Doha Debates: Is it time we rethink taxes?

[0:07] taxes. They fund roads, healthcare, education and wars. Paying them has long been a fundamental [0:14] part of the social contract. But are taxes effective in redistributing income and building [0:21] a fairer society? I'm Malika Bilal and this is the Doha Debates Podcast. I'm not that heartless. [0:31] So I wouldn't mind if the government asked me to contribute a few extra bucks to help the poor. [0:35] We are forced to pay them. It's not a voluntary action. When we have inequality getting out of [0:43] control, this certainly brings problems for society in which, you know, the poor hate the rich, [0:49] the rich hate the poor. How is he making a billion dollars a day? Like, how did he get there? [0:57] Today's debate, is it time to rethink taxes? I'd like to welcome our guests. Martin Krauss is a [1:09] former professor of economics at the Faculty of Law in the University of Buenos Aires. [1:15] Sanjit Dami is a professor of economics at the University of Leicester. Pedro Sulemano is a [1:22] journalist at DL News covering the cryptocurrency space. And Gustavo Flores Macias is the dean of [1:29] the School of Public Policy at the University of Maryland. Thank you all for being here. It's really [1:34] nice to have you and I'm excited about this debate. So we are sitting in Argentina right now in beautiful [1:40] Buenos Aires. But people get pretty passionate about this topic wherever they are around the [1:45] world. So let's start big. Is it time to rethink taxes? I'll start with you, Martin. Kick us off. [1:55] It always will be, at least until we get rid of them. [1:59] Hmm. Okay. Until we get rid of them. So the ball has started rolling. Who wants to pick it up? [2:05] Pedro, is it time to rethink taxation? Yeah, I think fundamentally for sure. The idea of that taxes [2:14] are just something that we have to pay blindly, no matter how institutions operate, no matter what [2:21] sort of public services we're getting in return, seems a little outdated. I understand the argument [2:27] for it and I'm not completely against abolishing it. But I do think that we need to rethink them and [2:33] rethink the technologies around them, rethink why we're paying them, what for, who's receiving them, [2:39] in what amount. Yeah, it's a long overdue conversation. [2:45] I'm glad we're having it. Gustavo. [2:48] I do think that taxation is important for at least three reasons. The first one has to do with paying [2:54] for government services, paying for things like infrastructure, for public safety, which most [2:59] people can agree are essential functions of the state. And maybe other aspects like education [3:05] or healthcare that not everyone agrees should be something that the state is involved in. But [3:11] the second reason has to do with, it's a tool for redistribution, and I know this is also controversial. [3:18] And the third one is about the link between taxpayers and government that taxation generates that gives [3:28] people a stake in the system. And it also prompts a sense of government accountability or the need for [3:36] government accountabilities. Martín, you gave a short answer that kicked this off. Would you like to [3:42] elaborate now that you've heard two different positions? Yes, I would like to go, let's say, to [3:49] the end of the argument. And that is, I would raise two issues here. One is, why is it good to use coercion [3:59] against people? If we do that, as individuals, we'll be criminals and going to jail. Now, the government does [4:09] that and it is legal. Why? It is different from what we can do. That on the one side. On the other side, [4:17] is that taxes, let's say, they get more difficult to develop the process of capital accumulation, which [4:30] has, which is the one that has lifted so many people out of poverty in the last 200 or 250 years. [4:38] So, my question would be, why are we willing to reduce that process of wealth creation and improvement [4:48] for all, particularly those who are in the bottom? Hmm. Sanjit, we heard Martín use the word coercion there. And so, from a [4:57] behavioral economic point of view, do you see that as coercion? Why do people actually pay their taxes? [5:07] Yes. So, fundamentally, taxes capture a human desire to redistribute money from the better-offs to the ones who are not [5:19] as good of. Before governments came along, societies had various ways of redistributing income. The church [5:30] performed that role for a very long time. Going back to hunter-gatherer societies, where there were no taxes [5:37] at all, there was a great amount of redistribution happening. In these societies, they critically relied [5:45] for their survival on hunting meat at regular intervals. Now, it could be that a few hunters were [5:54] successful in finding prey, but others were not. The ones whose families had not, the hunters who did not [6:04] find the prey, their families would starve. So, they developed powerful norms of sharing. So, sharing resources [6:13] from the better-offs to the worse-offs is a very fundamental human desire. Taxation is a mere modern [6:22] manifestation of it. How high the taxes should be, what kind of taxes we should have, that's a slightly [6:31] moot point relative to this deep underlying human preference. And insofar as taxes can perform a role in [6:38] satisfying this underlying human preference, we