October 20, 2011

Perpetual Crisis in the Tax State

  • Richard Wagner

    Distinguished Senior Fellow, F. A. Hayek Program for Advanced Study in Philosophy, Politics and Economics
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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 and the dissolution of the Austro-Hungarian Empire. Goldschied asserted that this debt represented a crisis for a state that relies on taxation, and claimed that resolution required transforming the state into an entity that operated with its own capital. In contrast, 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 essay explains that Goldscheid's analysis was more on the mark than Schumpeter's, and does so by exploring the logic of interaction between carriers of distinct forms of property-based action: one form is private property; the other form is common or collective property. Perpetual crisis is a product of this interaction, elimination of which is conceivable only in the presence of a single principle for governing human action and interaction within both polity and economy.