Attitude towards taxes after Liberation

Author: Georgi Georgiev

The topic of the forcible seizure of property in the form of various taxes and levies is key to libertarianism (“taxes are theft”). If we take into account the skeptical attitude towards the way most modern Bulgarians spend tax revenues and the actions aimed at avoiding taxation, then the majority of Bulgarians are libertarians at least by this indicator.

A look at our recent history shows that the desire for a state with minimal powers and budget and, accordingly, minimal taxation has deep roots in our country, which have not been particularly influenced even after nearly 50 years of continuous propaganda under the conditions of a brutal totalitarian regime (1944-1989*). We find such a look back at Bulgaria at the end of the 19th and beginning of the 20th centuries in Volume II of Ivan Hadzhiyski 's work "Life and Soul of Our People", written during the Second World War. Hadzhiyski, being a convinced socialist, views everything through the prism of "historical necessity", i.e. with total disregard and even ridicule regarding individual human rights, but this does not prevent us from gleaning facts from his work, which mainly concerns the period immediately before and soon after gaining autonomy with the signing of the Berlin Treaty of 1878 (the real Liberation took place only in 1908 with the declaration of Independence).

Before we begin with the main topic, I would like to mention the curious fact that on page 110 of the same book we also find a description of the political order among the Slavs, which Hadzhiyski calls “armed democracy”, which in his words takes place in the “Lack of any power and coercion except the coercion of conscience and public opinion, i.e. lack of a state” and “Lack of taxes and duties for the maintenance of such a state”. As I have already written, a democratic order was also present among the ancient Bulgarians, so to say that democracy in Bulgaria is a new phenomenon and that our troubles stem from our lack of experience with this form of government is more than frivolous.

ATTITUDE TOWARDS TAXES AFTER LIBERATION AND MODERN PARALLELS

The most objective assessment of the real attitude towards taxes is obtained from what the tax rates were and how much resistance there was to raising taxes, as well as the ways to do this “unnoticed.” Here is what Hadzhiyski writes on page 447:

"This economic picture, which constantly kept the tax collector's hand in the pocket of the small owner, was not of a nature to inspire him very much. Moreover. At the beginning, due to political inexperience and suffering from fiscal sentimentality, the liberals resorted to the system of direct taxes - which are the most irritating method of taxation. Only after the fall of Stambolov did the populists introduce "plucking the hen without it crowing", through the system of indirect taxes."

Below the line we also see a report on tax revenues by type: a comparison between the numbers for 1896 and those in 1886, which looks like this:

First, we see that due to resistance to direct taxes, the insidious introduction of indirect taxes is necessary, so that the real tax burden increases without being noticeable to the population. The indirect tax burden jumps more than three times in just ten years!

Today, we see the same approach reflected in the popular mantra that taxation in Bulgaria is low, usually referring to the 10% corporate income tax. It is indeed among the lowest in the world, but the tax burden in Bulgaria is at levels comparable to and even higher than most countries in the Western world, and that’s without counting the unofficial “tax” of corruption. If you haven’t already used the My Taxes website to check your real tax burden, now is a great time to do so.

It operates in an identical manner after the fall of the gold standard and the inflation of the national currency in our country and around the world. Inflation is one of the main reasons for the illegal benefiting of circles close to the state, the destruction of nature at a disproportionate pace , and a number of other modern troubles.

Secondly, with data from the same book, p. 470, according to which salaries over 30 leva per month were considered very good, we can calculate that even with 10 leva per month income for this ten-year period the real tax burden was only 11% in 1886 and no more than 16.7% in 1896 after the increase by about 2/3 thanks to the threefold increase in indirect taxes. Compare with the current tax burden, which for the last 10 years has been moving slightly below 40%!

So, we see that the real tax rate starts in 1886 at a level that we would call a tithe and in 10 years reaches a much higher level, which, however, remains more than half of what we are forced to pay today.

Despite these low rates from a modern perspective, the desire of a large part of our ancestors was clearly in favor of reducing government spending and tax burdens. On page 456 we read:

"What the opposition wants," writes K. Ireczek, "is a natural resistance of the semi-educated against the European administrative order: unlimited freedom without taxes, without monopolies, without duties, without conscription."

Of course, Irechek is highly biased in his qualifications, because by “semi-educated” here is meant the Liberal Party of the undoubtedly well-read P. Karavelov – Minister of Finance and Prime Minister in a number of cabinets at the end of the 19th and beginning of the 20th century. According to Hadzhiyski, his coming to power in one of the cases occurred after he led the resistance against a new tax on salt. On page 457 we read:

"During the election campaigns, the liberals, knowing that the people's most sensitive corner was in their wallets, had generously promised voters tax cuts and a reduction in the relatively large salaries of civil servants."

