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Taxation

Tax Freedom Day is Something to Celebrate
by Marco den Ouden

This article is previously unpublished. It was written in response to a column by Craig McInnes in The Vancouver Sun called Tax Freedom Day is Nothing to Celebrate on June 10, 2011. I believe I sent it in to the Sun as an op-ed piece. If so, they declined to publish it. I may have sent a copy to McInnes himself. I don't recall. 

Craig McInnes misses the point in his Friday column Tax Freedom Day is Nothing to Celebrate. He argues that the Fraser Institute’s annual Tax Freedom Day suggests that up until then, “you are working for the government, which by implication is not working for you”. He goes on to argue that government provides health care, education, police protection, courts and many other good things that enhance our quality of life. The Fraser Institute’s report, he argues, glosses over this as if these things are not worth having. Moreover, he argues that a focus on taxes without noting the benefits leads to pressure to cut taxes without consideration of the consequences and leads to deficits and bankrupt governments as is happening in the United States.

Of course we all value health care, education and police protection. The point that McInnes misses is that government, by its nature, does not respond to market demands. Government is an agency of force. It takes our money in the form of taxes by force. It disburses the money without any check on its activities.

Is what it spends on a particular item worth the money? Is it too much? Are there better ways to spend the money? In business, managers look at such things and consider them carefully. If a business mismanages its finances, the business suffers. If it mismanages it badly enough, the company goes bankrupt. But government is not accountable. The criteria for government spending is politics. Will it get voter approval? And if it blows the budget, if it overspends, it’s the tax payers who are on the hook, even unto the next umpteen generations.

Witness the stampede of politicians, particularly those in power, trying to get spending programs for their ridings – a playground here, a park there, largesse to prop up some business elsewhere. When it comes to spending, politicians spend as if the money were free. They spend to buy votes.

And that is the reason we generally support such activities. Most tax payers believe they get more out of government than they pay in taxes. As P.J. O’Rourke puts it in Parliament of Whores, “every government is a parliament of whores. The trouble is, in a democracy the whores are us”.

Of course, the spending McInnes mentions – health care, education, protection, are valuable and we cannot do without them. But the question is, is government the best way to provide for these things? Is it efficient? Can it be more efficiently done?

What services should government be providing? McInnes argues that because health care, education and protection are good, we shouldn’t quibble about government providing these services and the taxes we must pay to support them.

In the past government provided a monopoly air travel service and regulated prices, keeping them artificially high. When government got out of the airline business and deregulated it, competition generated many new airlines, companies like Westjet, that provided inexpensive reliable service. Air Canada became competitive.

The same happened with the railway business. When CNR was privatized, it transformed into one of North America’s best railroads.

The question arises, what would be the result of government privatizing health care? Education? Would similar benefits accrue as did with air and rail? I can hear the bleating of protests against this idea already. It would create elitist education and medical care. The rich would get it, the poor wouldn’t. But why then, did this not happen in the air travel business? Deregulation and privatization actually made air travel more accessible to people with lower incomes as prices dropped. Would not the same thing happen with medical care and education?

One might ask the opposite question of McInnes. If services provided by government are so important, why not go the other way and have current privately provided services of equal importance taken over by the government? Isn’t food vitally important? Shouldn’t government take over the agricultural and food distribution businesses? How about housing? Shouldn’t government take over housing? Instead of some people living in wealthy enclaves like Shaugnessy or the British Properties, some in middle class neighbourhoods and some in slums, shouldn’t the government take over the housing business lock, stock and barrel and provide everyone with equal subsidized housing?

Why not raise taxes to 90% and have government provide everything that is vital and important, leaving just toys and trinkets to the private sector? But hey, some people see toys and trinkets like i-Phones and Blackberries as essential. Maybe the government should take them over too!

The reason McInnes would oppose the government increasing its scope and taxation in such a fashion (presuming he would oppose it) is exactly the reason why we should celebrate Tax Freedom Day.

Postscript: I am currently reading Matt Ridley's fascinating book The Rational Optimist. In the first chapter, called A Better Tiday: The UNprecedented Present, he lists a number of ways in which the world improved between 1955 and 2005. These include:

  • average income per person on the planet (adjusted for inflation) tripled
  • the average person consumed  a third more calories of food
  • child mortality decreased by a third
  • breaking down those stats, real income increased in all but six countries of the world (Afghanistan, Haiti, Congo, Liberia, Sierra Leone and Somalia)
  • life expectancy increased in all countries except Russia, Swaziland and Zimbabwe
  • the average Mexican lives longer now than the average Briton did in 1955
  • the average Botswanan earns more now than the average Finn did in 1955
  • a car today emits less pollution travelling at full speed than a parked car did in in 1970

 

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