Why taxes are a key part of representative government : The Indicator from Planet Money Taxes get a bad reputation, but they were central to the formation of representative government and even the written word.
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An Ode To Taxes

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An Ode To Taxes

An Ode To Taxes

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Hey, everyone. Stacey and Cardiff here. This is THE INDICATOR FROM PLANET MONEY. And it is Friday, Stacey.


It is Friday, which means that it is time for another installment of our INDICATOR summer school.

GARCIA: Yeah. And for this lesson, Stacey, you actually did some traveling to a pretty fantastic place. You went to Greece.

VANEK SMITH: Yes. This was a couple years ago when we could travel, and it was a really wonderful trip. I spent a lot of time in museums because this is what I like to do. And I was in this museum that was inside of a monastery. And there were all these texts there. Most of them were Bible texts. It was like, you know, illuminated Bible texts and things like that. But I saw this one scroll way kind of off in the corner. It was a little different from everything else. And, Cardiff, I took a photo of it. Here it is.

GARCIA: Wow. It's, like, bigger than a person. It's taller than a person and about half as wide it seems.

VANEK SMITH: It's, like, 7 feet long. It's just this long scroll. It had this big gold seal on it, very fancy. But guess what it was about.


VANEK SMITH: Taxes. I was beside myself, I was so excited. In fact, according to this museum, this long, 7-foot scroll was a list of tax exemptions that was granted to a particular monastery from Alexios I, emperor of Byzantium in 1088. And this got me thinking because, like, you know, I know that taxes are important, right? Obviously raising money is important for a government, for an emperor. But, like, are they this important? I mean, why are tax exemptions worthy of this? I mean, the two things on manuscripts in this museum are, like, our immortal souls and taxes.

GARCIA: Maybe Byzantium had interest groups lobbying the emperor for tax breaks, too, you know?

VANEK SMITH: That is actually very possible. Of course, right now, Cardiff, everyone is talking about taxes because the government has been spending so much money to try to help people and save the economy. And also at the same time, people are paying way less in taxes right now than they were last year because of unemployment and pay cuts.

GARCIA: Yeah. And so now everyone is talking about possible new taxes in the future, like a millionaire's tax or a higher inheritance tax, some way to get more revenue to the government when the government needs more money because a lot of the government's money does come from taxes.

VANEK SMITH: Yes. And so all of this news is why I kept thinking about this scroll I saw in Greece because that scroll made me realize that I have been thinking about taxes in entirely the wrong way. More on that after the break.

To learn more about the history of taxes, I called it William N. Goetzmann.


WILLIAM N GOETZMANN: You can call me Will.

VANEK SMITH: Will is the author of "Money Changes Everything," a book about the history of money and taxes. The list of tax exemptions I was looking at was from the year 1088, but Will says for the real story, you have to go back to about 600 B.C.

GOETZMANN: The founding father of the Greek government, if you will, was a king named Solon, and he is known for many things, but one of them is he created a central fund for financing the activities of the Athenian state. And he financed that through the collection of tax revenue.

VANEK SMITH: Fun fact - if we could even start having more fun than we're already having, Solon wrote poetry. He was quite the renaissance man. Of course, this was before the renaissance, so, like, the - like, a naissance (ph) man.

GARCIA: I'll allow it.

VANEK SMITH: OK (laughter) aw, thank you. Anyway, when Solon took the helm of Athens, Athens was just kind of a mess. It was pretty weak. It was not doing much exciting stuff. And Solon wanted to centralize things. He had this vision. He wanted to make a larger, more powerful government, and he did that partly through taxes.

GARCIA: Yeah. At the same time, Solon started putting together the foundations of a democratic government, a representative government. And Will says that the orderly collection of taxes and the creation of this central fund were fundamental to that project. Taxes were kind of the glue to the whole thing.

GOETZMANN: The democratic process in which everybody has some say is something that made ancient Athenians more willing to give up some of their individual rights and brought them together.

GARCIA: And Will says that collecting taxes in a way that's orderly was itself a technological innovation of sorts.