We even have an example of tax revolts in response to the suspension of the constitution by Prince Battenberg and the rulers:

"In opposition, some liberals had preached that all taxes should be waived to a ministry (of T. Burmov) that had violated the constitution. Always receptive to such sermons, the population had listened to them. The richest districts: Ruschuk, Tarnovo, Pleven, owed the most to the treasury."

Here is what Petko Karavelov tried to do in response to the demands of his voters (p. 451) after taking power:

"Battenberg wanted from his Prime Minister and Finance Minister funds for modern state construction, for arming the army, for the decorative splendor of the new modern state and its supreme representatives. P. Karavelov, who knew that these funds had to be collected from his voters, whom he had won in the fight against the salt tax introduced by the conservatives, was stingily squeezing the state purse and there was no question of any expenditure beyond the absolutely necessary. In order to form a state fund, Karavelov had adopted the rule: as much revenue as possible and as little expenditure as possible."

This contradicts other statements by Karavelov, quoted by Hadzhiyski, in which he firmly declares himself against reducing taxes, as well as against reducing the terribly high civil servant salaries, which would be necessary as one of the ways to reduce taxes without going into a deficit:

Against the provincial ideologists of liberalism who wanted to reduce the salaries of senior officials, he shouted: "We must not arm the bureaucracy against us, which could otherwise do us harm."

What contradictions there were within the Liberal Party is not so interesting. What is interesting is what the Bulgarian people want, what they were promised (low taxes and a small state) and what they were given: an increase in taxes by over 66% in just 10 years, during a significant part of which the Liberal Party was in power. The modern parallels are visible to any reader, not only in terms of tax rates.

MORE CONFIRMATION OF SKEPTICISM TOWARDS TAXATION

Not that they are necessary, but the other examples of skepticism towards the tax burden and the work of the state that Hadzhiyski gives are also eloquent. On page 480, for example, we understand that:

"After the Unification, the Serbs, in order to justify their military invasion of Bulgaria, scattered agents among the border population, who presented them with petitions to collect signatures for the Serbian occupation. These agents, among other things, promised the villagers that if they joined Serbia, they would not pay taxes for 5 years."

On the next page we read about Russian imperial propaganda:

"When the shopkeepers came to Sofia, Russian agitators met them outside the city and told them:

You don't need elections, Russia does. Russia doesn't want a tax. Russia doesn't want a requisition. Russia won't take your soldiers."

Paradoxically, there was also a time when socialists wanted to reduce state taxes and bureaucracy:

"The issue of reducing the state budget was the subject of resolutions of the socialist congresses: "The Congress, taking into account the great importance for the population of reducing state expenses, decided: The party press, as well as individual agitators, shall pay the most serious attention to the need to reduce state expenses as much as possible, by progressively reducing, in proportion to income, the salaries of all elected and state officials, by reducing the number of civil servants, by abolishing the current law on civil servant pensions, etc.""

Let's not forget that this happened with a much smaller state apparatus, with a much smaller budget as a percentage of the wealth of the inhabitants of Bulgaria.

DESIRE FOR A MINIMAL STATE

On page 481, Hadzhiyski summarizes the attitude of the Bulgarians of the late 19th and early 20th centuries as follows:

"The small owner wanted a state, a state authority that would protect his property, to preserve the order, peace, and quiet so necessary for its fulfillment; he wanted a prince as the embodiment of our independence, as the head of the state and the army - but if this could be done like this... with less expense, somehow economically, cheaply, for little money, so that this would not be done at the expense of his purse at all."

If we leave aside the author's bias towards greater state power and speaking "from above", the picture painted clearly shows a desire for a minarchist state with a responsible fiscal policy - without deficits and with maximum efficiency of the invested funds. There is no place for ridicule and looking down on others - everyone, in every interaction, wants, if possible, to get something at the cost of minimal resources, and this is the basis of all economic relations, both between people and between nature and each of the animal species, including humans. One cannot expect any other attitude on the subject from people who have their feet firmly on the ground and do not parasitize on others.

CONCLUSION

The attitude of society towards taxes and towards the newly created state with a liberal Constitution for its time, at least according to Hadzhiyski, paints a picture of an extremely freedom-loving society that does not want to accept a yoke, even if it is “its own”. The desire for minimal taxes also corresponds to the desire for a minimal role of the state in society. This is in unison with what was described by other chroniclers of that time such as Zahari Stoyanov and is in stark contrast to the opinion imposed, probably through the propaganda of the totalitarian regime, that Bulgarians are a “slave people”, with a “slave mentality”, etc.

How, despite these attitudes, Bulgarians, and not only us, are subject to a state that supposedly should work in our interest, but in fact works mainly in its own, is the topic of my next article, in which I examine some curious facts about the creation of the young Bulgarian state, again based on Hadzhiyski's book. The article is "Why the State Does Not Serve the People".

* the regime in its most severe manifestations ended then, but remnants of it still exist today

The article is reprinted from the author's blog.

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