Tax Is Good

Taxation Wasn't Always Good

Taxation has been around as long as man has. Call it rent, a tribute, or outright theft, taxation has always involved a portion of funds going to a 'higher' authority. While 'traditional' tax methods were at times suspect, more modern methods of collecting and spending taxation certainly, on the whole, benefit society. I couldn't imagine a world without taxation as I believe it has a very positive influence on society.

Modern Taxation Evolved from the Past

Prior to the early 1800s nations raided each other in controlled wars to plunder enough money (gold and commodities) to build their nations further. They even created laws of war to manage the practice. Since this time nations decided it was in everyone’s best interest to allow each nation to live their lives as they saw fit as long as it was within their own borders. Nations learned better ways to raise taxes on commerce to fund their needs:

How Taxation Benefits All

We would not live in the world we have without taxation. Transportation links increase commerce and arguably private enterprise would never have built this infrastructure entirely on its own, and if they did individual companies (their owners) would monopolise and strangle trade for their own purposes.


Without public infrastructure for water and sewerage the number of people falling sick and dying would be far higher from diseases such as cholera. Think of London city before the first sewers were built.


Without public education only a priviledged few would be educated and the levels of poverty would be far higher, crime would be higher, and there would be higher levels of civil unrest. Just look to countries with little or no public education.


Public health systems ensures all the people are looked after. Without it more people would not be able to afford medical care, diseases would spread and even the rich would not be immune to disease outbreaks. People left with untreated injuries could not join the workforce to add to the economy, while being a burden on those who support them, and increase the level of poverty. The amount paid by government for health care is relatively small against the loss to the economy if there was no public health system.

Taxation Cannot Provide Free Handouts

There are many in this world who will take charity if it is offered. While this is not a bad thing, becoming dependent on charity is. In my opinion there is a sub-class of society who don't believe in themselves enough. They seek support from others and in freely elected democracies tend to drive policies of government welfare and free handouts. I wholly believe in welfare but not its misuse. Welfare is for support in times of trouble and personal difficulties.


Individuals need support in times of difficulty. Like the old saying goes though "Give a person a fish and they eat for a day. Teach that person to fish and they eat for a lifetime". In my opinion taxation can be used to help people to help themselves while giving them direct assistance until they can. An unsupported person is more likely to be a burden on everyone through a loss to the economy, crime, and emotional hardship to those around them.

How Tax Works and is Gathered

A nation's economy is basically the sum of all transactions made, that is every time money changes hands a transaction results. The more money moves around the more income is generated if a profit is made. If no-one spends then there is no economy. These profits pay wages and allow you to spend money, thus generating more transactions.


The government (at all levels) levy tax (see Tax Types) on transactions in different ways to take a portion to pay for public services. If they over-tax they can cripple the economy (by limiting profit), but if they under-tax they can also cripple the economy as government expenditure on services is a major part of the economy and in fact has a multiplying effect. This multiplying effect can be upwards of 10 times the government money spent flowing into the economy. The trick for any government is to strike the right balance for the current economic conditions as over stimulation can lead to inflation. A good government constantly fine tunes the economy to stay within healthy economic parameters.


If tax revenues are low then there is more pressure for your government to put the tax rates up, or it needs to spend less otherwise the country will need to go into debt, and this reduces the positive cashflow available for government spending as interest must be paid. Like individuals or businesses, governments are bound by the universal need to spend less than they earn as even countries can get into a debt trap.

The Role of Government

Opinions vary on the role of government and how much they should be involved in the economy. Many wish for minimal interaction (like Adam Smith) while at the other end others want the government to be a 'parent' to the populace (like Vladimir Lenin and Karl Marx). Each of these positions is extreme by modern standards and a balanced approach between the two is now considered healthy.


Successful governments create healthy boundaries (laws) within which the people can go about their business in an optimal way. This is similar to putting up a fence around a paddock for horses. Inside the paddock the horses can do whatever they want but they know not to cross the boundary. When it comes to people if their fundamental rights are catered for these boundaries (laws) don't create too many issues. An individual can form a company and trade for a living, work fairly within another's company, live a safe existence away from harm caused by negative people, and utilise shared government services.


For a private company to provide services on a national scale many would argue that they would have too much influence and monopolise trade in their area of business. There needs to be a balance between companies and competition provides this. In the case of large corporations like Standard Oil or Carnegie Steel from the early 20th Century governments knew these companies had too much power and could charge whatever they liked. They also put a lot of other companies out of business. Government regulation as well as government sponsorship of projects (especially of national importance) balances competing forces and maintains healthy competition.


Without tax no one could be paid to regulate industry or independently provide security with police forces.

National Savings Provide Economic Stimulus

Direct investment from government is needed in times of economic problems (like post-GFC) to support jobs and industry and spur them back to life. This is called economic stimulus and was primarily developed on the theories of John Maynard Keynes. Prior to the Great Depression this was not something that was regularly practiced and the world stayed in an economic downturn for over a decade. Conflict over resources, poor economies, unemployment inflamed political tensions and was a major contribution to the outbreak of World War 2.


The Global Financial Crisis (GFC) of 2008 could have been as bad or worse than the Great Depression but we as a people have learned a lot from our past and the policies of government spending have arguably cushioned the blow and as of 2013 seem to be helping the return to health for many countries. Time will tell.