OP-ED We need to change the way we view taxes
April was tax month. President Trump’s major legislative achievement has been the Tax Reform bill he signed at the end of last year. Paying taxes is probably the most significant interactions most people have with the government. But we need to change the way we view taxes.
Taxes have two primary purposes: The obvious one is to raise revenue. The other purpose is to change behavior. The latter characteristic is what leads conservatives to decry the “nanny state,” as “sin taxes” on things such as alcohol, tobacco and soda try to discourage their use, and if those behaviors do not affect anyone else, that is a valid argument. On the other hand, if those behaviors create costs we all must pay (such as increased health care expenses), then we have a vested interest in discouraging those behaviors. Other taxes, like the gas tax, are more like user fees, where the people paying the tax directly benefit (the gas tax funds road construction, e.g.).
I’m going to focus on income tax, which brings in almost half of federal tax revenue. The income tax is not a sin tax. The government does not tax income in order to discourage work. It taxes income because (paraphrasing Willie Sutton, the notorious bank robber when asked why he robbed banks) “that is where the money is.” A progressive income tax raises revenue more effectively than any other type of tax because it collects more revenue from those most able to pay it (the rich), at a time when they are most likely to have it (when they earn it). A progressive tax does not “punish success.” It simply follows the law of diminishing marginal utility – when one has a lot of something (like money), each additional unit provides a diminished amount of satisfaction (the first bite of a meal is more satisfying than the last, e.g.). With regards to income, the first dollars someone earns are spent on vital goods (food, housing), but as a consumer has more money to spend, the last dollars are used on less vital purchases, so it is easier to give up those dollars.
Supreme Court Justice Louis Brandeis argued that taxes are the price we pay for civilized society. On the other hand, a complicated tax code has often allowed people who might have a large tax bill to hire smart accountants and lawyers to dramatically reduce their tax bill. Leona Helmsley, the spouse of rich New York developer Harry Helmsley, famously declared that paying taxes was for “the little people.” Another New York developer who became president, Donald J. Trump, echoed this philosophy in a debate with Hillary Clinton when he said he didn’t pay taxes because he was “smart.”
Some on the far right claim that “taxation is theft,” and liken the government to robbers who take your property without consent. Some of the same people want to abolish the IRS, but the only people that would help would be those who want to cheat on their taxes (honest taxpayers need an IRS that has the resources to respond to their questions). A better argument would be to make the tax code simpler so the IRS has less to do (but unfortunately, Trump’s tax legislation made the code even more complicated).
An effective Republican argument against taxes is that most taxpayers think they know better how to spend their money than the government does. While this is usually true, sometimes the government can more effectively provide services than individuals can, because there is power in communal action (getting supplies in bulk at a discount, e.g.). While there is justifiably a lot of debate about what the government should or should not do, suffice it to say that there are some things the government can do better than the private sector and vice versa. But that debate is not about taxes; critics of government spending should focus on eliminating spending, not limiting revenue. In recent years, Republicans have adopted the strategy of cutting taxes to reduce revenue, and then claiming reduced revenues force them to make unpopular cuts in spending. While this may be effective politically, it is intellectually dishonest.
Instead of seeing taxes as evil, we should see taxes for what they are – invaluable support for public services. People who pay a lot of taxes should not feel stupid for not being able to hire a smart lawyer who could get them out of it, but instead should be celebrated for heroically providing the resources for the government to do things that benefit us all. People who contribute more to the common good than they take out should be proud of that, not feel like suckers. The government should publish (with permission) the names of the people who pay the most in taxes, and they should be celebrated for their contributions. It should be an honor to be on the top 100 Taxpayers list, as it is an honor to be listed on the Forbes 500.
Kent James is an East Washington resident and has degrees in history and policy from Carnegie Mellon University.