might still see them for a long time yet. [6:44] I think a problem there is the scale when it comes to it. Because hunter-gatherer societies were [6:53] much smaller than, I don't know, Argentina has what, 54, 55 million. I'm from Chile, we have 20 million. [7:01] And so, obviously, when you have a small community of hunter-gatherer, then it makes sense to sort of pool [7:06] resources. Sharing becomes something a lot more tangible. Whereas now, and I think this, I understand [7:15] the argument for people who say, well, if I'm living in the North and there's somebody in Patagonia, [7:21] why am I going to send the fruit of my labor halfway across the country when I can't even seem to find [7:29] how my taxes are getting used here? So, I think that's something that we need to also take into [7:33] account, which is the scale of societies, how big they've become, when you're also putting in this [7:39] conversation about taxation, because it's not as simple as just a church in a small community [7:47] somewhere, just redistributing to a few families or a large village or something like that. When [7:52] you're talking about millions of people and you have people in Buenos Aires that have to send to [7:56] Mendoza, that have to send to Patagonia, to Salta. Perhaps one way to think about it, I think scale is [8:02] important, certainly. But, you know, governments at the end of the day are meant to solve collective [8:08] action problems. And these problems, the larger the size of the group, the harder it is to coordinate. [8:15] So, one would argue that with smaller groups, maybe you don't need a central authority to coordinate, [8:20] but the bigger the group, then this coordinator body becomes more important. I think we've made [8:26] considerable progress over time, but I think it's also important to consider the role of government [8:32] in this prosperity. And markets require certain rules and certain order to function [8:39] correctly. And I think, you know, take financial markets. If there isn't oversight in terms of [8:45] proper disclosure, then these markets can break down or there can be, you know, misrepresentation [8:55] and so on. This, of course, happens, but with certain rules and enforcement, it becomes harder. [8:59] So, these essential roles that governments serve for markets to function and that play a role in [9:07] prosperity, I think taxation becomes important in supporting these efforts. [9:13] Martin. [9:15] I think we have two different levels to discuss here. One is the efficiency level or the economic argument [9:24] about the need of government and taxes, which usually relies on the concept of public goods, [9:32] the supply of public goods. But then there is a moral issue as well, which is what justifies the use [9:40] of coercion against other people. Why do I use the word coercion? Well, that's the typical definition of [9:47] political science regarding what a state is. It is the one with the monopoly on the use of force. [9:55] Any one of us who use force will be going to jail probably. Now, the government does it and it is [10:03] legal. So, my concern and question is, when did that happen, that social contract? And was it agreed [10:13] in a unanimous way? What about the people who disagree with that? So, you force them into paying [10:20] taxes that they don't want to pay. Do you disagree that there is a social contract? [10:24] I don't think that you can prove that there was any social contract. And there is another question. [10:31] If there was, at some point in history, a social contract, why should that social contract [10:39] restrain us now when we were not part of that? Okay. So, this idea of coercion has come up again, [10:45] and I love it. I want to explore that a little bit more because there's a clear point of view [10:51] that this is coercion. Pedro, is that how you see it? I agree. I wouldn't say necessarily the use of [10:57] violence, but the threat of violence is definitely a key factor because there's a lot of people, and I do [11:03] think that that's a fundamental wrong of the state, or something that I don't necessarily, I don't [11:11] think that it should have, at least blindly. And yeah, I do think that having that coercion or coercive [11:22] action is definitely a problem, but I understand that of it is its existence, because otherwise, [11:29] what do you do? Because when you talk about moral obligation, there's also a moral obligation to pay [11:35] taxes, whether you disagree or you agree with it. I know that if I pay $100 worth of tax, I know that [11:43] maybe one will go to a public school or one will go to a hospital, just a small trickle. That's a moral [11:51] obligation I have with the rest of society. We might disagree with the origins of the social contract and [11:56] where it became and the illegitimacy of the state, but there is a moral obligation that I have or that [12:01] I believe that I have with the people who are lesser off that I should be helping out or participating in [12:08] society. Whether that should be necessarily through the government, through state, through one big [12:16] centralized authority, I think that you can definitely decentralize things. I think you can [12:21] federate them. You can create some sort of autonomous organizations, whether that's regional, [12:26] whether that's at the municipal level. There's a bunch of different ways that