By Deborah Liebart. First appeared on DisputatioMagistrorum. DOI: 10.5281/zenodo.3714557
Licensed under CC BY-NC-SA
- “Feeling” is a social reality
Today, I would like to start a new cycle on the tax question, debate brought to light in France by the movement of yellow vests and more generally in Europe through various movements in recent years. When I started to study the tax issue, my questioning was to understand what motivated the anti-tax revolts, in the 17th and 18th centuries : from the Fronde, to the “Bonnets rouges”, from 1738-1739 to the crisis of subsistence of 1740 and the “guerre des farines”, during which the rumor denounced a new “famine pact”, to use the expression of Prévost de Beaumont. My line of work, questioning the french national and regional archives, was to know what motivated these crowd movements : political campaigns launching rumors and publishing libels against the monarchy, popular reaction to the royal and local edicts creating or increasing taxes, denunciation of the daily suspicion of tax officials, financially interested in penalties and levying sums higher than those due, criticism of the removal of family and business secrets, home visits, tax permanence which legally should only be temporary… At a time when the dominant economic discourse is mobilizing the writings of Adam Smith to legitimize his decision-making and his actions, I wanted to talk to you again about the” invisible hand” and another economist, Jean-Joseph Louis Graslin, an opponent of physiocratic theories, and more widely of the expanding modern liberal theories… Graslin, unknown to the public, like many heterodox authors relegated by the discipline as minor or marginal authors.
What creates the most resentment against tax in modern times is the obligation to pay without seeing its use or usefulness, of being forced to give without receiving anything, whereas a tax which one can daily observe the use and the usefulness generates little resentment and seems less conducive to triggering a violent popular reaction.
In reality, this feeling seems still very real, according to the results of a study by the OFCE in 2019 which shows that the injustice felt is proportional to the distance from the big urban centers. This disappearance of local public services has been at the heart of the protest of the yellow vests movement denouncing a “two-tier France”, opposing equipped urban centers and abandoned rural areas in which, the last small local store, when it still exists, fulfilled the missions of the post office and the tax center. The denunciation of the tax injustice corresponds to the feeling of abandonment, whether real or experienced, by the citizens of municipalities with less than 500 inhabitants, a feeling highlighted by the CEVIPOF studies, evaluating criteria of the local conditions of life between 2012 and 2017 : employment, local taxation, disappearance of equipment, shops and local public services, associational network density. With this new cycle through history, but yet so current, we are going to go back to the sources, at a time when the concepts that still govern contemporary operating modes and economic models have been defined. So what is tax ?
- A brief history of tax and conceptualization of its definition
If originally in France, the sovereign is obliged to live on income from his domain only, quickly the needs of the Crown require the creation of new taxes: the expenses of the Hundred Years War straining the finances of the kingdom , the tax pressure constantly grows. In 1614, Miron, president of the Tiers-Etat, described a people burdened with taxation, both royal and local, and declared: “may your finances be well administered and justly distributed, the poor people relieved, […], and all reduced to the point it was in 1576”. The medieval model giving way to absolutism, from 1614 to 1789, the Etats généraux, representing the three orders of society are no longer convened and the progressive centralization of finance changes the nature of the political link between people and sovereign, but also between sovereign and regional powers. The Constituent Assembly declares, (as a principle, Articles 13 and 14 of the Déclaration des Droits de l’Homme et du Citoyen of 1789), that a common contribution is essential for the maintenance of the public force and for administrative expenses, that its distribution must be egalitarian between all the citizens constituting the society, because of their own faculties, and that the citizens have the right to note by themselves or by their representatives, the necessity of the public contribution, to consent it freely, to monitor its use and to determine the quota, the base, the collect and the duration.
For Baudeau, the tax is a portion of the natural productions allocated annually to the sovereign and his salaried agents or representatives. However, as pointed out by Graslin, his opponent, in l’Essai analytique sur la richesse et sur l’impôt, où l’on réfute la nouvelle doctrine économique qui a fourni à la Société royale d’agriculture de Limoges les principes d’un programme qu’elle a publié sur l’effet des impôts indirects, (EARI), “as each citizen would find it advantageous for him to receive without giving, no one would hasten to passively enter the exchange, being always assured of being actively included. So there needs to be a law that regulates what everyone has to give; and this law, is tax”. In other words, for a society to be able to function properly, everyone must participate within the limits of their means, in the maintenance of the common. Here we find exactly the debate on tax evasion and fraud that France and more generally Europe has known for many years. It is no longer just a question of what type of tax to put in place, but a conceptual definition of what tax is. In the same way, it is a question today of rethinking the whole tax system, from the concept, with the aim of rebuilding cohesion and inclusion. If central redistributive systems exists and subsists for a little less than a century, precariousness is developing everywhere in Europe, leaving a whole part of the population out of the social game, and on the edge of extreme poverty.
