Monday, March 10, 2008

Taxes and Government Spending

The different sides on this issue are typically caricatured in this way: those who want lower taxes are described as selfish, as people who don't want to pay their fair share, and who don't care about taking care of others who are in need of government services. Those who want higher taxes are described as taking money earned and owned by others, and as punishing achievement.

The fact is that our taxes are used to pay for services from the government. Some of these services are necessary for our prosperity; we wouldn't be able to earn a living without the security afforded to us by them. But some of our tax dollars go to things that aren't necessary, and aren't even desirable. They are a waste of money.

There are, however, legitimate disagreements about which government programs are wasteful and which are desirable. And then there are a number of economic goals that tax policy might influence: economic growth, employment, income disparity, etc. Which of these goals are of greater priority?

Further, which of these priorities are furthered by tax cuts, and which are furthered by more government spending? Do we know enough to make accurate predictions on these matters?

Finally, there are legitimate disagreements regarding who should pay for how much of those programs. How do we determine someone's fair share of taxes (or, for that matter, their fair share of government spending)? This debate is a familiar conflict between need and merit. On the one hand, some people are in greater need (and thus deserving of more assistance) while others are in less need (and thus have more to sacrifice for others). On the other hand, those who have done more to create wealth and jobs and industry merit a greater reward for their greater productivity, and deserve to keep what their efforts have created. Need and merit are both sound moral considerations, yet they are often in competition. There should be a thoughtful debate about how they weigh against one another.

Nobody in the debate on taxes and government spending wants a 0% tax rate, nor does anyone want a 100% tax rate, though this is what the political caricatures would have you believe.

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