Taxes have always been topics of lively debate, even leading to revolts and rebellions on occasion. (The Boston Tea Party was over a type of tax.) But until relatively recent times, tax discussions usually dealt with a complete equation: tax who how much by what means for what purpose. Or to take a recent example, shall we the people of the county tax ourselves 1 cent sales tax to improve public transportation?

In the last 20 years in the United States there was been a push by a major part of the political establishment to convince the people that taxes are bad, period. No linkage to the question of why taxes are collected, no published plans for what services to cut or eliminate to compensate for the cut in taxes.

In the year 2001, we have a president who says that the government is something totally separate from the people - that the concept that American government is "of, by and for the people" is obsolete. We hear senior Republican (and some Democratic) politicians saying "who knows best how to spend your money - you or the government?" "Give the money back to those who can make the best decisions about how to get what they need." Right. Let the individual protect the country against international terrorism, control the borders, regulate the airways (airplanes and TV/radio), etc.

Any intelligent discussion of tax policies and rates has to be much more rounded than has been the case in recent years on both sides of the dividing line in Congress.

Why do we have taxes?

The United States is among the few countries formed voluntarily, from the bottom (at least of the land owning class) up rather than being imposed from some top. The original rebel colonies banded together to provide for certain common goods (particulary defense) - with the power to tax to pay for those common goods.

Thirty seven of the US states were formed by petition of the residents, asking to set up a government to provide for certain common goods - with the power to tax to pay for those common goods.

ALL, to my knowledge, American cities were formed when residents petititioned for the authority to form a local government to provide common goods - with the power to tax to pay for those common goods.

The major common goods desired were initially defense (often meaning Native American cleansing), law and order (particularly including land rights), and communications (roads, mail service, ports). Through time those original functions have become much more sophisticated and expensive, and others have been added. By the middle of the 19th century, free primary public education for all (at least white, non-Jewish males) was widely accepted. Primary was later joined on the list by secondary and finally higher education, with related activities such as free public libraries. Around 100 years ago other protective functions started joining the desired common goods - flood prevention, protection of the right to form unions, protection of the public from monopolies, protection of public health by building sewers and organizing the disposal of garbage. Communications broadened from just clearing trails and building ports to dredging rivers, digging canals, subsidizing railroad construction, and eventually operating airports and air safety systems. The Internet has now joined the list, although what role governments should or will play has yet to be determined.

Governments at all levels became actively involved in public health, funding research, providing public hospitals, inspecting restaurants, setting safety standards. Local governments either assisted - by issuing monopoly rights - or themselves built water, gas, electricity and telephone systems, and streetcar, bus and subway networks.

And governments at all levels became involved in quality of life issues: parks by all, theaters, museums and community centers by most, and sports facilities to finally include (by most larger cities) very expensive facilities for professional football, hockey, basketball, tennis, etc.

Another major relatively new function of governments is financial support. The largest program is Social Security, but there are massive welfare programs for many types of business and particularly farmers.

If you say "CUT TAXES," I respond "AND WHICH ACTIVITIES?" And if you really want to cut taxes, stop demanding money from governments if your home is washed away in a flood, or suing the city if you trip on the sidewalk.

What happens without taxes?

Take for example Somalia. Nobody has paid any kind of tax for over a decade, for there has not been any government. You want protection from criminals? Join a gang. You want water to drink? Go find it. You want to set up a business? Be prepared to pay protection to whatever gang controls your village. Want to educate you children? Send them overseas, if you can. You want a solid currency? Use DM or dollars. You want to sue somebody? Ask your gang.

But people really do want some things, like a police force. So lets have a police force without taxes to pay them reasonable salaries. (Or if the people running the government simply steal the tax money rather than paying police salaries.) We saw the results in Indonesia. I could stand in the front garden of our apartment complex and watch the police shake down drivers. No law enforcement, just money collection. Don't stop the expensive cars (probably somebody with connections), or the peddle cycles (no money anyhow). Stop the cheap cars.

The policeman on the beat would pass much of his collections to his supervisor, who in turn passed much of his takings to his supervisor, etc. No contributions to the boss, no job tenure. The same happened at all customs stations, in the courts, with building inspectors, the phone service, even the schools. A government job was literally a license to steal. (For more on this topic, see What is corruption?)

Tax and spend Democrats

Tax and spend - the routine chant of Republican candidates against Democrats. But what is the reality of the last 20 years? The national debt at the moment is about $5.4 trillion. Of that, the vast majority was accrued during the Reagan and Bush I administrations. At the end of 1979, the national debt was less than $1 trillion (845 billion, to be exact). When Bill Clinton took office after 12 years of Republican presidents, the debt was near $5 trillion. It continued to grow a little while he was president, but then started shrinking. (You can see these and other figures on the debt at the US Treasury web site.) We now face the threat of renewed growth under a new Republican president who wants above all to cut taxes.

In my opinion, one of the most important investments that can be made in and for future generations is to pay down the debt. Lower debt means the ability to cut future taxes permanently. But the cuts should not be based on projections, which are wild guesses. When the actual surplus for year x is on the books, then decide how much to devote to what.

last update 12 March 2001

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