In Praise of Taxes

The message came over the Internet, and it began in an amusing and informative way.

“A billion is a difficult number to comprehend,” it said, “but one advertising agency did a good job of putting that figure into some perspective in one of its releases.

“A billion seconds ago it was 1959. A billion minutes ago Jesus was alive. A billion hours ago our ancestors were living in the Stone Age. A billion days ago no-one walked on the earth on two feet.”

But, notes Our Correspondent, in bold red type, “A billion dollars ago was only 8 hours and 20 minutes, at the rate our government is spending it.” That would be the US government, I assume, although there is a later reference to both Washington and Ottawa. And then the message goes on to note that Louisiana Senator Mary Landrieu is asking Congress for $250 billion to rebuild New Orleans – which works out to $516,528 for every person, or $1,329,787 for each home, or $2,066,012 for a family of four.

I would have some trouble with that, too – though probably not for the same reasons as our anonymous author. Sea level is rising, the Mississippi delta is sinking, and Katrina was only the first catastrophe. What the good Senator is trying to do, really, is hold back the sea with money. It would be smarter to rebuild somewhere else.

But that's not the conclusion in the message. Our Correspondent works himself – herself? itself? -- into a full-court lather about reckless government spending and rampant taxation. First comes a poem:

Tax his land,
Tax his wage,
Tax his bed in which he lays.
Tax his tractor,
Tax his mule,
Teach him taxes is the rule....

And then an endless list of taxes – income taxes, tobacco and liquor taxes, dog and vehicle licenses, unemployment insurance premiums, and so on for roughly a page.

“Not one of these taxes existed 100 years ago,” cries Our Correspondent, “and our nations were the most prosperous in the world. We had absolutely no national debt, had the largest middle class in the world, and Mom stayed home to raise the kids. AND NOW WE ARE THE MOST IN DEBT OF ANY COUNTRY ON EARTH!!!”

Hold on, now. “We” are not. Despite the ambitions of the corporate elite, Canada and the US are still two separate countries. Only one has been ruled by for the past eight years by ideologically-motivated tax-cutting spendthrifts – financial idiots, in short – and it wasn't Canada.

And – though I don't enjoy paying taxes any more than anyone else – I complain about the ludicrous complexity of our tax system, not about the fact that we have to pay taxes.

Income tax, for instance, ought to be fairly straightforward – but the Income Tax Act now runs to 2,226 pages, mainly because it's full of tax breaks for various interest groups. It doesn't have to be. The Canadian Taxpayers Federation recently published a report on tax reform proposing a simple, revenue-neutral set of reforms. Write down your income. Subtract a few standard deductions which apply to everyone – basic but generous deductions for yourself, your dependents, your RRSP – and then pay 15% tax if the remaining amount is less than $80,000, and 25% if it's more.

Done. And you don't need 2,000 pages of text to describe it.

But the larger point is that tax-denouncers like Our Correspondent assume that one's income is fundamentally one's own, and that taxes are inherently a form of theft. That's codswallop. The economy, within which your success occurs, is a social framework Your earnings involve employers, producers, customers, suppliers, and the orderly marketplace which government provides. Your success also relies on the whole infrastructure of modern life – highways to move people and materials, an educational system to provide literate workers, health care facilities to help them stay productive, police to protect the whole enterprise. You couldn't succeed without the services that taxes buy.

So yes, we didn't have most of those taxes 100 years ago, but we also didn't have today's wealth, today's levels of literacy and education, today's capacity to travel, today's support system for the unfortunate. Perhaps most important, we didn't have today's life expectancy. Admittedly, it's expensive to keep old people alive – but the older you get, the more worthwhile that expense seems to be.

And of course Our Correspondent overlooks the fact that many taxes are essentially transfers from the taxpayer to the private sector. Why is health care so expensive? Talk to the manufacturers of medical equipment and to the pharmaceutical companies. Why is defense so expensive? Talk to your friendly defense contractors, like GM and Boeing.

Taxes are just a form of expenditure which buys us the essential components of a modern, civilized society – the very framework within which wealth is created. The economy, I'm told, has grown sevenfold since 1950. Have taxes harmed that economic growth? Hardly. Taxes have made it possible.

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