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Seen and Unseen

Frédéric Bastiat

Tags Taxes and SpendingPhilosophy and Methodology

07/13/2000Tibor R. Machan

A few days ago I received an e-mail telling me that some producer at ABC-TV News was hoping to find some evidence of what taxation does to people.

The post went on: "Specifically, the producer wants to find someone who is trying to cope with the high medical costs of helping an ill family member. She wants to make the point that if this person didn't have to pay so much money in taxes, she would be better able to help her ill family member. She is in effect being forced to choose between paying the greedy government and helping her own family member survive."

This brought to my mind a principle identified by the 19th Century French classical liberal, Frederick Bastiat, best known for his book The Law. He identified a very interesting and important principle, in his essay, "That Which is Seen, and that Which is Not Seen," that states: "In the department of economy, an act, a habit, an institution, a law, gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause--it is seen. The others unfold in succession--they are not seen: it is well for us, if they are foreseen. Between a good and a bad economist this constitutes the whole difference -- the one takes account of the visible effect; the other takes account both of the effects which are seen, and also of those which it is necessary to foresee."

This idea of Bastiat is of special importance to the medium of television where the news is often covered by reference to pictures. The stories are made interesting to viewers by incorporating a good deal that can be photographed or video taped. Without this possibility, however, a story tends not to get coverage. And that is devastating when it comes to telling the story of what taxation does to people.

The results of taxation--as of robbery, burglary and other forms of confiscation of property--are seen mostly in what is done with the resources taken, who gets it and so on. The resulting absence of resources, produced by these acts--including by taxation--are much more difficult to depict.

This is because what people might have done with the funds they could have had without the confiscation that occurred is only imaginable, not possible to render pictorially. People also respond differently to having had their property confiscated: some pick up and work harder than they would have otherwise and make up the loss, some give up and work less, some continue as before. The work they do, however, would have very likely added to what they had before it was confiscated.

Professor Arthur Laffer, the USC economists, identified another principle that's relevant here, captured in a graph called "The Laffer Curve." It is bell shaped and proposes that up to the top of the bell people will try to work hard to restore their losses from loss of resources, including, especially, from taxation. Thereafter they will start becoming dejected and discouraged and their productivity will slow down.

So examples of what people might have done had they not be taxed are nearly impossible to show. One can only imagine that up to a point most will try to recover but if taxation is too high, they will give up the struggle.

But it isn't difficult to do this imagining, with a little bit of intelligence, and it could even be shown on television if someone is committed to doing so. For example, it isn't a problem to figure that a person who has been taxed might have purchased a new tire but because of losing the resources for the tire, that will not be an available option. The consequences then could be a blow out and perhaps even a tragedy on the road.

The same can be imagined easily enough with education, medical care, vacation time and other values that would have to be foregone. Sure, extra work could replace some of the funds to pay for these, but then this extra work may never be forthcoming--the taxpayers may be too exhausted, too overworked already to replace the funds.

In contrast, the looters will be able to show something for their loot, as they spend it to purchase various goods and services. In the case of taxation, this is what happens when people in government triumphantly point to public works! Sadly, most producers believe they need visuals in order to tell their stories, to the adverse consequences of taxation are rarely if ever the subject of TV news coverage.



Tibor R. Machan

Tibor R. Machan (1939 - 2016) was a Hoover research fellow, Professor Emeritus, Department of Philosophy, Auburn University, Alabama, and held the R. C. Hoiles Endowed Chair in Business Ethics and Free Enterprise at the Argyros School of Business & Economics, Chapman University.