Alan K. Henderson's Weblog


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Saturday, April 16, 2005

A Prehistoric Tax Tale

For a few weeks the Alley Oop comic strip has been running a storyline that is reaching its conclusion this week. The online archives go back only a month; at the time of posting the beginning of the tale is unavailable, and by mid-May the entire story will be faded into Internet oblivion.

For those not familiar with the strip, "Alley Oop" is about the adventures of a caveman (the title character), some set in and around his prehistoric surroundings and some in the future, courtesy of a Dr. Wonmug who discovered Oop's prehistoric kingdom of Moo via his time travel machine. Observant readers will note several anachronisms in the strip, which include metalworking (the crowns worn by the cave-royalty), paper and written language (see below), evidence of the invention of shaving (the stranger in the current storyline sports a mustache and is otherwise clean-shaven), and, of course, dinosaurs living side-by-side with people.

Our story begins in the neighboring kingdom of Lem. A fellow named J'on Fish has concluded some unknown business with King Tunk, and leaves the kingdom with a large bundle of goods that he earned for his services. Shortly after appropriating an unattended cart to carry his bounty, he sees a stone marker pointing to the kingdoms of Lem and Moo, and Fish takes off for Moo.

There he requests a private audience with King Guz. Oop's best friend Foozy (who always speaks in rhymes) speculates: "Perhaps he plans to share his wealth! I'm sure these furs would help my health!" But the stranger has the opposite in mind. After inquiring what compensation Moo's king receives for his services, Fish convinces Guz that the citizens haven't been paying their fair share. Fish emerges from the royal cave with a parchment (!) reading:

By Order of King Guz Effective IMMEDIATELY....Each Citizen of Moo Will Pay A 7 Percent TAX!

As the first taxes roll in, Foozy worries that "this sudden wealth could lead to greed," while Oop recognizes problems in calculating the tax for certain Moovians. In the case of the man who paints but doesn't hunt (there's another anachronism - not the painting but the caveman who doesn't hunt), Fish figures he can make payment by doing a portrait of the king. As for the single (probably widowed) mom, he looks at the youngest of the children and says, "this one looks nice" - alluding to those jokes about selling children to pay off debt. (We never see Guz take possession of the baby.) Oop doesn't like the tone of things, and states his objection to the tax "insanity." Guz arbitrarily raises it to 10 percent on the spot, and threatens to throw tax protesters into the Pit, a deep ravine that serves as Moo's prison.

The April 6 strip introduces those dreaded initials "IRS." dreaded One evening, as a family of four sits at the table for dinner, agents from J'on Fish's Intimidation and Requisition Squad come knocking on the door. The husband is behind one day on his taxes, so they take payment by seizing the dinner and even the daughter's rag doll.

Other Moovian families are going hungry as a result of a visit from the IRS. Outside the royal palace (a mostly-nondescript cave), a boy complains to his mom that he's hungry, and the mom says the food went to the king in taxes. Guz and Fish overhear, Fish says, "Don't let their whining get to you, King Guz! You're doing the right thing for your country!" Guz's thoughts reveal doubts, though.

Alley Oop shows up and warns the king that there's massive unrest. Fish dismisses this as Oop's attempt to get out of paying taxes. But when the population descends on the palace with picket signs, Guz decides that he should have heeded Oop's warning. The Moovians run Fish out of town, pelting him with (appropriately) rotten herring. In today's strip the forcibly-retired government consultant considers a career change to auditor.

I have a few observations from this storyline. For the first two, refer to the explanation J'on Fish gives the Moovian public for the tax:

My dear citizens of Moo, consider what your king does for each and every one of stores, water supply, protected borders...just to name a few! And just imagine how much more he could do with proper remuneration!

First observation: the tax was established without a clear notion of what services it would fund. Governments should draw budgets first and taxation methods second.

Second observation: tax planning must consider the budgetary needs of the taxed. This tale illustrates the premise of Henry Hazlitt's Economics in One Lesson, which is now available online (link via Rand Simberg). The "one lesson" is that to properly judge a policy one must consider all of its effects and not just the most obvious and immediate. Guz saw the big stash of loot he was getting, but not the empty dinner tables.

Third observation: the Laffer curve is real. The curve illustrates that tax rates and tax revenues rise together only up to a certain point, above which revenues decline as rates rise. As Jude Wanniski states in The Way The World Works, at a certain rate tax revenues will immediately shrink to zero - as Guz witnessed when the kingdom went into revolt.

Fourth observation: Government consultants must be subject to checks and balances. Consultants can be valuable resources, or they can be parasites who lobby for programs only so they'll get rich.

Fifth observation: the kingdom of Moo already had de facto taxation. Guz has a standing army equipped with spears and turtle-shell helmets. Somebody had to hunt all the turtles, make trees into spear shafts, gather stones and shape them into spearheads, and lash the spearheads onto the shafts. You think Guz did it all by himself? And who is doing the hunting and gathering that feeds the army while it guards the palace and the borders?

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