A Democracy Funded by the Few


This article first appeared on the Mises.org blog.

By Douglas French

In America the population is collectively on edge at tax time because 140 million people file tax returns out of a total population of 310 million. Of course not everyone who files, pays taxes, but at least all these folks share in the annoyance at filling out (or paying someone else to) the ever-changing, mind-bogglingly complex, 1040 form.

Here in South Africa, I learn that the South African Revenue Service just announced that there has been a 13.8 percent increase in the number of tax returns filed. A record of just over four million tax returns were filed, up considerably from just over 3.5 million in 2010.

South Africa’s total population is well over 50 million. So less than 10 percent of SA’s population is paying for the other 90 percent. But of course, individual taxpayers only cover 35 percent of the government’s budget, while 45 percent comes from the VAT (value added tax) and corporate taxes.

On the other hand, the five million taxpayers likely pay most of the VAT and as Business Times columnist Stephen Mulholland points out, “the more prosperous among the five million also relieve the state of the burden of health costs, education for their children and, in many cases security in their homes.”

The last place you want to go for health care is a government hospital, I’m told, and the walls around the home where I’m staying in Johannesburg are a good 10 feet high, with electric wire at the top. The neighbors have a generator anticipating the frequent power outages.

Roughly one million people work for the South African government, so after those people are netted out, it is really four million people paying for a South African government that spends 50 percent of its budget paying its one million workers. And, while public workers have enjoyed wage increases, SA’s infrastructure crumbles, as little is budgeted for providing the services government insists on providing.

Living in South Africa means learning to live with sporadic brown outs, despite rate hikes of 25 percent each of the last three years. In every city we have visited, the power has gone off for extended periods of time, making it especially uncomfortable, for instance, in sweltering Durban.

But while our hostess is extremely annoyed at her government’s ineptness at keeping the lights on, there just aren’t enough taxpayers like her in this democracy to carry any weight.

Douglas French is president of the Mises Institute and author of Early Speculative Bubbles & Increases in the Money Supply and Walk Away: The Rise and Fall of the Home-Ownership Myth. He received his master’s degree in economics from the University of Nevada, Las Vegas, under Murray Rothbard with Professor Hans-Hermann Hoppe serving on his thesis committee. French teaches in the Mises Academy. See his tribute to Murray Rothbard. Send him mail.

  • Len

    Do I understand this correctly ? You cite that 4 million tax returns were filed yet there are 5 million taxpayers. Does this mean the 1 million civil servants do not file tax returns ?

    • Juann

      I believe what he means is that the civil servants are paid their salaries out of tax revenue, so they in actual fact just move money around when they pay theirs. Some organizations refer to this as “funny money”.

  • Georgia Resident

    I suppose the predominant race of the 4 million net taxpayers versus the 1 million civil servants is already implied.