Taxes

This is just a quick thought about taxation. There are really two ways people tend to think about taxes. One way is to add up all the dollars and brag about how little or complain about how much tax we all pay. The other way is to add up everything we get from the government and brag about how great or complain about how rotten it is to live in America.

In fact, a more reasonable approach, harder, is to think of taxes as one way that we can improve our lives, along with payments to the butcher and the dressmaker. Some things really need to be done by the government, and other things are done better by the government, but other things really can't be done by the government, and other things are done better by non-government groups or individuals. When things are done by the government, we call what we pay for them "taxes", and when things are done by non-government groups or individuals, we don't call them taxes. But in terms of our daily lives, the effect is the same: we pay out our money and we receive various kinds of services or benefits.

It seems to me that the trick isn't to try to get taxes down to the lowest possible level. The trick is to determine which things are done better by government, and to support those things with as much tax money as necessary. Things that can be done better by non-government groups or individuals shouldn't be supported by taxes.

By "better", of course I mean better for humanity, or better for Americans. I don't mean better for me or better for you.

It is a cliché that polls that ask about taxes show that people want taxes to be reduced, but polls that ask about things that people receive that taxes support show that people want taxes to be maintained or increased. The fact that there is this split indicates that something is wrong in how people understand the relationship between tax and non-tax support of services: they simply aren't used to thinking about things in terms of optimizing their lives and maximizing the value they receive from money (tax and non-tax) they pay. Instead, demagogues have learned that by focusing just on a benefit or just on a cost, they can swing votes one way or another. This isn't good for us as a people, and it illustrates a real vulnerability of the democratic system of government.

To counteract this, people need to develop a contrarian habit of mind. If some politician says, "I'll cut taxes", you need to ask, "What services will be lost? For services that will be maintained, how much will I have to pay compared to what I pay now in taxes? Will services be maintained at the same level or will they be lower quality?" If some other politician says, "I'll give you this great service", you need to ask, "Can this service be provided better and/or more efficiently by a for-profit operation? What will this cost in terms of increase taxes? How will that cost compare with paying a non-government group or individual for the same service? Will there be a windfall profit that could be avoided by a tax-supported, government operation?" Of course, those are just examples, the general idea is to be a little skeptical, to recognize a lack of balance and try to fill in the missing pieces.