Moderator’s remarks

Since we are all living in modern nation states, the question of paying taxes is relevant for all of us. One of the fundamental roles of state is its re-distributive function. In order to redistribute the wealth, people have to pay taxes which generate the revenue of state. The problem arises when we start to discuss how much every citizen will pay. Basically, there are three types of tax systems. First, progressive system of taxes means that the more you earn, the more you contribute on taxes. Second, proportional tax system means that the state imposes the same rate of taxation regardless of income. Third, regressive tax system is the opposite of progressive system. That means the more you earn the less you contribute to running of the state.

The question of paying taxes touches upon the value of fairness. Fairness itself is a value. It is not measurable object. Therefore it is more abstract concept of our personal values. I am very glad that both speakers in the debate discuss the question of fairness in their papers. You can evaluate their arguments in discussion forum below the text.

The second problem which is situated in both papers is the issue of state spending. Marine, affirmative speaker, claims that the state spends its money in useful areas of public. On the other hand, Michele, opposition speaker, claims that state spending is inefficient and corrupt. Well again, it is up to you to evaluate the arguments.

My last point covers concluding remarks of both papers. Marine’s paper is longer than Michele’s one (which violates Guidelines for Speakers, by the way) and is offering many examples. It is laudable to provide such a big variety of examples, but examples themselves are not always persuasive enough. Michele’s paper is brief and clear. The briefness of his text, however, does not influence overall quality, because he covers all relevant points. Therefore, I hope that every reader will find his/her interesting points in the debate. And do not forget to comment!

Affirmative speaker of the debate: Marine Betrancourt (AEGEE-Lyon)

Opposition speaker of the debate: Michele Turati (AEGEE-Brescia)

Ivan Bielik, Speaker of IPWG

Defend the motion

Marine Betrancourt, AEGEE-Lyon, is student of Political Science and Law at University Lyon III, France.

Paying taxes is, fundamentally, political. How do you want to rule a state without money? The first idea of “state” came from raising money to kings to run the war and defend one’s territory. Now, the idea of “state” has evolved, whether you, only, see the “state” has merely a regalian one, only assuming the basics of society or more, as the “welfare state”, protecting the citizens all along their life. However, you see the “state”, all citizens are part of it, working and living, somehow, thanks to it and in this logic, it seems legit to pay taxes, if somehow, one will see a benefit for society in it. Moreover, the process of taxation has been evolving with democratization and government budget has to be voted by the Parliament. Everybody is part of society and is getting something from it, and rich and poor and middle-class should pay taxes according to their wealth. Therefore, richer people should pay more taxes than poor people.

People may not like paying taxes, people may see it as a loss of money they earned, people may say it’s misused, it would be wasted, but what about when one is earning so much money, they don’t need?

Last May, François Hollande (Socialist Party) was elected in France, one of his promise was taxing 75% the upper 1 million € of people earning more than 1 million €/ year. The law passed the Parliament and the Senate, but was refused by the Constitutional Council, last December, on the constitutional basis of equality in front of taxation. It raised a lot of concerns. Gérard Depardieu on upmost mediatic coup decided to flee to Belgium, Montenegro -and in the end, went for- Russia not to pay taxes. He argued he started from nothing and made his wealth on his own. On his own? Can you really assume you made your wealth on your own and that you shouldn’t give back to society?

Basically, you can hardly make money on your own. If you’ve been successful, you didn’t get there on your own. You will, always, have needed exchanges with people and have been part of society for it. Therefore, being part of society also means using what it has to offer. To continue on the example of Depardieu – but he’s not the only one sneaking out of France because of taxes -, if he succeeded it was, also, because French cinema is, funded -thanks to the French cultural exception – on subventions from the government. Subventions funded by taxations. He didn’t make his wealth on his own. Neither did all the “rich people”. They needed people to buy the goods they were selling.

Fine. He didn’t made his wealth on his own, but now, it’s his money. Well, Thomas Malthus, British economist from the 18th century, was saying “It’s not in the power of the rich to provide the poor with something to do and something to eat, and therefore, the poor have nothing to ask them” – “Il n’est pas au pouvoir des riches de fournir aux pauvres de l’occupation et du pain, et en conséquence les pauvres par la nature même des choses n’ont rien à leur demander.” Right. What about the gap between the rich and the poor? Everyone should stay with what they have? What they earned? What they inherited? Indeed, it’s such a successful choice! Look at the US, from 1932 to 1980, people earning more than 2 million dollars a year were taxed the upper 2 million dollars up to 80% – and this, without hurting the American dynamism, thanks to the liberal Reagan’s turn in the 1980′s, slums in the middle of L.A, while a few kilometres further, some are living the “grande vie” in billions dollars villas.

