27 April 2016

Winston Churchill and taxes (revised and updated) #nlpoli

You have probably seen the quote and a picture of Winston Churchill flying around Facebook or Twitter since the provincial government introduced its budget in the House of Assembly a couple of weeks ago.

"For a nation to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle."  Winston Churchill.

People don't like the massive jump in taxes and the creation of new fees and charges like the levy. They pass this around as their statement of protest.

Three things to know about the quote, besides the fact that Cathy Bennett used it in the budget debate last year to argue against a hike in the HST:

First,  the tax increases aren't an effort to tax everyone into prosperity.  They are about trying to deal with a government deficit of $2.5 billion.  There aren't many alternatives to bring in other money and the government can't just keep borrowing and hope to God the thing sorts itself out later.

Second,  there are different versions of the prosperity tax quote going around.  There's one that poses the thing as a couple of questions.  "Can a people tax themselves into prosperity?  Can a man stand in a bucket and lift himself up by the handle?"  There are a couple of others that start off with either "I contend..."  or "we contend..."

There's even a  quote attributed to Churchill that says "There is no such thing as a good tax."  That variation is usually a bad sign for internet memes so you can guess what is coming:

Third:  Churchill never said it. What's more,  there's not even any evidence that Winston Churchill ever said anything even vaguely like it.

There are, however,  plenty of examples of Churchill talking in favour of taxes that brought money to a government desperately in need of cash.  "A necessary evil" he did call taxes once.  Churchill said it in 1907 in the House of Commons during the address in reply to the King's Speech.
The reciprocal arrangements which may be made by the different self-governing Colonies in the British Empire are of course beyond our control; they are self-governing Colonies and they are free to make what fiscal arrangements they choose. We could not prevent them from making such arrangements if we wished to do so. But is there any reason why we should wish to interfere? I think distinctly not. Taking the simple position of the orthodox Cobdenite Free Trader, I am of opinion that taxes are an evil, a necessary evil, but still an evil, and the fewer we have of them the better. 

Of course in the 17 years before CHurchill said that,  the British government had interfered to halt free trade deals negotiated by a self-governing colony but that is another story. The thing to note is that Churchill was very much in favour of free trade and not opposed to taxation, as long as it wasn't designed to frustrate trade.

The sentiment contained in the quote everyone attributes to Churchill is actually taken from a speech by Ronald Reagan in 1982.  He said:
In opening my remarks -- I told you there was a quote -- I would like to quote a few words by a very famous and celebrated orator, journalist, soldier, historian, and statesman. People have even said he might have made a great actor if he'd tried that. [Laughter] Winston Churchill. He said, ``The idea that a nation can tax itself into prosperity is one of the crudest delusions which has ever befuddled the human mind.'' Now, I don't know how that quote happened to catch my eye -- [laughter] -- I realize it has nothing to do with the meeting here today.
Notice that the quote people are passing around these days is actually worded differently even from the one Reagan used.  The idea is the same, though.  Ultimately, even Ronald Reagan's speech writers were fooled: Winston never said it.

Who said it wasn't as important to Reagan Republicans as what it said:  taxes are bad. You see, the Reaganites had this idea of trickle-down economics.  If you left money in the hands of the wealthy, those people would use it to create wealth and that wealth would trickle down to everyone else.  We can argue about whether that part of the theory worked but we do know that Republican economics has another very peculiar feature.

Republicans don't like taxes but they do like government spending.  One of the truly funny things about conservatives since Reagan is the way they rant against taxes and government spending but, in practice, spend and spend and spend ever more as they cut taxes for themselves and their friends. Then they criticise their opponents for spending too much and vote massive appropriations for their own pet causes.

That's perfectly in line with what many of the folks circulating the quote believe or have supported in the recent past. They loved the years of massive government spending since they benefited greatly from it in one way or another. They liked the lower taxes  and the outrageous overspending but now that the bill for their good time is coming due,  out come the old Reaganite quotes  that oppose the very sort of financial prudence that fiscal conservatives should support.

Tax and spend liberals in the American political slang become tax and spend New Democrats in the Canadian version but the truth be told,  there was no one who could overspend like a Conservative in Newfoundland and Labrador after 2003.  And if the rest of the truth be told, between 2007 and 2011, you couldn't find a New Democrat or a Liberal who thought otherwise either. All three parties shared exactly the same ideas.