- Development of the tax model and the “invisible hand”
The philosophers of Enlighment, in search of models, depict the first societies presented as idyllic, harmonious and united and where the levy of the tribute equitably distributed on the agricultural productions was done without fear and without constraint. They pay tribute to the efforts of Trade, arts and agriculture, working daily for the multiplication of wealth, prosperity, abundance, the power of state power and the happiness of peoples. Lost paradise… replaced by a society in which the multiplication of taxes on land and agricultural production, in which the transition from the real to the personal leads men to inactivity and the nation to begging according to the physiocrats…
In quest of this fiscal and social golden age, the dominant discourse in the 1760s and 1770s, largely influenced by physiocratic theories, proposed to liberalize cultures, (tobacco, salt or cotton…), to maintain reserve stores in all the main cities in the provinces, to abolish inter-provincial and international entry and exit duties on goods, to introduce low duties on foreign goods essential for French consumption, to remove monopolies, real, personal and mixed taxes, to authorize freedom of profession, to settle the debts of the State, and to implement the Dixme Royale de Vauban… A whole series of measures intended to liberalize the economy, setting up the famous Gournaysian “laissez faire et laissez passer”, this conception of an economy independent of all politics, of an economy operating on the same principles as physical science , with its indisputable truths, in other words, economic laws as natural laws, in the same way as the law of Newtonian gravitation, the economic game and its own laws having to be naturally balanced, without any political intervention. We see here, with the disciples of Quesnay, a conception of a resolutely liberal economy, the economy no longer being a tool for the political, nor for the good of the people but on the contrary ordering its own laws to the political sphere.
The idea is widely taken up and disseminated by the economic press today, in particular through the famous “invisible hand” of Adam Smith supposed to represent the market mechanisms, while of the three occurrences of the expression made by the author, the concept of market has to be discussed, as the expression is absent from the pages dedicated specifically to the market and the exchange, and so much the extrapolation favors the idea of a historical continuity of the discipline, while the history of political economy is precisely a history made up of disparate pieces, dissonant voices and contrary theories, along the times and authors. Yet Smith openly criticizes in the Wealth of Nations (WN), the mercantile system and the agricultural system of the physiocrats, Quesnay’s theory, considering agriculture as the only source of wealth, when the Smithian analysis of wealth and the value is much broader, which, concerning taxation, is not a simple rhetorical dispute… Reading the WN, the reader discovers a Smith less liberal than he is claimed today by the proponents of neo-liberalism, a Smith far from unrestrained liberalism, describing a state having duties toward its citizens : the security and the administration of justice, but also the creation and maintenance of certain public works and institutions beneficial to the community, and whose low profitability cannot be entrusted to the private sector… No doubt then, it should not be forgotten that for Smith, sentimentalist, largely influenced by Hutcheson, the “invisible hand” rather refers to the passions of the Man and his capacity to interact by sympathy towards others, much more than the theory that the sum total of special interests ends up in the general interest. In this sense, it would undoubtedly be profitable for the discipline to reread its own classics and to restore order in the artificial and simplistic classifications of different economic theories and different authors, a practical classification certainly to delimit a field of study and discussion between peers, but in fact passing only badly the test of rereading of the mythical works of the discipline…
- Wealth, value, freedom, security, taxation
With the impulse of philosophers, physiocratic and classical economists, the tax becomes part of a transaction, of a tacit contract concluded between the taxpayer and the public authorities. With the impulse of philosophers, physiocratic and classical economists, the tax becomes part of a transaction, of a tacit contract concluded between the taxpayer and the public authorities. Since Montesquieu, this idea of tax as being the portion that each citizen gives of his property to have security, makes its way in societies where attacks are numerous, the history of public lighting reminds us of it, when Sartine, in the 1760s, organize the set up of a vast network of oil lamps, intended to ensure night safety for Parisians.
Any subject having to contribute to the expenses of the State because of the advantages which it derives from it, the rich should pay a higher tax than the poor peasant having only his labor power to ensure his life and that of his family, however, in reality, the tax burden opress more and more the little ones, deteriorating the quality of their daily life, the relative share assigned to tax in the total budget increasing over time, either by increase of existing taxes either by creation of new ones.
