Taxes as Payment for Services

When discussing taxes, there is a trope that seems to come back over and over again: we pay taxes in exchange for the services rendered by the government. Most commonly mentioned as services are infrastructure and the legal system. Most recently I saw it in the comments under Matt Yglesias’ post where he jokes that murder would be an appropriate way to deal with tax expatriation. (I must confess I do not see much that is amusing about murdering people for the crime of paying taxes to a different country than the United States.) The “logic” is that taxes pay for things such as the legal system, the enforcement of property rights, roads, etc… Those things are used by people to build their companies and as a result, it is proper that they pay for what they use.

There are too many things wrong with this argument to list. But there is one which suffices: the vast majority of taxes pay for transfer payments and the bloated defense department. So when you next hear that the rich should pay for the roads and courts which were necessary to make their fortune, it is often futile to speak of private roads and tribunals. Instead simply ask if from their tax bill, the rich should be allowed to deduct the price of medicare, social security and the much of the defense budget which do very little for them.

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4 Responses to Taxes as Payment for Services

  1. thetawavesii says:

    I work for a living, I am far from rich, and yet I pay 28% of my income to taxes, about a third of which goes to pay social security and medicare, far more than a rich man like Mitt Romney pays. I will never own the houses that Mitt Romney enjoys, nor any house at all for that matter.

  2. Joe Seydl says:

    Yes, let’s defund SS, even though a third of retirees are entering retirement with nothing other than SS payments to live off. Or let’s defund Medicare, even though the system does a better job at controlling health care costs than does every private insurance plan. I’m all for gutting the defense budget, but your libertarian pal Paul Ryan has made it very clear that he wants to keep defense spending at currently levels.

    • PrometheeFeu says:

      Hello Joe,

      My point was not that we should de-fund Social Security or Medicare. My point was that given that Medicare and Social Security is what taxes really pay for, it’s just wrong to say that rich people’s taxes are a payment for their use of roads, the education system, etc…

      But I don’t want to be dishonest, even though it is unrelated to what I just said, I do want to defund Medicare and Social Security. Obviously, any such action would require plenty of transitional provisions to ensure that those who expected to rely upon those programs not have the carpet brutally yanked from under them. On Medicare, I am no expert on that matter. I do know people who work in the medical industry who say that the Medicare rules are byzantine, leading to sub-optimal care being given in at least some fields. (I’m speaking about pretty radical left wing friends here, not fellow libertarians) I also know that there are plenty of absurd regulations that raise the costs and prices of private insurers. I’m not sure how things would shake out under an alternative healthcare system, but it sounds quite plausible that we would end up with cheaper care.

      As for Paul Ryan, I have never met him and cannot claim him as a friend. I also find amusing the claim that he is a libertarian. Sure, he is more libertarian-leaning than many of his colleagues, but is more of a conservative than a libertarian. So I disagree with him about the defense budget.

      • Joe Seydl says:

        Well, I’m glad that you don’t want to “yank the Medicare and SS carpet out from under the feet of poor people.” But how about a little international trade in health care? The best place to go for a reading on that would be Dean Baker’s work, some of which can be found here: http://www.cepr.net/documents/publications/free-trade-hc-2009-09.pdf

        I was slightly kidding about the whole Paul Ryan=libertarian claim. He’s obviously not by philosophical standards. But he does — as well as many other anti-tax crusaders, such as Norquist — fall under the dysfunctional philosophy of “American libertarianism,” which claims to support low taxes and small government in speech, but which has established a historical track record of blowing up the deficit by engaging in pointless wars with nonviolent countries.

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