Taxes are bad, right? Death and taxes, mentioned in the same breath so tax must be bad. We have to pay it, never want to pay it, imagine what we could afford if we didn’t have to pay it. Taxes are so bad that we spend millions on paying less tax.
But of course that’s all wrong. Taxes are not bad.
Got your attention? Good. Note that I didn’t say taxes are good. It’s a little more complicated than that.
Even in the most free, capitalist society taxes are necessary. It’s not that paying tax has some sort of magical benefit, but rather than government expenditure (financed through compulsory taxes) is sometimes the optimal solution for the country.
I like having a police force and judicial system and clean, running water and roads and trains and light-houses and compulsory vaccinations and a thousand more things. These are typical examples of goods and services that can better be provided through the scale of a national government and financed through compulsory taxes rather than relying on free markets to provide the appropriate amount of services.
I benefit from every vaccination provided, since it reduces my risk of infection. Most people (and I’m sure I’m included here too) wouldn’t pay for the vaccination of others just because they received a benefit. Rather let somebody else pay for the vaccination since they will also benefit. Do we really want corporations to run our judicial system? Access to good legal representation is already a function of money, I’m quite glad the judge I get trying my case isn’t a function of how much I can afford!
SABC TV licences are not solely about provided television viewing that you want. If we agree that educational programmes and mother-tongue programming are good for the country, then we really don’t want to leave this in the fickle, profit-motivated hands of corporate advertisers. Economic growth driven through a more skilled workforce benefits the entire country. Just because you individually don’t watch SABC2 doesn’t mean there isn’t value to you in paying the paltry R250 per year for a TV licence.
I could go on, but these examples are not new or inspired – they’re age-old arguments of where public goods and externalities mean that government spending is a good thing. Once we recognise that some expenditure is necessary, it follows we need taxes.
So taxes are needed. This doesn’t mean that all taxes are automatically good. The real debate should be around these points:
- Is government spending on the right sorts of projects, with positive returns for citizens and where free markets can’t do a better job?
- Is government spending relatively free from corruption, fraud, wastage and inefficiency?
- Are projects financed through the appropriate mix of debt (to be repaid out of future taxes paid by generations benefiting from the expenditure) and current taxes where the benefit accrues to current citizens?
- Is the progressive/regressive nature (and thus redistributive) nature of the tax in keeping with the constitutional balance between property rights of the individual and the need to uplift all citizens and increase overall national utility?
- Is the mix of general taxes (income taxes and VAT) and use-specific taxes (rates, fuel levies, business licences) appropriate for the desired outcomes and incentives?
- Do the taxes inhibit economic growth (inappropriate taxes on communications, deterrents to starting businesses and hiring workers) such that the cost is greater than the revenue collected?
These questions are not only more subtle than the complaint of paying too much tax, they are also more difficult to answer. They are also questions that most people can consider multiple perspectives rather than viewing tax as a purely personal, cost-only anathema second only to death.