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Why Taxation is Bad

Photo Credit: Alan Cleaver

By default, we should look to lower all taxes because of their destructive and counter-progressive effects on society.

If you are a United States citizen, the reasons for paying taxes have been ingrained (some would say indoctrinated) in you.  Upon being asked why we pay taxes, most people will say that it is “the price we pay to live in a civilized society”, “what separates us from anarchy”, or “a necessary thing we must do have a unified nation.”  To a degree, taxation does accomplish these things.  However, I would ask you, the reader, to come with me to an intellectual space past these dogmatic, reactionary answers.  You might find that these reasons against general taxation usually outweigh the benefits.

My first case against taxation is the destructive nature found fundamentally in it.  In the field of Economics this destruction is known as ‘deadweight-loss.’  According to Investopedia, “A deadweight-loss is a cost to society created by market inefficiency. Mainly used in economics, deadweight-loss can be applied to any deficiency caused by an inefficient allocation of resources.”  In other words, deadweight-loss is taking what could have been productivity and making it disappear: as if people just sat on the couch a little bit more instead of working.  Economist Dr. David Henderson describes it as such: “The deadweight-loss from a tax is the part of the loss to those who bear the tax that does not go to the government. Thus the term ‘deadweight.’”

My second case lies in the opportunity cost of not lowering taxes: the world we’re missing.  Naturally, we would think that by lowering the tax rate we would then be lowering tax revenue.  However, the famous “Laffer” curve has shown us that’s not always the case: “tax rate cuts will always lead to more growth, employment, and income for citizens, which are desirable outcomes leading to greater prosperity and opportunity.”  If we then take this action a step further, this growth and prosperity leads to a greater amount of tax revenue being collected; this change in the object being taxed might even entirely offset the loss in revenue by the reduction in tax rate.  In the end we have a healthier, more vibrant economy with little change in tax revenue.

My third case does not lie in macro-economic evidence, but rather in introspection.  We all pay taxes whether they are on our income, sales tax, gas taxes, estate tax, capital gains, corporate, ad infinitum.  My personal question to you, the reader, is: do you honestly think the government will spend the revenue collected from taxing you in a better manner than you could spend it?  I encourage you to estimate a figure that you are taxed each year (including all types of taxes) and consider what charities can do with even just half of that amount of money.  The trade-off is staggering.

I am not advocating for the abolition of the government or taxation.  I’m not saying that we shouldn’t investigate tax changes on a case-by-case basis and possibly even raise taxes in certain situations.  My claim is that we should have an instinctive negative attitude toward taxation for the two-scientific reasons, and one introspective reason I’ve explained.  Perhaps our reaction should be to lower and even eliminate some taxes when at all possible.

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