Concomitantly, with the emergence of political democracy, the financial sphere and the link sketched by Montesquieu between taxation and political freedom are developing in economic and philosophical writings comparing the proportionality of the amount of tax and the degree of freedom of subjects , greater freedom requiring a higher tax. Again, one could wonder about the universality of freedom, in a society in which personal and real servitude still exist, and where the peasant serf, excluded from property, cultivates the domains of landowners, sometimes absenteeists…
Asking the central question of the tax requires thinking about the notions of wealth and value in order to know on which sector or which property to base the tax without drying up the source. If for the mercantilists only gold and silver are wealth, for the physiocrats the only source of wealth is in the soil, all the rest being a secondary product resulting from agriculture.
The contribution of Forbonnais and Graslin on this issue is important. Graslin associates property and labour value, explaining that the one who works the land and values it, should be the true owner, thus recognizing labour value as a source of wealth, by the added value it gives to cultivated land and / or to the raw material it transforms. He considers tax in a political way, beyond the definition of the base or the type of tax. Graslin explains the social necessity of tax by focusing on a conceptual definition. The tax becomes a public service payed by the taxpayer in proportion to his means but also to his needs, protection being an object of incommunicable need, like the health or the tranquility of the soul“. In the Dixme, Vauban had already mentioned the idea that the tax was a pact between the sovereign and the taxpayer, the monarch having the obligation to give equal protection to all his subjects, because “it is obviously certain […] that all the subjects of a State need its protection, without which they could not exist there “.”The prince being unable to give this protection if his subjects do not provide it with the means, whence it follows that a State cannot support itself if the subjects do not support it, but this support includes all the needs of the State to which all subjects are obliged to contribute”. Tax, because it is the levy that ensures the defense of citizens, territory and property, becomes security, and security, a commodity that is obtained through this exchange. Thus, the “wealthy”, who has more property to guarantee, in case of war or invasion, should and has interest in fairly contributing to the tax because by taking part to the collective effort, he allows the State to protect his person and his property in case of violent popular revolt. The taxpayer able to obtain this protection has to pay, because “who benefits from state protection does not benefit as a man, but as a man in society, it is even the aim of the association“. The value of this protection is variable depending on the interior and exterior circumstances. Graslin’s theory of value being a theory of need and scarcity, with protection acquiring scarcity value when the state is shaken, the raising of additional taxes becomes necessary. Graslin’s “security pact” goes further, the system being based on a variable tax rate allowing to reduce the differences : the rich taxpayer compensates for the expenses of the most modest, in proportion to his fortune, because three one hundred thousand pounds of tax for the taxpayer with an income of four hundred thousand is always a less considerable sum than thirty pounds for the taxpayer who, acquiring by his work only eighty or one hundred, struggles to pay his daily expenses. “Protection” is discussed in Smithian literature, the author noting that “the subjects of a State must contribute to the support of the government, each one as much as possible in proportion to his faculties, that is to say in proportion to the income which he enjoys under state protection”.
Comparing the management costs of the national entity to a joint ownership for the maintenance of which each member must contribute to the costs in proportion to the interest possessed, any difference constitutes for the author, an inequality in the distribution of the tax. Basing the tax on a single sector or on a single category of population is necessarily unequal. If the proportionality induced by this first maxim is the first general rule adopted by Smith, the minimization of tax costs is the second. The purpose of the tax must be to protect the property of the taxpayer from anything that could interfere with the possession of his property and must also guarantee the taxpayer from the excesses of the tax system itself, excesses which are often the consequence of a bad general organization. The economist points to four abuses commonly caused by a bad tax :
- The collection of tax and the excessive number of tax officials whose wages absorb the greater part of the tax revenue, and whose excess in the levy, establish another additional tax on the people.
- The destruction of professional sectors and economic sectors, which, if preserved, would provide occupation and livelihood.
- Confiscations, fines and other penalties incurred by fraudsters can ruin and destroy the profit of professional sectors, therefore depriving the State of resources, an inconsiderately imposed tax, offering a powerful lure to fraud.
- Repeated visits by tax collectors, which could expose the people to many unnecessary punishments, harassment and oppression, not unrelated to the percentage withdrawn by the tax officers on their own seizures.
Smith argues in favor of a staggered justice because the law violates the first principles of justice, first by creating the temptation and then by punishing those who succumb to it. The harshness of the penalties incurred by tax evaders is widely criticized by economists who deplore the loss of economic agents and condemned the harshness of the procedures due to insolvency ; tax agents having the possibility of engaging in seizure of furniture or livestock, and as a last resort, the doors and the wood beams to, thus removing all possibility for taxpayers to rebound. It is the ruin of the poor laborers and small people, made insolvent, burdened by an arbitrary fiscal distribution. Smith having carried out an important work of compilation of previous economic theories, his four points include almost all the questions raised by theorists but also by practitioners of the economy of the Ancien Régime. It is undoubtedly this summary work carried out by the Scottish economist, who makes him, one of the founding fathers of economic discipline, for the Liberals, while Smith never hid from borrowing and quoting anteriors theories. Among other authors, there are quotes and thought from Quesnay, Locke, Petty, Hume, Turgot and Cantillon…
- Direct tax or indirect tax ?