Not going in an extreme example and in time of crisis, letting rich people pay more taxes seems pretty legit. Everyone has to pay its part, according to what one earns in order for the society to run. Education system, health system, social security system, security system, administrative system, they all run because of taxes and redistribution. And taking the example of France, usually, everyone is pretty happy to go to the doctor and only pay one effective € – 26€, but 25€ reimbursed, to have free emergencies, to be treated at the hospital and barely pay anything, to have free education until graduation and merely pay 400€/ year at university, to get a minimal revenue on a time period when you’re unemployed or sick and ride a car on concrete and safe roads. And if not, one should think about the extra-cost of a private security system, a private health system, a private education system.

Another typical example may be the one of Bernard Arnault, French magnate and businessman in the luxury industry (LVMH), declared by Forbes as one of the fifteen richest men in the world. If he had the intelligence to work strategically to end up at the head of the international luxury industry, he, also, built his success on the long-time image of France as “pays du luxe et du savoir-vivre” and thanks to the quality “main-d’oeuvre” (labour) of its workers -healthy and educated thanks to the public health and education system funded by the government on taxations. But here is not my point. For the last ten years, Bernard Arnault had financial strategists and legal counsellors helping him creating foundations in Belgium where he put all his money to avoid paying taxes on succession as his heirs would have had to in France. He deserves his money, but as one of the fifteen richest men in the world avoiding sharing his wealth by refusing redistribution is disgusting.

No one – just, as Bernard Arnault – may like paying taxes, but on an ethic and moral point of view, it is, just, fair, just, as it is, also, economically more efficient. For Warren Buffet, American magnate, avoiding paying taxes and living out of annuities is going against the capitalist spirit of entrepreneurship and somehow, innovation.

He – Warren Buffet – is one the leader of the US call for rich to be taxed more, movement who got world wide as German, French and others European wealthiest got into it. In Germany, if the wealthiest of all – with a capital wealth over €500,000 – were taxed 5% over that ceiling for the two first years, and thereafter at 1% or more, it could raise €100bn.

Therefore, in a time of crisis, while more and more countries are struggling with their national debt and leading austerity policies, cutting back funding on public services, I believe, that rich people should pay more taxes. It is not about getting one’s money stolen by the state, it is about giving back to society for the success they had thanks to it. It is about sustainability of our future generations, so they can live, just, as good – or better – as this generation had. It is about society in the long-run and seeing further than one’s own little golden world. A healthy democratic state needs taxation, and therefore, rich people should pay more taxes – except if we want to end up in an oligarchy.

Against the motion

Michele Turati, AEGEE-Brescia, studied Finance at University of Brescia, currently working in Wroclaw.

First of all, rich people already pay more taxes, which we all believe it’s fair. Direct taxation is proportional to the income and indirect taxation is related to consumption. The more you consume, the more you pay (fair). The less you consume, the less you pay. If you consume you have to pay (fair). Simple J

The point here is to be fair, we don’t want a new hero to redistribute our money because this modern Robin Hood can only be the central State and we all know how inefficient and corrupted each State is. The risk is to tax more wealthy people and waste this collection on corruption and bureaucracy while only a minimal part will be redistributed in means of services to the community. More revenue for the government is not the answer. They have more than they need already. The solution is to stop spending; distribution of wealth is eaten by inefficient spending. That’s point 1.

Point 2: richer people do spend their money and generate growth. The whole economy is based on production of goods which is purchased by those who has money to buy. If we reduce (also by taxation) the wealth of men, they have less purchasing power and therefore buy less stuff. When we buy less stuff, producers receive less money, make fewer investments and generate less growth in a negative cycle.

Do not forget one key aspect: what motivation do people have to succeed if you are going to increase the percentage they pay into the system the more they succeed? One of the ten principles of economics is that people respond to incentives. If you take away people’s incentive to get rich by taxing them more for earning more money, the incentive to the population is to not get rich. Thus, we lower our entire society’s motivation to higher standards of living when we tax the rich more.

Nevertheless, do not forget one simple point: Robin Hood was a thief!