or purchase of something special, lessening the annoyance of the tax
5. Temporary taxes, which somehow never get repealed when the emergency passes
6. Taxes that exploit social conflict, by placing higher taxes on unpopular groups (such as the rich, or cigarette smokers, or windfall profit makers)
7. The threat of social collapse or withholding monopoly government services if taxes are reduced
8. Collection of the total tax burden in relatively small increments (a sales tax, or income tax withholding) over time, rather than in a yearly lump sum
9. Taxes whose exact incidence cannot be predicted in advance, thus keeping the taxpayer unaware of just how much he is paying
10. Extraordinary budget complexity to hide the budget process from public understanding
11. The use of generalized expenditure categories, such as education or defense, to make it difficult for outsiders to assess the individual components of the budget
Notice anything about this list? The United States government uses every one of those strategies—and so do most foreign governments. That just might lead a cynical observer to conclude that the government was actually trying to soak the taxpayers for as much money as it could get, rather than, say, raising just enough for its essential functions.
In all these ways, government’s constant instinct is to grow, to take on more tasks, to arrogate more power to itself, to extract more money from the citizenry. Indeed, as Jefferson observed, The natural progress of things is for liberty to yield and government to gain ground.