Why are taxes needed?
Certainly there are the obvious reasons why taxes are necessary: police, firefighters, military, Social Security, Medicare, etc.
While capitalism is generally a good distributor of services and goods it is by no means perfect. The profit motive is flawed on certain issues.
Nobody likes to work for free even with the promise that eventually that free work will pay off.
People don’t work for free or for just promises, generally. In fact, some might call that slavery.
Here is an example of what I’m talking about: generally corporations don’t like to spend too much money on research and development. Research and development is a promise that may not result in any profit.
Hence, the government and the taxpayers have to step in, like with the National Institute of Health which funds research for the drug companies. Also, money spent directly by the drug companies for research is tax deductible.
This has been money well spent by the government. Doctors and hospitals rely more on drug therapy now than any other form of treatment, I hear. This is because these drugs work very well with little risk. And these drugs have certainly worked for the drug companies who have a relatively high profit margin.
Here is another example:
Infrastructure is essential to capitalism. To see what I mean, go to Africa where they have very poor infrastructure for the most part. Many Non-Governmental Organizations say the biggest obstacle to getting aid to the needy in Africa is the poor infrastructure.
But for some reason corporations do not want to pay for infrastructure development. I would imagine that the short term cost-benefit ratio on infrastructure is not good enough for capitalists to get involved without some sort of public assistance, also known as corporate welfare.
Perhaps it would be cost-effective for a collective of all corporations to build the infrastructure they would all benefit from eventually. But how do you organize such a collective and how would you run it? Who would run it?
Apparently Eisenhower answered that question in the 1950s by having the Federal government build America’s interstate highway system. And this decade, the answer is provided by the Chinese central government in their massive spending on all kinds of up-to-date infrastructure, including about $150 billion invested in alternative energy.
But I suspect that the key word is organize. Organization. The government is essentially an attempt to organize the resources of society for publicly desirable goals. And the government cannot operate without taxes. Just like many private organizations charge dues that their members pay with the intent of achieving the goals of those members.
For this reason, I contend, humankind has advanced by forming bigger and bigger organizations. We started with tribes. Then city-states. Then countries. Now the Europeans have formed a continental organization mostly for economic purposes. North America has tried to copy this approach with NAFTA.
While some nutjobs may see this as a fatal conspiracy at work, the reasons for this centralization of organizations and resources is motivated by a rational drive toward economic advancement. In fact, the best way to explain this motivation can be found in capitalism itself. The capitalists refer to it as economies of scale.
The larger a company becomes the more bargaining power it has. For example, Walmart is able to sell goods very cheaply because it is able to buy very cheaply on the wholesale level. Walmart can say to a wholesaler, “We need ten million of your widgets. But we want a discounted rate.”
The wholesaler will be so excited at selling a million widgets that they will discount the rate as low as they possibly can to please the giant Walmart. This is how Walmart is able to put many smaller businesses out of business.
One can find economies of scale in the public sector as well.
The CBO has determined that the Ryan plan to privatize Medicare will actually wind up increasing health care costs for the United States. Basically, Ryan wants to let private health insurers do what Medicare now does. This will increase health care costs because Medicare is much bigger and centralized than the private insurers and HMOs. Therefore Medicare can operate much more cost effectively than private insurance.
Medicare represents essentially all people over 65 in America. Therefore, doctors and hospitals generally want or accept Medicare patients even though they often complain about how little Medicare pays them. Indeed, Medicare pays them much less than private insurance does. So why then do the doctors continue to put up with those low Medicare rates?
Because if a doctor turns away almost all people over age 65, that doctor will be out of business. The biggest consumers of health care are people over 65 and they are almost all organized within the centralized confines of Medicare.
Another example of economies of scale is the Veterans Administration. The VA is able to purchase drugs at a very low rate because it is a large, centralized institution which makes it very attractive to drug makers and distributors.
Likewise, Canada with it’s nationalized health care is able sell drugs to the public at much cheaper rates than can be found in the USA. I suspect the entire nation of Canada has a lot of bargaining power, rather than each hospital in Canada dealing with drug companies and wholesalers on their own.
Indeed, I suspect the drug companies themselves see the advantage of centralizing into one lobbying organization to persuade the US government to make it illegal for Americans to purchase their drugs from Canada.
Here is another way to look at it:
Republicans like Michele Bachmann suggest that we can spend our money a lot better than the government can. So she maintains we should be able to keep all of our money, I hear. And indeed, we will all do different
Republicans like Michele Bachmann suggest that we can spend our money a lot better than the government can. So she maintains we should be able to keep all of our money, I hear. And indeed, we will all do different things with that money if we are allowed to keep it all. Some will spend it all. Some will save it. We will spend it on different things and save it in different ways. The effects of this spending or saving will be scattered like a shotgun blast. It will be unorganized and chaotic.
But when we send all that money to the government, the government will usually spend all of that money for targeted purposes such as defense or Social Security or Medicare. Instead of a scattered shot like a shotgun you have a very powerful laser beam that can cut through anything. The more centralized the government, the larger the economies of scale, the more powerful the laser.
This may be why the state governments were not powerful or rich enough or willing to institute programs like Social S
This may be why the state governments were not powerful or rich enough or willing to institute programs like Social Security and Medicare. It took the Federal government to do that. And as I pointed out before, Medicare is actually more cost-effective than letting seniors take their vouchers around to various private insurance companies.
To see the advantages of Social Security and it’s associated COLA, cost of living adjustments, one need only go back in history to see the conditions of seniors before those programs existed. I recall hearing of many seniors who were forced to eat dog food.
Certainly, centralization of resources through taxes is not always a desired benefit, just as disadvantages of economies of scale can also be demonstrated by the negative aspects of Walmart. Negative aspects which are many. For example, the way Walmart destroys small businesses which create most of the new jobs in America.
I merely wish to point out why we pay taxes to a giant organization like t
I merely wish to point out why we pay taxes to a giant organization like the Federal government which is a necessary aspect of a civilized, advanced society. I still must contend that capitalism is the best way to distribute goods and services in a society. The fall of communism around the world is certainly a testament to that fact.
Indeed, we must accept the fact that there is corruption and waste in the Federal government and in all organizations, and in all individuals for that matter, and certainly in all corporations.
But I suspect that organizations that have been founded to fight corruption in government have learned over time that they are better able to fight that corruption with a larger, more centralized approach…along with a larger organization budget.