you can play around [12:29] with it. He brought up a moral obligation. Is that what you see based on the research? Is that why we do [12:35] it? I agree. You see, try to imagine a world where there were no taxes. How would you fund the social [12:44] services? Now, in the West, for instance, the social welfare state really took off after the Second World [12:50] War, in the UK particularly. So the NHS came along, free healthcare at the point of delivery. It was [12:58] free education to children. It was associated with massive increases in living standards across the [13:05] Western world, which were unprecedented. And they went hand in hand with developments in how governments [13:13] would raise enough tax revenues in order to fund these growing services. Now, obviously, there are parties and [13:19] differences in terms of how big the state should be. In the US, there are well-known differences [13:23] between Democrats and Republicans about the size of the government. But I don't think anybody is really [13:29] arguing that we should get rid of taxes altogether. I mean, that's an argument that one doesn't often [13:34] come across because one takes as given that government programs of various sorts are necessary for a just and [13:44] fair society that we all desire to live in. After all, none of us would want to live in a primitive [13:49] society where these programs were suddenly absent, where people wouldn't get access to healthcare, [13:56] education, basic facilities. How are these going to be financed if not for taxation? So I suppose the [14:02] debate really is what kind of taxation? At what level should people be taxed? State or the federal level, [14:11] for instance? What should be the mix of taxes, income taxes or consumption taxes? Should we be taxing [14:19] wealth? How much of the tax evasion that we actually do observe in the real world is something that we [14:29] can control with actual policy? So I think those are some of the relevant debates to think about. [14:34] Marzina, I have to go to you with that. Do you agree or disagree? Should we reframe this debate? [14:41] Well, as I said, and I would like to go somewhat deeper on that. There are two issues here. One is the [14:51] moral one. The other is the economic one. Let me end with the moral one. I think that we, [14:59] and I agree that we have a kind of a moral duty to concern for those who are in a bad situation and [15:08] condition. Now, let me bring this into a kind of a story. Let's suppose that I die, and I go to [15:20] heaven, and at the door of heaven is St. Peter is there. He certainly is going to ask me this. [15:28] Okay, he's going to say, in order to get into here, you please answer to me, what did you do [15:35] for the others, for the pools, for those who are in need? And then I start getting nervous, [15:41] and I think, what can I say here? And then it comes to my mind, well, wait a second. I pay taxes, [15:48] and with the taxes, there were a lot of social programs that helped the pool, build houses, etc. [15:55] St. Peter is going to say that those resources were taken from you cohesively. You did not pay [16:04] voluntarily, and whenever you could, let's say, evade in some way, you did. So, I'm sorry to say, [16:13] but that argument will not open the door of heaven to you. Okay, so please wait there a second. Then [16:21] comes on the same position, comes the government official in charge of the social plans and social [16:28] policies. He is asked the same question, and he also said, oh, well, I did a lot of things for the [16:34] poor. I run all these social programs that help the poor. And St. Peter is going to say, oh, wait a [16:40] second. That was made with someone else's money who was taken coercibly from their pockets, and I'm [16:47] asking you what you did for the poor with your own money, with your time, and with your own effort. So, [16:53] you are not getting into as well. Go there, there is someone else waiting. So, what I mean with this, [17:00] that none of us get a moral justification about what is done with taxes, because we are forced to [17:06] pay them. It's not a voluntary action, which I certainly regard as superior in a moral way, [17:16] that we voluntarily take our money and help the poor, and we go and help the poor, not the government, us. [17:21] Can I just come in on the fact, on the coercion issue? Now, we do have an element of choice, [17:32] and that element of choice comes via voting for different political parties who have different [17:39] platforms on how high the taxes ought to be. The other thing is that despite a lot of social programs [17:49] being undertaken through taxes, there's a great proportion of social programs that are also taken [17:57] up through charitable contributions. Now, these same individuals who are paying supposedly high taxes, [18:03] then are paying extra money in charitable contributions to fund more private social [18:08] services. So, I think we observe a mix of it, and we're not as helpless as some of the comments would [18:15] suggest. We still have an element of choice, a bit of maneuver room, if you will. [18:21] I also think that there's a couple of things that, for example, in the US, and you know this, [18:29] you tell the tax man how much money you made last year, you do your own taxes. So, you also have a [18:34] choice there to tell them whether how much you