October, 2015

The Tax State as Source of Perpetual Crisis

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The term “tax state” originated in a controversy between Rudolf Goldscheid and Joseph Schumpeter over the treatment of Austria’s public debt in the aftermath of World War I. Goldscheid asserted that this debt represented a crisis for a state that relied on taxation. Schumpeter argued that the crisis was temporary and could be resolved by a one-time capital levy to reduce the debt, after which the state could resume its tax-based mode of operation. This chapter explains that Goldscheid’s analysis was more on the mark than Schumpeter’s, because perpetual crisis is a systemic quality of the admixture of private and collective property. Mitigation of this systemic crisis requires modification of political activity in relation to property rights, as illustrated by extending the principle that hotels are forms of city state.