Forgive me for spraying some gasoline on a debate which is well and truly aflame. But I think blocko's rather sensible comments seem to have been lost in the fray.
Goosechase's original question could be read like this: is tax, in principle, a good thing or a bad thing? That's like asking if water is good. It's essential to life, but you can drown in it. One might as well ask if one leg is better than the other.
But I don't think that was Goosechase's intent. Rather, he asks, is tax a brake on the creation of wealth? Does less wealth trickle down through the economy so we all have less to share? And on a different tack, is there a social justice issue--should you be penalised because you think smart, work hard, and earn a lot of money?
Let's look at the first half of the question.
Blocko reminds us that the money paid in tax doesn't evaporate into thin air just because it passes through the government's hands. The government can spend it, or invest it.
Roads and other infrastructure, clearly, count as investments. Public roads enable economic growth; Wal-Mart wouldn't be able to offer its low prices if it had to build its own private roads from warehouse to store, and Target had to find a way to do the same. It's clearly more efficient for these businesses to pay taxes and share the roads with each other, and as a happy by-product, with you and me.
Here, the USA is a stark contrast with the rest of the world. Americans view almost all government investment as spending. And no wonder.
The ethos of freedom and independence is a noble one. But it makes for incredibly inefficiencies when it comes to government.
In Britain, Her Majesty's police is structured and ordered--and paid for--centrally. Same with the French gendarmerie. In Australia, the Federal government collects most of the taxes, and the six states do the investing. One of the investments is a state police force; no local police fighting with the state police and the feds over who does what.
By contrast, I drove through New Jersey yesterday. State troopers pulled people over on Route 80. So did the Parsippany police. The George Washington Bridge is patrolled by two state police forces, the Fort Lee police force, New York's finest, the Port Authority police, and get this, the George Washington Bridge Police Force.
All of this creates incredible inefficiency and waste, and the opportunity for pork barrelling skyrockets. Every community guards its independence and self-determination; in truth, they just want to play with tax money and not be accountable to anyone but the local, manipulable political machine. Amercans get incredibly poor value-for-money from their tax dollars. Governments are not investors, they're spenders, with the Federal Government the classic helpless sugar daddy, shredding cash and sprinkling it on whichever special interest bleats the loudest. And special-interest groups become the only real communities to which we belong, nowadays.
No wonder Americans hate paying tax, even at a modest 22%.
According to Nationmaster.com, the US puts 29.6% of GDP through the public sector, Australia 31.5% through the public sector, Britain 37%. Significant differences, yes, but still plenty of room in the economy for people to make money; all three economies have grown at a healthy clip over that last few years.
What astonishes me is that for the small percentage differences in the size of the public sector, Australians and Britons get so much more in the way of public services.
IN the USA, museums are built largely through private or corporate charity; in Australia and Britain, the government foots a large portion of the bill.
Public broadcasters in the USA constantly put out their hands to subscribers; they have to, it's where the majority of their funding comes from. Australia and Britain support robust--and independent--public broadcasters from the public purse.
And of course, there's health care. In the USA, preserving your freedom of choice in a free market system often results in no choice at all. 20% of the population without health insurance? And a good half of the rest trapped in greedy HMOs? Give me socialized medicine any day.
And let me assure you, both systems, for all their faults, perform coronary bypasses on any smoker who needs one. What they don't do is allow you to by six pairs of fashion eyeglasses and facelifts out of your FSA. In fact, it's the current US HMO system that refuses bypassses to smokers, or insurance coverage to the fat, old or genetically unfortunate. The only people who qualify for so-called Cadillac care in the USA are healthy enough not to need it.
The thing that makes health insurance affordable is that everyone participates, and the risk is spread. Not the denial of services.
In fact, the absence of national health insurance is the real brake on the creation of wealth--just ask Ford and General Motors.
There are some areas where, frankly, money in private hands works against the common good. Market forces simply DO NOT WORK when it comes to health care. You're never really in a position to exercise informed choice--you can't really tell the ambulance driver to take you to a cheaper hospital, can you?
The Australian state of Victoria embarked on a massive program of putting public assets into private hands--railways, gas, electricity, even public transport. Guess what? Service standards went down, and costs went up. None of the private companies involved are willing to invest in infrastructure, and the government ends up footing the bill for much of it with sweetheart deals or direct subsidies.
Co-operation, rather than competition, makes sense in many areas of the economy. Often, the instrument of co-operation must be the government. That means paying higher taxes to save money in the long run.
Few of us think of welfare as an investment rather than an expense. But read Freakanomics for a sobering account of what a tremendously astute investment welfare is.
But so much US welfare is in the hands of private charity--and let me knife a sacred cow here. Charities are disparate, inefficient, often self-interested institutions with ideological axes to grind. The rich in the USA use charity as a kiss-off that allows them to plunder the working and middle classes with a clear conscience. I hope that those who have boasted of their charitable donations on this thread have done so wisely and compassionately.
Personally, I think that the most handsomely supported charities in the USA are Halliburton and the oil companies. But this corporate charity seems to go unnoticed.
Frankly, I think that the USA has a long way to go before taxes become a "bad". So my personal answer to your question, Wyld GC, is that taxes are actually a pretty good thing. As a corporate animal myself, I know that both the companies I work for, and myself personally, are much better able to make money in a community that's healthy, well-educated, and well-fed.
Making money by squeezing an embattled middle class (as the rich seem to be doing now) shows a decent short-term return, but is a crummy investment in the long run.
The largest investments must be funded from the public purse; because these investments must be patient ones, and because the return is diffuse rather than direct. INterestingly, Asian economies, which we often picture as ruthless and hard driven, are sources of extremely patient capital. And they hold quite large reserves of social capital.
Sorry to ramble. It's late.
HB8