made, whether, and you can sort of, to a degree, [18:40] decide on how much you want to get taxed. And so, there is also an element of choice there. I've [18:46] worked for many years as a freelancer, and in Chile, I also had the choice, okay, I can decide to avoid [18:53] taxes, evade taxes, and there's also a choice that I make there. And then there's a second order, which [18:58] is if we leave this all to voluntary, to voluntarism, and we get to decide how much we provide or how much [19:05] we give, that's going to separate the gap or segregate the gap even further, if you ask me. [19:12] Like, I come from Chile, one of the most unequal countries in the world. We have a Gini coefficient. [19:18] Last time I checked like 0.44 or 0.43, something like that. And if there was no, and you can see [19:26] the absence of the state there, and you can see that gap just growing and growing and growing. [19:30] And so, you have to think to yourself, all right, if you eliminate the state completely, [19:35] what's going to happen to that whole bunch of people? [19:38] I want to pick up on the inequality, and Gustavo, I want to bring that to you because [19:42] earlier we heard this beautiful moral quandary question that I also kind of want an answer from [19:49] you on how you see what Martine brought up, but we're living in a time when the richest 1% [19:57] hold nearly half of the world's personal wealth. And I can't even say that sentence without a little [20:01] bit of disdain, but I wonder, is that a problem? [20:04] Yeah. I think the moral question is very important. But let me take a step back and say that public [20:11] policy is always necessarily an exercise in choosing the least bad option, right? So, [20:18] rarely do we get to pick ideal scenarios and see them through. And we can maybe think of an ideal world in [20:25] which we would have government services that are effective and equal opportunities for people to [20:36] succeed in life. And we have then no taxation also, perhaps, and people can decide whether they help [20:44] others or not. And ideally they would. But the reality, I think, is complex. And if we take out taxation, [20:52] which would bring the coercive aspect necessarily, then I think that world wouldn't exist. I think [20:59] the system would break down. And I want to point to then more the externalities or sort of maybe the [21:06] more concrete material implications that this would bring. And I think we would have to picture a world [21:13] in which maybe these government services are absent because no one is [21:18] there to provide them and individually wouldn't make sense to bear the cost of, you know, building [21:24] these roads or big airports or whatnot. But also a world in which redistribution might just not [21:32] happen at all. And one can say, well, you know, one should be free to decide whether one redistributes [21:38] your own wealth or not, if you have it. But there are externalities. And I think this was implied in [21:44] the conversation and in the question. When we have inequality getting out of control, this certainly [21:53] brings problems for society in which, you know, the poor hate the rich, the rich hate the poor. And there [21:59] are parts of the world in which we see this even with some role of government, right? There are societies [22:05] in which different sectors of society don't recognize each other as legitimate parts of that [22:11] one society, which is certainly problematic to achieve national goals. And it leads to a world of, [22:20] you know, it could be insecurity, it could be affecting business, it could affect prosperity. So [22:26] it is true that ideally taxation would imply coercion. But I think the alternative could be a world of [22:34] chaos and extreme inequality that I think we also wouldn't want to see. [22:40] Martin, you painted a picture of this world of the afterlife. We just heard Gustavo paint a picture [22:47] of what some would call a dystopian reality if we didn't have taxation. So I'm wondering from you, [22:53] what does a world without taxation that's coercive look like? [22:59] Gustavo Pérez- Let me tell you on this side that what is now part of the social policies, [23:06] it's something brand new in the history of humankind, must have 150 or 200 years. So we have had [23:16] many societies, but that was not the case. And all contributions were mainly voluntary. I can tell you [23:23] this. It is usually supposed that the welfare state filled a vacuum, you know, that wasn't there. It was not the case. [23:34] Let me tell you briefly, in the story of Argentina, we started having an inflow of [23:44] immigrants from Europe at the end of the 19th century and the beginning of the 20th century. [23:49] There was no welfare state and this was where all people, pool people coming in attracted by the [23:56] opportunities that the country was given at the time. And when they arrived, what they did, [24:02] if there were no social problems and no help for the pool, they organized themselves in societies, [24:10] charity societies of societies for mutual help, where they cover all the needs of the members [24:17] and all that we all call welfare was part of that voluntary organization. So when the welfare state [24:28] then took over those organizations, at the time in Buenos Aires, there were more than 1200 friendly [24:37] societies that were organized, most of them