Why Taxation is Necessary

If you have been reading this blog for any amount of time you probably know that I am generally against taxation and especially against increased taxation.  That being said SOME taxation is absolutely necessary.  Necessary for the running of a country and certainly necessary to increase the overall standard of living for everyone involved.

Arguments Against Taxation

There are about as many arguments against taxation  as there are opinions.  Since taxation is not voluntary, but mandatory – people claim it is equivalent to stealing, thus immoral.  People claim the Government creates no value and much of the value of taxation is lost in transfer cost as it runs through the Government – so it’s not worth it.  Others simply claim the market and capitalism could do it all better.  Perhaps some or all of that is true, but I still contend (some) taxation is necessary and beneficial.  Here’s why.

Collectivism is sometimes necessary:

I am the secretary of my Home Owners Association.  We have 184 houses in my neighborhood and of those less than 25% pay the voluntary annual fee of $25.  Yep, $25, a year.  This isn’t a poor neighborhood either – I mean we aren’t rich, but everyone there could afford $25 a year!

The worst part is 100% of the fees collected go back into the neighborhood via landscaping, painting, upkeep, etc.  There is no paying government employees – no nothing!   Yet, despite our best efforts, we cannot get the other 75% of home owners to participate.  Instead they pass the buck and people like me end up donating flowers and pine straw every so often to pick up the slack.  The classic free loaders problem.

Similarly, without a mandatory taxation of the population I wonder what the US would really look like?  Would it be a society where a few responsible citizens do a disproportionate amount of work to pick up the slack of the free loaders?  Would it be a society where everyone’s standard of living was lower because working together was just too much work?  I think the answer is most obviously yes.

While I would never implement a mandatory “tax” on my neighborhood – if the consequences were national – I think almost everyone would agree a tax is necessary and even beneficial.

What I learned in the Third World:

When I was in Guatemala I really began to appreciate the idea of “public good” and the services that are generated via tax dollars.  Sure Guatemala and most of the rest of the third world has a lot more problems (corruption) than taxation, but the lack of services really highlighted a few of the things we have here in America.

For example, Guatemala is one smoggy place.  There is no or little Government regulation or enforcement of air quality control.  There are no catalytic converters on cars and from what I could tell – companies could pretty much pollute uninterrupted.  In America we put a tax on pollution.  Some of those tax dollars go to parks and public facilities (some of it goes to war too, unfortunately) which in turn makes living here better for everyone.

Another thing were public spaces.  Except for the touristy parts of town there were basically no parks nor public facilities.  This hurt the homeowners by driving down prices and hurt everyone else because it simply drove down the standard of living.  At one point we stopped at a station headed to lake Atitlan to get a view of the Lake and Volcanoes.  It was one of the most beautiful places on earth yet this little stop remained undeveloped and un-kept.

A free market thinker might argue that if a profit was to be made on an area then it will be developed – well what about publically used spots like this one.  Maybe this is the perfect opportunity for the Government to develop a non-profitable area to be used for public good.  So next time you are in the Mountains of America and you see a nice little well maintained watch tower – just say “thank you”.

Taxation not Socialism:

The dangers of socialism from an economic perspective are many.  Most notably the fact that it is unsustainable over the long run.  That, of course, is NOT what I am advocating.  Rather I am talking about a system in which the poorest of our society are taken care of (inevitably in a capitalist environment there will be those in poverty – everyone can’t be rich) and society as a whole benefits by the fruits of working together.

Today we spend far too much on military, our social programs are not well run, our political officials are no longer public servants, and we are living in a border line oligarchy.  What we should do is not eliminate the Government, but put it in its place.  That, I think, is an idea we can all get behind.

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3 thoughts on “Why Taxation is Necessary

    1. Atticus Finch

      How are the public services for areas that aren’t specifically for tourist? Is there good public education, social services, roads?

      No taxes sounds awesome though.

      Reply
  1. jon

    I agree with this post.

    Along these lines, someone close to me was diagnosed with Hodgkins Lymphoma. It’s a cancer that today has an 80-90% survival rate with medical treatment, and from what I’ve heard, 20 years ago it was a death sentence. Would the medical research to treat the disease have come about with private funds? Maybe, maybe not. It would depend upon how many people get the disease, how much profit could be expected from this pool of potential consumers paying for emerging treatments, and whether the expected revenue made the research investment worthwhile for investors. Thank god for government investment in medical research.

    Reply

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