3/29/2009

Taxation?

I had a thought that may have been obvious to some, but for me, it was a little slow at becoming a reality. I thought of the true meaning of taxation, and if it was, in fact, the source for government revenue. I stumbled upon a book online that briefly covered my thoughts in skimming it. Why do we care of taxation? I can see that the money I suddenly can't choose to use due to taxation is a issue we all must tackle. I cannot, for the life of me, understand why we worry about how it is used. In the news lately, anyone with a online associates degree will arrive on the television and protest the use of the public's money in the recent "stimulating" acts of congress. I haven't seen anything that would suggest the money that is taxed from me going to the government is used for anything specific. The instantaneous restriction and subsequent expansion of the monetary system would lead me to see that all that is happening has to be the revenue services of our government are taking our money, placing it into a pile on the white house lawn, and burning it. At the same time, they print more and decide to use it for something that would make them happy. The distribution of wealth is a concept of child's play in that scenario. Someone please tell me that I am an idiot, and that I am missing the elephant in the room. Explain to me what i am missing!

6 comments:

Alexander said...

If you look at the example of our latest SUU elections, there is a lot of concern about where taxes are spent, or in our case, student fees. Everyone that makes an income pays taxes, just like everyone paying tuition pays fees. Naturally, since we cannot avoid paying either, we want to know that the money is being well spent. The government may not have a specific list of how many hammers they bought with your last taxes paid, but they do have a way of tracking spending through the budget proposals every year. The different allocation of money for health care, defense, social security and numerous other items are the reflection of where they plan to use your money. The reason we care is the same reason that all these items come up in elections, we all have concern about how much money gets diverted to each of them.

Trevor said...

I believe that the American people are concerned about where their tax money is being spent because they work hard for their money and want to ensure that it is being put to good use. Those in favor of the bailout do not mind that they will be paying off the $800 billion for years to come because they believe the bailout to be a good use of tax revenue. Those same people many not be so excited about money being spent on the war in Iraq. Regardless of view points, Americans are concerned about government spending because they don't want to feel like their hard earned cash is being wasted on some insignificant cause or government policy.

Landon said...

Greedy would seem to be the answer. We worry about the money because we never think we have enough. The issue at hand is when it became your money; it’s always been a staple of the United States that you have to pay taxes. So, if you never have the money and you never get to realize a gain from it, is it ever really your money? I would say the biggest issue with taxes isn’t where my current money is going (never realized taxes), but where my future funds might be going. I am not talking about the unrealized portion (taxes). I am talking about the other percentage you are expecting in the future, and by this I mean an increase in taxes to pay off debt. One of the issues with the stimulus package is, where does the money come from, are we going to be over taxed in the future to help cover the funds needed to survive today.

Jason said...

I would hope that Americans continue to care about how the government spends our tax money. We need to always watch the government and make sure they are doing what we want. That is the purpose of the government. They are supposed to carry out the will of the people. If the government is doing things that the majority of us would not want, we need to be able to recognize that and put an end to it. That is why the current push by government to take control of certain private institutions scares me.

anthony said...

People care because that tax money is supposed to come back to enhance their life. For example, we give tax money and in return the government builds schools, roads, etc. If our tax money is wasted that would mean we're getting nothing in return. Also, tax increases are happening all the time, obviously people will be upset if taxes are increased and we're seeing no benefits come from it.

Dr. Tufte said...

-1 on Liam for multiple grammatical mistakes.

I'm a little flustered by this whole thread. There's a lot here that's unusually incoherent: I can't even tell if it's wrong. I'll try to shed a little light.

First, I think there is a huge misperception that the government doesn't know what it did with the money it had. Unfortunately, I think they know in excruciating detail where the money went. Instead, the problem is that they don't plan very well where it is going to go.

Second, there is a huge amount of conflation of taxation and spending with the monetary system. In truth, there is very little relation. Yet people believe a lot of conspiracy theories about this relationship. I haven't read the linked book, but my suspicion is that it falls into this category. A big stumbling block here is the idea that private banks can create money "out of thin air" with or without a quasi-governmental central bank like the Federal Reserve. My, admittedly casual, experience with sort of argument is that people accuse the Federal Reserve of doing things that could just as well happen in its absence.

Third, there is a general sense that the government is profligate. I challenge anyone to come up with a government employee who can document significant amounts of waste. When you pick at those stories a little bit, what you usually find is a (long) list of things that don't add up to much. Just like the private sector, 2/3 to 3/4 of what the government pays out is compensation to employees. If your list isn't filled with 2/3 to 3/4 of people not doing their jobs, then you should probably withdraw that argument. Having said that, there are a lot of government jobs that don't seem very busy. The thing we need to remember there is what's important is whether or not those jobs are busy on the margin, not on average. For example, (professional) firefighters don't do much work on average. But clearly, their average workload is not the right way to think about what they're doing.

Fourth, Americans are obsessed about taxes, when they really ought to be obsessed about spending. One way or another the spending needs to be financed. There are only three ways: taxing current income, borrowing (to be paid off by taxing future income), and printing money (which devalues nominal wealth, which is the primary way that people hold their past income). Our obsession with taxation merely means that spending is being increasingly financed out of past and future income. No one talks about whether or not that is a good idea.

Fifth, we don't live in a democracy. We never did. We live in a republic. By definition, that means that we don't have a lot of direct influence. My experience has been that people that don't know the difference tend to the most worried.

Sixth, Americans complain a lot about our government. Fine. The acid test, though, is whose government would they accept in exchange. Some people can answer that question, and more power to them. But ... most can't. It would be helpful if that group wasn't so uppity.