through the origins. There were Spanish, there were Italian, there were German societies, there were all kinds of that. [24:50] If you go around this city, you will find the German hospital, the British hospital, [24:56] the French hospital, the Spanish hospital. And where did all this come from? [25:01] Well, there were the communities that actually built the hospitals at the time because there was no [25:08] public or state hospitals. I mean, Elon Musk made a billion dollars yesterday. Fine. [25:15] But I'm concerned, are the poor getting opportunities to go up or not? I don't mind about the others. [25:22] And if they make that lot of money, fine. It's going to come back to us either through [25:27] consumption or investment in one way or the other. So very briefly, because I like that that's a [25:34] little grenade on this table that you're not concerned with the differences in income. But before we get there, [25:40] how then do you solve for what you are concerned about, which is, are the people at the bottom rung [25:46] doing well enough? Well, first of all, there are three ways that you can help the poor, or let's say, [25:55] let's put it this way, markets help the poor. First of all, is the best from an economic perspective and [26:05] from a moral perspective, which is jobs, having opportunities for jobs. That's the best way that [26:12] people will make themselves out of poverty, not by helping them, giving them money, but actually allowing [26:21] them to earn their own money, which is good not only for their living, but also for their self-esteem, [26:28] let's say. So one is that. The other is the one that I mentioned recently, that is the mutual cooperation, [26:35] people organizing themselves to supply themselves with all kinds of services and needs. And the third [26:43] is philanthropy, all of us giving and helping the poor. So the data does not show that inequality [26:54] is correlated with growth rates. So it's not necessarily the case that if you're more or less [26:59] unequaled, you have high or low growth rates. So in terms of countries' growth rates, it doesn't seem [27:04] to make a difference. But it seems to make a big difference to the social fabric of the country. [27:09] So high inequality is associated with low levels of trust, with high levels of imprisonment, [27:18] with greater incidence of teen pregnancies, and so on. So, I mean, and social strife. People develop [27:28] envy. You know, people who are not as well off might be enemies of people who are the, you know, [27:33] the have-nots and the haves. So it can lead to all kinds of social tensions. And the higher [27:41] stress levels and lower levels of mental health in more unequal societies as well. [27:47] Now, if we claim that, well, inequality is something that I can live with, then I have to be willing to [27:56] factor in the social costs of some of the things that I've just mentioned. [28:00] Heather, can you live with those social costs? [28:04] I mean, so most of you made some pretty compelling points. And I think it's important to address one [28:14] of the big ones, which is the, I think, inequality and the differentials between the people that have [28:20] and the have-nots is probably one of the most insidious problems that we have. Because I also [28:27] don't have a problem with Elon Musk making a billion dollars. I guess I do have a problem with him making [28:31] it. I thought you did. Earlier I called it a grenade. I meant it was being lobbed this way. [28:36] Yeah, no, I do think that's pretty insane that he can make a billion dollars a day. Because I think [28:43] we also have to ask, how is he making a billion dollars a day? Like, how did he get there? You [28:48] know, like it doesn't make much sense for somebody because he can obviously, I mean, he walks through [28:56] the hallways of the White House. He goes and meets with parliamentarians around the world. Like, [29:00] so, I mean, how did you make that billion dollars a day? But then there's another problem. What's the [29:05] gap between him making a billion dollars a day and the workers on the ground floor that are building [29:11] his electric cars, that are building his robots, that are building his satellites? And like, if I look [29:18] at it and I'm making minimum wage and I see the person above me making a billion dollars a day, [29:23] and I think to myself, well, that's just wrong. Obviously, if like the bottom half of my, like, [29:29] if the bottom bit of my Maslow hierarchy of needs is covered, obviously, I don't care that much about [29:34] the differentials because I don't have to worry about like having those sort of basic things to cover. [29:40] But if I'm living in poverty or squalor or seeing my boss make magnitudes more when a lot of that is [29:49] coming from what I'm adding in, then I'm going to say, okay, there's something wrong here. There's [29:54] something that needs to change. And then you can also, and then to kind of throw a curveball, you can [29:59] kind of question the role of the state there because the state enables that, you know? And so you think [30:03] to yourself, all right, where are lawmakers? Where is regulation closing that gap? [30:08] So say you're at the bottom, you are sweeping the floors of that factory. [30:13] Then does it placate you if you know that the corporation or the person who leads that corporation [30:20] is paying