Regardless of whether or not Churchill actually said the quote about the bucket, the key thing is that it reflects, in every dimension, what the people who circulate it believe.  They don't care about the purpose behind the tax.  Cut taxes and the economy grows, they say. It's classic Reaganism but what people miss in the whole scheme is that, as with the popular Republican mantra, what actually grows is the public debt. Those same people expect all government services to continue unchanged.

If they are a local business owner, you can bet they are arguing for some kind of heavy government subsidy for their pet project.  They will tell you about the important role the government plays in supporting their sustainable industry.  Of course, an industry dependent on government spending isn't sustainable, by definition, but that sort of logic is inconvenient at best for these people.

There's another irony in all this.  Winston Churchill believed in free trade.  The local business community in Newfoundland does not.  They like the sort of closed system that existed in Newfoundlander before 1949.  They used to use heavy taxes on imports to protect inefficient industries.  These days Conservatives and New Democrats alike oppose free trade agreements like CETA, arguing we must have all sorts of rules and protections for local industry.  That sort of protectionism has weakened local businesses just as they did before 1949.

The truth about Winston Churchill, by the way, is that he was part of an administration that implemented broad social reforms between 1906 and 1914.  They introduced a modest levy for example, shared among workers, employers, and government, that helped fund health care. In the same way, the Commission government introduced a small fee for health care in the 1930s that helped fund the cottage hospitals. Newfoundland and Saskatchewan had such a system far ahead of anyone else in Canada at the time.  Had government reintroduced that kind of levy now - on an equitable basis - they might have garnered more support than they have for the one they brought in unconnected as it was to any tangible purpose..

The British government of which Churchill was a part funded its social reforms through a drastic change to the tax scheme that introduced and then later increased taxes on the wealthy in Britain. You have to remember, incidentally, that this was at a time when most countries didn't have an income tax.

The idea that Winston Churchill opposed taxes is actually pretty silly.  Once you know the context, it is laughable that people quote Churchill because they don't like tax increases. Nobody does. But Churchill knew that taxes, properly applied,  can be used for a greater social purpose. We'd be better off following Winston's example than Ronald's.

That doesn't mean that the tax increases in the current budget are good.  Far from it. The government does need to raise income because the problem it faces - that all of us face - is really that bad.  The problem with the increases is that they are not fair, as implemented.

The income tax increases are essential to deal with a problem as large as the one the government faces. They should likely go further especially for those on the higher end of the income scale.  The levy is a regressive idea, regressively implemented.  As former Premier Roger Grimes said on Friday,  the government could have raised the same amount fairly by a modest adjustment to income tax.

The tax on books is just a silly, petty idea. In a province with the highest illiteracy rate in the country,  any steps to hinder access to reading is just bad.  One could almost imagine this budget was crafted by someone who wanted to infuriate as many people as possible in the province all at once.

No matter what the budget looked like, the absolutely bizarre way the government introduced it sent such a predictable shock wave through province that it will have an exaggerated negative impact on the economy and support for the government.   That will make it much harder to get support for the necessary steps the government should take in the future to reduce the size of government.

We can likely expect other fake quotes to appear.  it might be curious if they are as revealing as the Churchill quote some people have been using.


Revised and Updated:  There's an update to this post based on some new information about a Churchill comment from 1904.  The new information added below adds a bit of colour to the original post (above).

The story remains the same.  Churchill never spoke against taxes.  Ever.  He was in favour of free trade and in 1904 he delivered a speech in the House of Commons against those who thought you could make a man prosperous by putting up barriers against trade.  That means there's an especially delicious irony in this if the folks passing around the fake Churchill quote oppose free trade agreements like CETA in addition to supporting the sort of American Republican cut taxes but massively overspend nonsense that got us up on the financial rocks in the first place.  Churchill is not the guy to quote if you are the bastard love child of Maudie Barlow and Donald Trump, in other words. 

Here's what Churchill said in the House of Common about 113 years ago:
"It is the theory of the Protectionist that imports are an evil. He thinks that if you shut out the foreign imported manufactured goods you will make these goods yourselves, in addition to the goods which you make now, including those goods which we make to exchange for the foreign goods that come in. If a man can believe that he can believe anything. [Laughter.] We Free-traders say it is not true. To think you can make a man richer by putting on a tax is like a man thinking that he can stand in a bucket and lift himself up by the handle. [Laughter and cheers.]"
07 January 2017