The true cost of the Welfare State

Published in Expansión

Do you happen to know, dear reader, which proportion of your hard-earned income is eaten up by the State’s Leviathan if you add all the direct and indirect taxes that you pay throughout the year?

Welfare States follow two essential rules: the first is to conceal the true level of taxation it obtains from plundering citizen-taxpayers, the second is to incessantly pat itself in the back for the benefits it purportedly warrants to the majority of voters (while it appallingly leaves open to the elements the truly underprivileged – those it is under a serious obligation to support – because they lack electoral interest). Using several tricks, the oligarchic parasite (“organism which lives at the expense of another, feeding from it and impoverishing it without causing its death”) ensures that the true level of coercive extraction of citizens’ private property goes unnoticed.

The first trick is that it does not collect one single individual tax, but rather makes use of several different types of taxes – if possible, payable to different administrative institutions (State, Regional, Local) at different times of the year, in order to ensure better camouflage. Today citizens pay taxes three times: for making money (direct taxes, such as that on personal income), for spending money (indirect taxes, such as VAT, vehicle registration taxes, or special taxes on fuel), and for keeping whatever remains (real estate tax, vehicle tax, wealth tax, among others).

A second trick is the application of withholding taxes. The always devious politicians soon understood the truth in the old adage “out of sight, out of mind”, and therefore grasped that it pains taxpayers less to receive wages net of taxes rather than to receive their income in full and later pay taxes after enjoying the fruits of their labor for several months. This ploy has proven to be so successful that many taxpayers misread the eventual tiny tax refunds forgetting the huge amounts previously taken from them by the tax authorities.

The third trick is key for the Welfare State, and entails terming a huge tax as “Social Security”, which sounds much better, doesn’t it? Through this trickery (pay-as-you go State-sponsored pension systems) taxpayers are made to believe that they are somehow saving for future retirement when, in fact, they are only financing current pension payments. Taxpayers are also persuaded that they acquire a right, that is, that the State has an obligation to hold sufficient funds to finance their future pensions payable upon retirement (there goes Security!), while in fact taxpayers, including those who have contributed throughout their entire working life to the System, have no legal right whatsoever to be paid a single cent by the State upon retirement, but rather a vague promise (that I wouldn’t rate AAA) from a politician who is in passing. I say again, not one red cent, as future retirees will learn the hard way when the purchasing power of their pensions gradually diminish to the extent of only affording peanuts.

The fourth trick is called “progressive taxation”, the sacrosanct principle of levying increasing tax rates as a function of income. This ploy is especially perverse in that it is masqueraded as a question of justice by stating the truism that those who own more, or earn more, should pay more, which is actually the exact definition of proportionality. Indeed, a proportional tax rate implies that anyone earning ten times more than someone else should pay ten times more tax, which seems to be fair enough (the proportion is actually higher if we include the fair exemption of the lowest incomes). In reality, progressive taxation is just the weapon cunningly used by Welfare State politicians to brutally increase the tax rate paid by the average taxpayer, who can be counted upon to give in to the always-compelling feeling of envy. Taxpayers will more easily tolerate a hike in tax rates if they believe that their richer neighbor pays even more: “Now, don’t be angry, the rich will pay even more”. “Oh, I feel better now: tax me, please”.

The final trick is to keep taxpayers deliberately in the dark about the true destiny of tax revenues. Did you know that just paying the payroll of the almost three million public sector employees (who, by the way, earn an average 50% more than their private sector peers) eats up all Income Tax revenues and most part of VAT revenues?

Back to the beginning: how much does the so-called Welfare State really cost? Well, first we add up personal income tax revenues, VAT and excise taxes, local levies (real estate, motor vehicle tax, etc.) and contributions to Social Security, then subtract contributions to the public Treasury made by pensioners, unemployed and public servants (the latter also subject to the same abusive taxation) to obtain their net cost, and divide the resulting amount by the total sum of salaries and other sources of workers in the private sector (who barely manage to keep this racket going): then we can determine what the average tax rate paid by each worker in the private sector is that is needed to finance the Welfare State. Hold on to your seats: on the average, every year, each worker pays nearly 65% of his/her salary in taxes. In other words: out of every 100 euros you make every year through your efforts, dear reader, the State takes 65 and you are allowed to retain no more than 35. Out of these 65 euros eaten by the voracious State, only 27 go to pensions, health and education (the alibi) whereas the other 38 go to keep the “organization” in place (and the nomenklatura in power). Imagine for a moment that there were just one income tax with no withholding, and that every June 30th each citizen were required to pay 65% of his previous year’s earnings: how long do you think it would take for taxpayers to revolt?

The Welfare State has become a totemic euphemism driving us unknowingly towards a despotic system where an overwhelming political and administrative bureaucracy snatches a growing fraction of citizens’ private property under the pretext of providing “free” public services, while gradually reducing their freedom towards the brink of covert serfdom. As surreptitious heir (given its bloodless nature) of the totalitarian regimes of the 20th century, the Welfare State embodies a despot (“a sovereign who rules without being subject to any law whatsoever (…) and abuses his power or authority”), not a person, but rather a parasitic oligarchy whose survival requires an ever-increasing level of tax collection.

Historically, Parliaments were created in order to protect the rights to citizen-taxpayers and to defend them, among others, from abusive and arbitrary taxation by the Sovereign. That was the case in Spain’s Cortes of León in 1,188 A.D. (the first parliamentary system in History) or in the English Parliament in the 13th century. At present, Parliaments have become one more appendage of the new Sovereign (the above-mentioned parasitic oligarchy), a Sovereign that constantly and merrily passes legislation, creating new and eccentric taxes or increasing previous ones, scorning taxpayers and reducing them to helplessness. In fact, the 21st century Spanish taxpayer is less empowered to decide about the level of taxation than were the subjects of 12th century monarchs of almost 900 years ago. And then they say Welfare States are a symbol of the progress of civilization.

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