some taxes and those taxes are going to help you, the roads and the bridges? [30:25] And then does it make you even angrier when you know they're not paying the amount of taxes you [30:30] believe they should be paying? [30:31] I think, yeah, I think it would definitely make me angry. I think, or maybe furious is more the word. [30:37] Like there's, when you drive around Chile or Argentina, the roads are pretty much a mess, [30:45] you know, especially like we're here in Capital Federal. So things actually like, depending on [30:51] where you go, there's some sort of basis for things to work and things are okay. But as soon as you get [30:56] outside, like roads get pretty dismal. And so you think to yourself, all right, if the basis for the [31:02] state is to build roads is always has, has been a trope for many, many years, where are, why is [31:10] there holes everywhere? You know? And so, but, but back to your, to your question, I do think that [31:17] obviously it would infuriate me to know that the person that makes a billion dollars a day is making [31:21] a big loop around. [31:22] So the rich have honed finally the game of tax avoidance. So if you look at the top 0.01% of the [31:34] rich in the West, they are able to hide about 25 to 30% of their income at the minimum. So tax avoidance [31:46] is, is a very serious problem. [31:47] Is it a serious problem first, Martina? I'll get that from you. Do you see it as a serious problem? [31:52] You mean the, the, uh, uh, income inequality? [31:55] Uh, the tax avoidance or evasion or the ability to find a loophole that means you aren't giving to [32:03] the social good. [32:04] Well, but it, it seems to me that in this conversation, we are assuming, uh, that politicians are angels [32:12] and they are, they are striving to achieve the, the, the common good, the public good. So first, [32:18] I would like to know what is that common good. And second, those are real people. Uh, and you know [32:26] how they act, they are not angels. So starting from the assumption that they will be, uh, uh, [32:34] trying to achieve a common good is, is kind of a, a fantastic, I would say. That's not how it, [32:43] how it happens. They follow the same principle as we all do. They pursue their own interest. And that, [32:50] that doesn't necessarily, uh, is a coincidence with us, with ours. Uh, so, uh, let's talk about the, [32:59] the real world and what politicians do with, uh, with our money. Is that a better use [33:04] that they do with the money than, that the one that I would, uh, use that money for? Uh, I, I don't [33:12] think so. I think I would, uh, trust the people to help each other much better than expecting someone [33:19] else in a position like that and with power like that, uh, to, uh, to, to help the pool. [33:26] I've always thought an interesting idea because I actually, to your point, uh, Martin, politicians, [33:33] politicians who are the ones that decide where you allocate resources around society. [33:37] Why don't we send politicians that they have their compulsory for them to only go to public [33:43] hospitals, for them to send their children only to public schools, for them to only use public [33:49] transport so they can see it and they can see it firsthand. They can witness and feel the problems [33:55] that the public system has. And then I'm sure we're going to start to see some considerable [34:00] changes have, but if they all live in their nice private estates or wherever they live, making vast [34:07] amounts of money, sending their kids to private schools and all that sort of stuff, of course, [34:10] nothing's going to get fixed, especially if we're just paying them their salaries and that [34:15] nice lavish lifestyle. So Gustavo, I'll give this to you. Do you think that we are giving too much [34:20] credit to these politicians? Are we thinking of them as angelic beings who are doing [34:26] the good of the world? I think most people would have a hard time thinking of politicians as angelic [34:32] beings and for good reason. But the issue of evasion is very important and it's something that [34:40] is often thought of as tax morale or sort of what shapes people's willingness to pay taxes. [34:47] And there are two very important factors for this. One is a sense of fairness that people around me are [34:54] also paying their fair share. And the other is the results, you know, the outcome of those taxes, [35:01] what I get back in return in government services. And if either of those two is failing or missing, [35:09] then people will have a harder time thinking that they should be contributing into the system. [35:13] Everyone here at this table has spent significant parts of your careers invested in this topic that [35:20] we're discussing and it shows. I'm wondering what alternatives then you've come up with or you've seen [35:28] to the current order that we should be looking at. Pedro, maybe I'll start with you because I know that you [35:34] work in emerging technologies, digital currencies. Do you see a route there that we should be looking [35:41] at when we're talking about alternatives? I mean, I think that the topic of money itself doesn't get [35:48] talked about enough in these sort of conversations. Just because like as a footnote or not, it's not really [35:55] a footnote, but there's an embedded tax in the money system, which is through inflation. And