On the observation, no presentation can better account for the main difficulties posed by global taxation of the eighteenth century, in direct, and indirect taxation.
If the observation is shared, yesterday and today, the diversity of responses to be made, remains : so, direct tax or indirect tax ?
Alletz, (while justifying the creation of a salt tax during the Punic Wars, the creation of la taille to finance the ransom of King Jean, or the levy organized by Saint Louis to provide expenses for the Crusades), chose the way of an indirect tax on the duties of entry on the goods, with an idea of proportionality and equitable distribution, because the “true pastors of the peoples, as Homer calls them, shear their sheep, but without skinning them”.
This reasoning is widely shared and indirect taxation developed along the 18th century, just as today when VAT is the first tax in France in terms of profitability, and this, despite all the injustices that this raises in terms of proportionality of the tax : 20% tax on a food product does not represent the same share in the budget of a modest family and in the budget of a family with high income, and this even taking into account the reduced rates on the staple products, which Graslin already proposed to exempt from all taxes as it represented the essential basic necessities for the poorest. How to make the tax regains it greatness, in societies in which fraud and tax optimization of the wealthiest have become common ?
What to do, and how to do in order to transform the tax system which is now experienced as a deprivation or an abuse of the State, by the most modest and middle classes, unable to afford the advice of tax specialists allowing them to escape tax legally ? The suppression of the ISF played a determining role in the crisis of the yellow vests because behind the transformation of the ISF into IFI, it is the idea of a certain fiscal justice which was manhandled, It was not a question of tax profitability per se.
How can a government combat this feeling of fiscal injustice grafted onto the social injustice felt by the poorest, and destabilizing social relations and leading today as yesterday to more or less violent popular revolts ? After having briefly described the modern historical roots that led to the contemporary taxes, the next post will focus on the possibles responses to be given today to the latent European social crisis, a social crisis which could in the long term worsen territorial and social fractures, both at national and European scales.
 Rapine, F., Recueil très exact et curieux de tout ce qui s’est fait et passé… en l’Assemblée générale des Estats tenus à Paris en l’année 1614, Paris, 1651, p.462.
 Baudeau N., Lettres d’un citoyen à un magistrat sur les vingtièmes et les autres impôts, Lettre seconde, Où l’on prouve que les propriétaires des fonds de terre payent toujours la totalité des impôts quelconques, qui sont levés dans l’État, Amsterdam, Arkstée et Merkus, 1768, p.90-91.
 Graslin J.J.L., Correspondance entre M. Graslin,… et M. l’abbé Baudeau,… sur un des principes fondamentaux de la doctrine des soi-disants philosophes économistes, Londres, 1777.
 Graslin J.J.L, op.cit, ch.III, « De la taxe personnelle ou capitale », p.291.
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 Montesquieu, L’esprit des Lois, livre XIII, ch.I.
 Bressan, T. , « Un épisode important et méconnu du procès du régime seigneurial en France : l’édit d’août 1779 contre les survivances serviles », Histoire, économie et société, 15-4, Paris, 1996, pp.571-599.
 Graslin, J.J.L, op.cit., p.289.
 Vauban, S.L.P, Dixme Royale, Maximes fondamentales de ce système, 1707, rééd. Librairie de la bibliothèque nationale, Paris, 1897, p.24-25.
 Graslin, J.J.L, op.cit., ch.III, « De la taxe personnelle ou capitale », p.290.
 Graslin, J.J.L, op.cit., ch.III, « De la taxe personnelle ou capitale », p.292-293.
 Smith A., La Richesse des nations, tome II, ch.II, « Des sources du revenu général de la société ou du revenu de l’État, section 2, « Des impôts », 1776, rééd. GF Flammarion, Paris, 1991, p.456.
 Vauban, S.L.P, op.cit., 1707, p.30.
 Auber, J., Mémoire concernant les tailles et les moyens de faire cesser les abus qui se commettent dans son imposition, Paris, J. Collombat, 1721, p.1.
 Alletz, P.A., La Philosophie de La Motte Le Vayer… précepteur de Monsieur, frère unique du roi Louis XIV, Paris, Vve Duchesne, 1783, p17-18.