Taxes v1.0 and v2.0

J Brauer | © Stone Garden Economics

A few days ago, a picture of a German-language poster appeared on my facebook wall. In English, it said something to the effect: “My son asked what taxes are. So I ate 47% of his ice cream. Now he cries, but he’s got the point.” I reposted this, and a number of people “liked” it. I suppose that’s the knee-jerk reaction to taxes version 1.0. Taxes reduce one’s take-home income; the higher the government take, the less one has left over for oneself. The “47% of his ice cream” line is great, tapping into deep emotions. But it is also entirely wrong.

It is wrong because the boy who loses 47% of his ice cream gets nothing at all in return. This is not true of taxation, certainly not in reasonably well-developed, democratic societies. Taxes version 2.0 are different. The poster might as well have read: “My son asked what taxes are. So I took him on the public bus on public roads to his public school. Afterward we went to the public park and to the public swimming pool. On the way home, we walked by the fire station under the public street lights and greeted the neighborhood police man. My son was happy, and he’s got the point.”

Taxes are your contribution to defray the cost of providing shared goods a community desires. If taxes were zero, there would be few roads, few flood protection schemes, little by way of public safety, probably no common currency, no financial market regulation at all, and so on. If there were no taxes, many of your family and friends would have no job and no income at all. (As a state government employee, this affects me directly as well.)

For the analogy to be correct, when involuntarily sharing 47% of his ice cream, the boy would at least have gotten a smile and a hug in return. Maybe the smile and hug would have been “worth” less than 47% of the ice cream; conceivably, they might have been worth more than 47%, the benefit outweighing the tax-bite. It is easy for forget that we do get something for our taxes.

Of course, 47% sounds high. Different people place different valuations on the public goods provided through taxation. Personally, I don’t see why my tax contributions should subsidize the commercial, big-business agro-industry or pay for unduly high military outlays for questionable wars. And I don’t see why government is not more vigorous in stopping, in the United States, social security disability and health care fraud. Each of us will have his or her own list of misgivings. But, ultimately, this calls not for knee-jerk negativity, disengagement, and misleading “47%” posters; to the contrary, it calls for civic engagement in our communities, states, and countries.

When we click “like” on the 47% poster on the facebook wall, as I did at first, we are saying that we want someone else to address the problem. We want to free-ride on someone else putting in the effort to set things right. We don’t want to put in our own sweat-tax of making things better. We just want to pay less ourselves and let others provide for the public services we enjoy. And thus we contribute to the societal rot we complain about and, really, have no right to complain in the first place.

The proper engagement with the issue of taxes, then, is knowledge-seeking and vigilant supervision of public authorities by those who elect them. In fact, it is to participate in debates and elections in the first place, perhaps even as a candidate for your local municipal or city council. The proper engagement may also well mean to move to a lower (or higher) tax jurisdiction. If you don’t like 47% taxes, move and place your son in a public school in Georgia and see how you like that. (For the uninitiated, Georgia’s public school performance record isn’t among the best in the country.)

In sum, taxes version 1.0 is wholly misleading and irrelevant; taxes version 2.0 is where the difficult debate and bargaining tasks about the size and distribution of the tax burden lie. Don’t take the easy way out.

J Brauer is Professor of Economics, James M. Hull College of Business, Georgia Regents University, Augusta, Georgia, USA.

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