so, and that [36:03] hits the poor immeasurably more than it hits the wealthy. So, there's that big issue. And I think [36:09] that the emergence of something like Bitcoin or like stable coins, but mostly Bitcoin is a fundamental [36:15] change or an alteration in how the system can fund itself, how the system can operate, how the system [36:22] sort of keeps itself afloat. I think that Bitcoin is one of the most, if not the most important [36:32] technologies that exists. There's arguments that say that no, because the internet is more important [36:37] because Bitcoin is like a subgenre of the internet. But I guess since it's applied to money, I do think [36:41] it deserves something else. But I do think that you're seeing an emergence of an industry and of [36:49] communities around the world that surround themselves on principles like openness, like transparency, [36:55] like fairness, like permissionless, that are around things like Bitcoin and like cryptocurrencies and [37:04] rightfully so. Like the state, you can think that it's essential, but it's proven to the world that [37:13] it's not really doing its job properly. It's very opaque. It's supportive mostly of corporations or [37:20] or multinationals or high net worth individuals. And so the emergence of things like Bitcoin are an [37:27] obvious alternative and a solution. It serves as a check against excessive spending. It serves as a [37:35] check against inflation. It defunds the state to a degree and it forces the state to provide much [37:42] better infrastructure. If you want me to actually start, continue to use your money. We live in a [37:48] hyper-connected world. We need to be able to operate where I can send money around the world [37:52] instantly for no fees. And you get the full amount that gets there instantly. [37:58] Marcin, do you see it as a viable solution when we're talking about alternatives? [38:03] Marcin Martínez- Definitely. I'm quite optimistic in that. Of course, [38:08] I cannot foresee what is going to happen, but that is definitely a challenge to the, let's say, [38:17] the monopoly of government. And I hope it will keep on growing and developing ways that we cannot even [38:27] imagine now. Now, briefly changing the subject, I will also point out that we have been talking about [38:37] the taxes here. But from a, let's say, logical point of view, we should not forget that we should [38:45] talk first about expenditures, government expenditures. That's the first discussion, [38:51] what government does, what government should do. And once we have a definition of that, [38:57] and then we should talk about taxes. How do we fund this? So it seems to me that this issue is [39:05] closely linked to what the government does or should do. And then they go to taxes. [39:14] Marcin Martínez- So what should taxes fund? [39:16] Marcin Martínez- You know, I think different societies have different needs, [39:20] and it's maybe not that different if we think about it in terms of a family or a household, [39:24] right? Well, different households have different needs, depending on size, depending on, [39:28] you know, backgrounds and so on. But it is true that even, you know, countries that tax [39:34] at high levels with respect to their GDP don't necessarily show great results when it comes to [39:41] spending and others that maybe don't tax as much, but do a lot more with that money. So [39:48] there isn't necessarily, you know, the fact that a country might tax quite a bit, it doesn't necessarily [39:54] mean that it'll show results and that it'll put that government to good use, that money to good use. [39:58] Marcin Martínez- Why is that? Do we know? [40:00] Marcin Martínez- Well, there are so many factors. So, you know, corruption is a big one, [40:04] at least in some parts of the world, where you really have a lot of that money. You have the leaky [40:08] bucket, right? That from the taxpayer to the actual service or good that you're trying to finance, [40:16] there are so many hands that took a piece of it that are not necessarily, you know, part of the vision [40:23] as to how that money should be spent. So that's one. Sometimes it has to do with obstacles in, [40:32] you know, political obstacles to how that money would be spent and lack of agreement as to what [40:37] these goals should be. Anyway, there are several factors, but let me give you just one example. [40:42] You know, Brazil for Latin America is the one country in the region that actually taxes at [40:47] the levels that one would expect given the size of its economy. So the levels of taxation as a share [40:54] of GDP are the highest in the region and are at the level, sort of the worldwide expectation. But when [41:03] one looks at outcomes for education in Brazil, public education, they're very, very poor. And this is [41:15] something that, you know, that accountability with citizens is important and just really to push [41:20] governments to deliver on these expenditures. I think ex ante, you know, it's difficult to say, [41:27] well, because we're taxing this much, we need to spend this much. But there certainly has to be [41:32] a connection because if you're not spending the money that you're collecting, that's a problem. [41:38] Do you appreciate that difficulty? Do you agree with what you've heard? [41:43] Yes, I think that one way around in a sense of problems like that would be