GOETZMANN: The way I think about finance is that it's a set of tools. It's a technology to move value backwards and forwards through time.

VANEK SMITH: And for a government, the organized collection of taxes makes it possible to plan and to grow because you can anticipate roughly how much money you have coming in and when so you can make plans for the future.

GARCIA: And in a democratic system, people kind of accept that they're going to hand over some of their money in taxes and they're going to give up a portion of their money and some of their independence to a government. These sacrifices give people a stake in the government and in its policies. It also gives them a right to speak up.

VANEK SMITH: In fact, Will thinks the desire to collect taxes on the part of the government was a lot of what motivated Athens to create a representative government in the first place.

GOETZMANN: Democracy is one way to legitimize in people's minds the taxation process. So one of the nice things about having a democratic process is you could say, look, everybody's had their say. We've agreed. And if you don't like it, you can vote your Congress people out of office. But we all agree that we owe our fair share. Whereas if you've got a despotic government that you feel is just squeezing you and not acting in the people's best interest, you're going to have a lot of resistance to paying taxes.

VANEK SMITH: Oh, it's a taxation - no taxation without representation.

GOETZMANN: I think that's the shorter way of putting it (laughter).

VANEK SMITH: Will says taxes were central to the social contract of a representative government. It is a central part of the government-citizen relationship. And he says when governments abuse this power or mess up this dynamic, it can have very powerful consequences, and it can even take them down.

GARCIA: Yeah, like, in France when tax collection was stepped up during a famine, and it's part of the reason that the French Revolution got going. It's kind of also interesting, by the way, what Will says about how in a democracy we all agree that we owe our fair share. We just don't agree about...

VANEK SMITH: In theory.

GARCIA: Well, we just don't agree about what that fair share actually entails.

VANEK SMITH: Or how it should be spent.

GARCIA: Yeah. That's a big part of, like, the democratic process. It's great.


GARCIA: Yeah. But no matter what the system is, taxes are definitely emotional. People have strong feelings about them, pro or con, higher or lower. And that strong feeling can cause revolutions. But there have been times when it has also caused quite a bit of innovation.

GOETZMANN: The first writing that we know of is cuneiform writing, which was writing on clay tablets. And, you know, it was fascinating when in the 19th century scholars figured out how to read this writing, but then a lot of them got disappointed because instead of finding great, you know, works of poetry and literature, which there were some of, almost all of these tablets were business transactions. And most of them appear to be business transactions that had to do with delivery of goods to the state.

VANEK SMITH: So it was taxes.

GOETZMANN: It was taxes and finance and accounting that really led to the emergence of a written language.

VANEK SMITH: In other words, Will says, without taxes and basically the deep human need for an IOU, we might not have the written word - like, no "Hamlet," no "Odyssey," no "Mrs. Dalloway," no "Bluest Eye" - without taxes.

GARCIA: Yeah. But also, like, no James Patterson, so, you know...

VANEK SMITH: (Laughter).

GARCIA: Maybe still not the greatest thing in the world (laughter).

VANEK SMITH: Fair. this is fair.

GARCIA: Taxes get at this idea, what's mine and what's yours? How much does the government have the right to take? And what do we get for the money we give to the government? In the case of representative government, if we're not happy with our tax situation or any other situation, we can vote people out of office. Will says that helps the taxes go down a little smoother.

VANEK SMITH: And to close out, Cardiff, if I feel like maybe we should have a poem from one of the fathers of this whole relationship between representative government and taxes, King Solon.


VANEK SMITH: (Reading) Some wicked men are rich, some good are poor. We will not change our virtue for their store. Virtue's a thing that none can take away. But money changes owners all the day.

Spoken like a tax man kind of.


VANEK SMITH: Yeah (laughter).


VANEK SMITH: This episode of THE INDICATOR originally aired in November 2018. It was produced by Darius Rafieyan and Jamila Huxtable. Paddy Hirsch is our editor and THE INDICATOR is a production of NPR.

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