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When Taxes Are Good for Us

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The government's near miss with a shutdown last week and the follow-up speech by President Obama are the latest episodes in our public conversation about the proper role of government and taxes. As currently framed, this conversation is badly, and improperly, skewed towards the negative. It has somehow become an unspoken "given" that taxes are always bad for you. Government, as the source of taxes, is therefore a bad thing as well.

Liberals at least assume that they are necessary evils -- but still avoid using the "t" word whenever possible. Our most libertarian conservatives seem to think that we could do very well without government and taxes at all. Their position is often: "we always have something better we can do with our own money, thank you." Both the strong and weak anti-tax positions are mistakes when taken to this extreme. There are many instances where paying taxes to an active government is positively good for us. Yes, good for us. And with the threat of a shutdown behind us and our extended April 18 tax day in front of us, it is a good time for us to make that truth a part of the conversation once again.

It has long been understood by economists that there are goods and services that can be most effectively paid for through some kind of pooled -- and compulsory -- mechanism. We typically call these items "public goods" and the mechanism "government" and "taxes". The "free rider" problem makes collective defense a particularly good candidate for the government and tax model of finance.

Fighting off external enemies and keeping our domestic criminals at bay benefits everyone in society. A voluntary model of paying for an army or the police will unravel as people realize that they will get the benefits of protection whether or not they contribute to the cost. Contributions quickly dry up as those who would otherwise be willing to do their part feel like chumps as they watch their friends and neighbors staying safe while skipping the bill. The only assured way to buy an army is for the members of the group to band together and to make mutually enforceable commitments to contribute to the cost. Sound familiar? Of course, these are government and taxes, at your service.

Taxes, in this case, are not an evil, not a drag on society, but are instead a wonderful purchasing opportunity, providing the most practical way to buy extremely desirable goods: peace and security. While there is always room for improvement in how these are delivered, here in the United States, we should all give thanks for having the chance to buy these essentials through a relatively competent system of Federal, State, and local governments. If you need encouragement to be thankful, consider the fate of people in parts of the world where governments do this badly, or where there is no effective government at all. Want to avoid taxes completely? Willing to live in Somalia? I don't think so.

So let's stop pretending that taxation and government are necessarily bad things. They can be, of course, when they outrun the desires of a citizenry or unnecessarily constrain growth. But as a country becomes more prosperous, and is able to move its goals for consumption beyond short-term, survival-based concerns, public goods often make up a significant proportion of what people decide they want to devote a portion of their rising income to purchasing. In terms of individual citizen satisfaction, we can just as easily miss the mark by under-consuming public goods as by over-consuming them. Sweden devotes a high level of its income to purchases in the public basket, and it generally ranks higher than the US in "happiness surveys" and in health outcomes. And its system still produces sound economic growth. The Swedish choices probably don't fully fit American values and expectations, but their apparent success ought at least to make us ask some wider questions.

Instead of basing our strategy on cutting alone, we should figure out -- and then implement -- better answers to some key questions about how and when we put taxation and government to work on the mix of goods and services that we Americans want. A grown-up conversation should ask:

  • Which goods and services would we like, as a society, to buy through a mandatory public buying club, and which ones do we want to buy as individuals? Where do "entitlement" items like old-age protections and health care fall in this mix?
  • How many of these desirable items do we want to afford, and at what level, particularly in balance with our desires to reserve the proper amount for our purchase of private goods?
  • How do we want to apportion our assessment for these purchases among society's members (i.e. who gets taxed, on what, and at what rates)?
  • Which items on the collective purchase list should be supplied through government, and which should just be paid for through government?

Asking these questions is certainly easier than solving them, but as the saying goes, a problem well stated is a problem half solved. The dominant role that cuts in services and taxes have in our current rhetoric states only a part of the problem. As we face the challenge of resolving our debates over government size, scope, and finance, an honest dialog, which appreciates the benefits of taxation as well as its burdens, will lead us to better solutions -- ones that might even include extending our pool of government purchase responsibilities. And, if that is what we really want, then the taxes that go with them will be an opportunity, and not a burden.

Oliver R. Goodenough is co-director of The Law Lab, Berkman Center for Internet & Society at Harvard University and a Professor of Law at Vermont Law School.

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