a deeper decentralization [41:54] of government, moving everything down, down from the national level to the state level, [42:00] down from the state level to the local government. That will help because people may be familiar with [42:07] some problems in the neighborhood or in the district they live, but it's very difficult that they pay [42:14] attention to the large problems at the national level or the fiscal deficit or revenues. So it seems to me [42:24] that we should, it would be beneficial, let's say, if we bring down the different levels of government, [42:35] as well as taxation down to the local level. Sanjit, I want to bring this back to how we got to this [42:44] part of the conversation, which is thinking about alternatives. So the Western tradition in economics [42:49] stays very much within a system where governments have to perform a certain number of roles, [42:56] which are considered extremely important. And we've spoken a lot about them. And to my mind, [43:02] it's, I mean, short of voluntary action, you know, performing some amazing miracles. It's not clear to me [43:11] how else, or your country might have natural resources that are so vast that you don't need taxation. [43:18] So we're thinking oil, we're thinking natural gas. [43:20] Yes. Short of that, it does not seem to me to be a practical option, but to go for some form of taxes. [43:30] As I've said, what kind of taxes you should have, the mix of taxes, the levels of taxes, [43:36] that's up for debate. And that obviously depends on what kind of country you live in, [43:41] what kind of needs the country has. [43:43] I've learned so much at this table, and I want to leave us with just one question, [43:48] because I think I can already imagine those who are watching and listening to this wondering. [43:53] So rapid fire, just sort of about a sentence, if you could answer in that length of answer. [44:01] Do you think you pay enough taxes personally? Gustavo? [44:08] I think I do. I live in the United States. So I guess it depends where you live, [44:12] you can answer this question differently. But I think I do. And you've opened quite a box here [44:20] with this last question, and I will get into that. But it really depends also where you are in the [44:27] wealth distribution, how much in taxes you pay at least nominally. And if indeed you fulfill your tax [44:33] obligations, you can end up paying quite a bit of taxes, even the middle class. Anyway, so a lot of [44:39] nuance in there, but I'll just say yes, I think I do. Pedro? [44:43] Yeah, I think I do. It's also hard for me to say I do, because I don't exactly know where my tax is [44:52] going to. And so this is a topic that I might have been insisting a lot. But if I could see it, [44:59] I could say, no, I'm not paying enough. Or if I could see it, I could say I'm paying much more than I [45:04] should. But I think I am. Same question? Well, just for perspective, I pay a marginal tax rate [45:12] of 40%. So every £100 that I earn, I pay 40 in income taxes. 4-0. 4-0. The remaining 60 that I [45:23] bring home with me, I pay 20% GST on that. So I pay £18 on that. So I'm getting at the end of the day, [45:34] £42 for every £100 that I earn. What I do observe is increasing hardship amongst the worst of [45:44] in the UK. So the local council now no longer has enough money to cut grass on the verges outside. [45:53] People whose children are disabled are finding it extremely difficult to get social support and care [45:58] workers to come in, because the government is running out of money. I could do the crib and say [46:03] governments ought to be more efficient in the way they spend my money. Or I could just keep [46:09] looking at these people and thinking, fine, it's their choice, they're poor. No, I'm not that heartless. [46:14] So I wouldn't mind if the government asked me to contribute a few extra bucks to help the poor. [46:20] And GST is? 20% of goods and services tax. It's the excise tax. It's when you buy [46:26] something at a shop. So necessities like food items, most basic food items would be exempt from it, [46:32] because otherwise the poor would find it extremely difficult to buy. But most of the items that you [46:37] would buy would be taxed around that rate. Marcin, we will start, we will end where we started. [46:44] Do you think you pay enough taxes? Definitely. I think on the one hand that those who [46:54] favour taxes should be paying more voluntarily. Why don't they do that? And the second is, yes, [47:02] I do pay more, particularly if I take into account what I get. I end up paying twice. I pay taxes for [47:12] government education, but I need to pay a private education. Same with the health system, and I need [47:20] to buy a health insurance. And same with security, that you need to live in a neighbourhood giving you [47:29] private security because the government does not. So I'm paying twice. Yeah. And that seems to me it's [47:37] paying too much compared with what I get. [47:39] Yes. Thank you so much for this conversation, for the points, the anecdotes, the stories, [47:45] and for sharing your own personal reflections at the end. I think they're very telling. I saved them [47:48] for the end because I know they could be individual shows in their own selves. But thank you very much for [47:53] your willingness to be part of this conversation. And thank you for watching.