Español April 15 is Tax Day in the United States, a day when millions of US citizens and residents are forced to write checks to a government that does not respond to their needs, reduces their freedom, and undermines individual choice. While it may be true that governments need money to operate, such government-imposed taxation will never be a voluntary activity.
In the vast majority of countries worldwide, taxation is the main source of government revenue. These tax funds are raised primarily to pay for what are portrayed as the nation’s basic needs: security and defense, infrastructure, government education, health care, and welfare programs (which turn out to be subsidies with little purpose other than assuring victory in future elections).
In this context, “taxation is theft” is a legitimate position: taxation is a coercive action, and therefore antithetical to freedom.
Taxes give individuals the incentive to do less of what they normally do, punishing them for earning higher compensation and being more productive. Being discouraged from pursuing an activity you value is harmful, and even though harm is sometimes inevitable, we should seek to minimize it whenever possible.
The annual tax-collection exercise also reflects governments’ inefficiency and bad policies, which result in yearly tax hikes that turn out to be harmful for businesses, families, and individual tax payers.
Policymakers tend to believe that high taxes will attract business, because they can purportedly offer high quality public services, like a good infrastructure or education system. This is clearly not the case, and the higher price on engagement with a jurisdiction turns out to be counterproductive, diminishing investment and promoting tax evasion.
Those of us who pay taxes — regardless of the state or country we live in — can relate to the old saying “no taxation without representation.” As responsible citizens, we are concerned that our countries are not addressing serious issues, like improving free trade zones, fostering investment, lowering taxes, and deregulating financial markets.
We do not feel “represented” by government, and are rather obliged to abide by brutal laws that take our hard-earned money. We then see this money go to useless government spending, with virtually no actual accountability.
When talking about tax reform — which is extremely necessary, not only in the United States but in many other countries — it is a widely accepted fact that the tax code provides endless loopholes. Tax legislation is so complex, most of us don’t even understand it, and therefore need to hire someone to make sure we do things right.
In most Latin-American countries, the tax burden is consistently placed on the same companies and people. The least we could do would be to broaden the tax base, so the same ones do not always pay the most, but political insiders fight this every step of the way.
Evasion in the western hemisphere furthers the disproportionate application of taxes, given that the controls of agencies such as the Internal Revenue Service are inefficient and enforced in either a political or arbitrary manner.
The graduated element of the tax rate in this part of the world — high earners not only pay more but a higher proportion of all they earn — can lead to general frustration. It encourages the sentiment that one is paying taxes as high as those in Nordic countries, but receiving deficient public services, resembling those in underdeveloped African countries: power outages, a faulty health care system, poor education, and poor infrastructure.
The only real solution is to reduce the size of government, and consequently its power and justification to demand citizens’ money. Tax reform that reduces corporate and individual tax rates, coupled with reduced deductions, would also help strengthen the economy, since more people would pay their taxes — as even the Kirchnerista regime in Argentina acknowledges. Small businesses, in particular, face an increasing burden of tax preparation costs. The vast majority spend over a week per year, and several thousand dollars, on preparation alone, according to the National Small Business Association’s (NSBA) 2014 Taxation Survey.
In the United States, though, there are two major areas where most government spending is focused and staunchly defended: national defense and health care. Unfortunately, the latter’s appetite for absorbing more resources will be hard to curb and is expanding.
With Obamacare, politicians are attempting to provide access to everyone, while promising the heavily insured that their consumption will not be restricted. Greater demand and no change to supply guarantees that health care expenditures will increase.
At the current pace, even with Obamacare’s array of new taxes, the United States is on a path to fiscal default within a generation — and that would still be the case if the federal government were to cease all other operations, including national defense. The current policy is clearly not sustainable and spending needs to decrease.
No matter how much tax money we pay, the insatiability of government guarantees that no amount will ever be enough. One cannot help but think, as Margaret Thatcher said in 1984: “I want my money back.”