Human customs can defeat state tax policy, making high taxes self-defeating

Evidence

The argument concerning the behavioral limits of state intervention, which Schmölders used repeatedly as a political advisor and public intellectual, had already been implied in his early research on the prohibition or taxation of alcoholic beverages. Here, Schmölders had tried to show that people’s customs and habits were stronger than the state’s means of influence. Generalizing this position in his financial psychology, Schmölders argued that politicians could not and should not impose taxes that ignored or contradicted the basic principles of “human nature.” High taxes would necessarily result in tax evasion, effectively reduce state revenues, and even undermine the citizens’ loyalty to state institutions. In an imperfect world, the state and its officials had to consider the “human, all too human” factors, Schmölders argued in Nietzschean terms. He declared that it was a mistake to view citizens only as tax payers whose behavior could easily be changed by setting financial incentives. — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 334

Categorization

• XREF: Connects to themes in ‘On Sacrifice’ about state power hitting the limits of social reality, and to behavioral-economics literature anticipating Kahneman-style critiques of homo economicus. — connects to: Mafia tax collection reduced evasion better than the state’s own apparatus — Diego Gambetta, The Sicilian Mafia The Business of…, 415

Broader Connections

• Mafia tax collection reduced evasion better than the state’s own apparatus #exemplifies (0.82) — Diego Gambetta, The Sicilian Mafia The Business of…, 415