ON THE BEAUTY OF TAXES
Many years ago, when my sister and brother-in-law opened their training and consulting firm, I asked her what was their goal. “I hope to pay more than $1 million in taxes,” she answered. I thought it was the oddest answer. If the only things we can be sure of are taxes and death, why welcome either? It took me some years to appreciate the wisdom of her answer.
Why do we hate paying taxes so much? There are three main lines of arguments used by militant groups, such as the Tea Party or American for Tax Reform, and other, run-of-the-mill libertarians, to answer this question.The first, principled, suggests that it’s a question of justice: I deserve to retain what I earn. Any tax whatsoever infringes on my individual rights. The government is taking away something I own.
Though there are Constitutional provisions to raise funds for government needs, such as wars, a uniform personal tax is a much later addition the reasonableness of which remains questionable. Those making this argument also refer to the 16th Amendment (1913), and suggest that not all states ratified it.A variant of this argument is aimed at inheritance tax, for example, as an outright theft: I already paid once income tax, why must my heirs pay again for the same earnings when I die?
Nine states have no income tax—illustrating that income tax isn’t necessary to run a state—but charge fees for particular services and have sales taxes.The second, functional, set of arguments uses a different logical line: federal and state governments are wasteful; if taxes were reduced, they would necessarily have to shrink in size: when starved (no taxes), they will die (a natural death).
The third, applied, set of arguments concedes that taxes are needed for some public goods and services, but wonder what the simplest and fairest system of taxation would be. Progressive taxation—the system we currently have, where the rich pay more proportionately on additional increments of their income—is contrasted with a flat tax system—where everyone pays the same percentage, say 10%, of their income regardless of how much money they make.No matter which set of arguments appeals to you, think about the social contract: are you getting more benefits out of paying taxes? What if you paid none? What services can you do without?
Should only use-taxes be paid, as Milton Friedman suggested decades ago? If you use the road, pay toll; if you go into a park, pay a fee; if you call the fire department, pay a protection fee. Perhaps this is what the Mafia understood all along, personalizing protection fees, and providing safety nets only for its members.The focus on reducing government expenditures is always warranted, unless we want to go to wars. Will government agencies necessarily become more efficient if their funding declined? From Reagan to Obama, with or without tax breaks, Republican and Democratic administrations alike have routinely failed to shrink the government payroll: about 22 million currently work for the government (about 16% of the total workforce).
The US Postal Service—a federal agency, lest you forget—is trying to reduce its deficit of $14 billion by $3 billion, focusing on closing facilities and not replacing retirees. But as a federally-mandated public service, it has less flexibility than FedEx or UPS. Will its size shrink? Will service be compromised? What if it were eliminated? Who’d suffer? Should we care about the few rural residents when the many urban dwellers have alternative options?
Instead of focusing on taxes as the root of all evil, let’s focus on government waste, locally and all the way to the federal level: when you see waste, call your representatives, write them an e-mail, or suggest alternatives. Think about what services you can do without: garbage collection, potholes repair, clean air, parks? What are you willing to pay for individually and take away from government control: sidewalks, street lights, health care, food inspection, burglary alarm?
There are those whose defiance of the social contract is more extreme. They belong to the underground economy or black market. Their unreported income is estimated at around $2 trillion annually with an effect of tax revenue loss of about $500 billion, representing about 10% of GDP (of course in other countries, such as Greece and Italy, it accounts for as much as a third of GDP). Would you like to join their ranks?While you ponder this question, I’ll stay in the social contract, pay taxes and enjoy government services. I still dream of paying $1 million in taxes, consulting the best tax lawyers in town. Would you mind joining my dream?
Raphael Sassower is professor of philosophy at UCCS. He can be reached at rsassower@gmail.com See previous articles at sassower.blogspot.com
