Governments Punishing People for Doing Right
By: James Peron
Tags: Bureaucracy, Taxing The Poor

Jabulile Ngcobo, 82, of Eurhuleni was horrified when the South African Revenue Service (SARS) threatened to take her home for taxes in arrears.

When she exclaimed, “Now they want to take my property I have worked so hard for over the years. What must I do? This has affected my frail health”, her plight caught the attention of the media and several tax specialists.

People from all over South Africa came to her defence and after she signed a power of attorney with a lawyer, SARS had a sudden change of heart. In response, Gogo MaNgcobo, as her neighbours call her, said, “I don’t have enough words to thank you and the entire people who have been calling offering to help me.”

I happened to be thinking of Ngcobo when I read an article at Deutsche Welle about a proposal floated by some researchers at Deutsche Bank to tax people working at home at greater rates than those working from a place of business. The logic according to Luke Templeman, if you are loose with your terms, was “A big chunk of people have disconnected themselves from the face-to-face world yet are still leading a full economic life. That means remote workers are contributing less to the infrastructure of the economy while still receiving its benefits.”

His report argued the average worker at home didn’t spend money on transport, didn’t buy lunch at restaurants and bought fewer work clothes. Now this is a rather silly version of a fallacy Frédéric Bastiat called the fallacy of what is seen and what is not seen.

While it is true that they stopped spending as much on transport and work clothes, it doesn’t mean they aren’t spending the money elsewhere. The home worker has to invest in better quality computing equipment and high quality Internet, they still buy just as much food, only at the grocery store instead. And while they may not be buying “work clothes”, most didn’t become naturists sans clothing altogether and are wearing out their “at home” clothes quicker. Stay-at-home workers merely changed how they spend their money. The economy still gets its share of their spending.

What Templeman sees is how they stop spending in a manner of which he approves. What he doesn’t see is they spend it differently. And, if “worse” comes to “worst”, they still save their money, which makes capital available for investments and new projects that create jobs.

So, what evil are these stay-at-home workers doing?

One is they are working at home to help stop the spread of a deadly virus. I say bravo to that. This is precisely what German Prime Minister Angela Merkel has been urging all along. In October, she begged the population, “I ask you to refrain from any trip that is not really necessary, any celebration that is not really necessary. Please stay at home — wherever you are, whenever possible.”

And two, by not travelling to work everyday they are reducing carbon emissions. This should be pleasing to the German government since it is one of the most insistent about global warming, insisting on many coercive and involuntary methods to reduce the amount of carbon emissions.

In doing this, stay at home workers are saving the government expenditures on health care and future spending on carbon emissions. But, for this, Deutsche Bank researchers think these workers should be punished with an extra tax. Do the right thing and pay a higher price for it, seems to be their motto.

How does this apply to Gogo as well?

In her case, the South African government made housing for the homeless or under-housed a priority. So why does it make sense to so easily threaten her with losing her home?

In fact, if you want people to be housed, why tax their homes at all? It makes no sense to tax those in the most basic of homes.

The problem with inept government is it often does one thing with its left hand and the opposite thing with its right, undoing any good from the previous policy with the detrimental impact of the second. SARS was ready to take Ngcobo’s home from her, and Deutsche Bank researchers were ready to punish workers following government policy!

We see this schizophrenic policy making at work all the time. Governments assert they wish to feed the hungry but tax food making it dearer to the poor and guaranteeing more of them go to bed with empty stomachs. On one hand they insist they wish to end unemployment and on the other they tax jobs.

When citizens do things of which the government disapproves, they are often fined to punish them for their crimes. But, it seems government also fines them when they do what the government says it wants done.

The more cynical amongst us may conclude politicians are more interested in revenue raising then in the right results.

This was published by City Press newspaper, South Africa, December 7, 2020.

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