One of the days, I’ll get around to reading the copy of Sandel’s ‘What Money Can’t Buy; The Moral Limits of Markets’. It’s even made the exquisitely painful cut of being one of only two dozen books brought on our three-month sojourn on the south coast of England. When I do read Sandel, I hope to acquire a greater appreciation for exactly how market thinking has permeated and corrupted so many aspects of human life.
One surprising place a weirdly attenuated and manically zealous form of market thinking has popped up is in the Minnesota tax office. (via BoingBoing) They’re running a quite unhinged vendetta against Lynette Reini-Grandell and Venus DeMars, a married couple who make music, art, poetry and teach English. The taxman running their audit says Reini-Grandell and DeMars’ creative activities don’t make enough money, and haven’t for years, thus proving the artists are mere hobbyists who shouldn’t get a tax break. Either they should turn a consistent profit by now, or have given up already and gone back to being good little consumers.
“The tone of all these proceedings have been completely anti-art. There has been an emphasis on creating a product, advertising it for sale, and then selling it. …
Writers do not write a few lines and then advertise they have a poem for sale, making sure that the poem sells at a break-even point of what it cost monetarily to produce it. But this is what the Minnesota Department of Revenue insists I should be doing. It sickens me to have to participate in this because I know it is deeply wrong.”
Sometimes, these apparent miscarriages of justice loom large in the headlines and then kind of fall apart when you look at the detail. Not this one. The further you get into the taxman’s narrow view of capitalism – large record company: good. Independent entrepreneur: bad – the more apparent it is that he believes so implicitly in the winner-takes-all model of capitalism that it’s not enough for musicians in the long tail to bump along the bottom indefinitely. No, they must be shamed for failure and fined a six figure amount in back taxes.
It all seems to come down to intent. Does running your own independent record label and ‘failing’ to sign to a major mean you don’t want to make money? At the consistent but modest level of success Venus de Mars has, the majors aren’t interested and the musicians keep more of their profits if they run their own show. Does allowing your music to be played royalty-free on public radio mean you just don’t want success enough? (Tell that to the Ariana Huffington business model of ‘blog for me for free – you’ll get exposure’.) It’s a Kafka-esque nightmare where the artists must try to prove they are innocent of just not wanting it enough.
In fairness, there is a question to ask about how much the state should, through tax relief, subsidise individuals’ artistic endeavours. And one person’s day-job supported creative career is another person’s tax-funded vanity project. But the amount of resources the Minnesota tax office is putting into going after two very modest earners seems odd, and speculation about what is fueling the animus behind it ranges from simple hatred of trans-gender people to a broader programme to discredit state cultural grant-making.
But even if the state looks at creativity purely from a market standpoint, isn’t it worth foregoing a small amount of tax income to keep the talent pool bubbling up winners? After all, that’s what we do with tax breaks for R&D or the UK’s much misused patent box. Even if you don’t believe the state should subsidise, or at least not penalise, art for art’s sake, doesn’t it make financial sense to very cheaply back a lot of creative horses in order to share the takings of the ultimate winner?
It would be foolish, in the age of austerity, to cultivate any idealism about the subjective choices states make on who to go after for tax and who to nod through to the winner’s circle. Overt choices are being made, and they are profoundly political. Just yesterday in the UK it was confirmed that the taxman used government surveillance powers (“We’ll only use it for terrorism or serious crime. Promise!”) to investigate the whistleblower of a secret deal to give Goldman Sachs a £20 million tax break. And today, Margaret Hodge, chair of the parliamentary committee that grilled Google on tax avoidance and shamed Starbucks into paying at least some corporation tax in the UK, had this to say about the latest HMRC sweetheart deals:
“If we got £4.5bn in, how much did we not get? That is what taxpayers will want to know”.
As the Greeks know all too well, once people believe that tax is paid only by the weak and foolish, the state loses an essential part of its credibility and ability to function. Why shouldn’t everyone claim for that unused home office or fiddle their VAT when the builders extend the side return? On a larger scale, why should UK taxpayers subsidise with development aid a state whose ruling class refuse to pay their way?
Just like the Minnesota taxman, the UK HMRC’s version of market capitalism shows a strong bias in favour of the biggest firms. ‘Too big to pay their tax bill’, you might say of the large companies who pay less than they owe and rely on the government to act strenuously to protect their secrecy. Even worse, the market distortions created by governments’ failures to tax and collect on corporate profits mean only the biggest, most multinational firms can win.
When, say, a national champion like Cadburys is taken over by a vast multinational like Kraft, many of Cadbury’s profits generated in the UK are shifted abroad to jurisdictions where almost no tax is paid on them. The result, which I’d not heard about till recently, is a significant loss of tax revenue to the UK. This isn’t just a happy accident for the company doing the buy out. It can be central to the deal. The fact that the acquiring multinational will pay a lower effective rate of corporate tax than any national competitor gives it an unfair advantage over domestic firms at the same time as it strips the government of tax revenue.
The market distortion facilitated by the government’s supine attitude to tax collection is bad for consumers (why compete so hard on product and service when much profit comes simply from a lower tax rate?), bad for competitors, bad for tax-payers and bad for users of public services. It’s not just Kraft, of course. Same for the Boots takeover by Walgreen. Same for the Walkers Crisps takeover by Pepsico.
I wish the unholy zeal of the Minnesota taxman could be grafted onto the UK government’s pursuit of corporate tax revenues. Or even for the government to start caring as much about taxing economic activity in the UK perhaps a quarter as much as it cares about clawing back housing benefit from the disabled. David Cameron waffles about the G8’s need to ‘do something’ about multinational profit-shifting while he refuses to cooperate with EU measures that might actually get somewhere. Unconvincing, to say the least.
Like our tax system, this government seems determined to punish the losers over and over again, while rewarding the winners with ever more prizes. Come 2015, we’ll see who the real loser is.