Tax and Spend!

So, I don’t really enjoy paying taxes.  I don’t know anyone who does.  Yes, it does suck to see a fat chunk of my paycheck disappear each period (especially the last one…ugh).

It seems that free-market economists generally argue for the lowest taxation rates possible, contending that excessive taxation inhibits growth, and that growth is ideal. (Sorry Josh, probably just bastardized that, so here’s your opening.)

Anyway, what about that other part of capitalism and the market that we all learned about before college — that simple, ruthless, elegant concept of supply-and-demand?  Why is it that tax discourse has been shaped by anti-tax free marketers who seem to ignore a bedrock principle of their own: people pay what they think something is worth.

Now, I admit that the above argument wouldn’t have really made much sense 250 years ago, when our forerunners got mad at England for screwing them over.  After all, there wasn’t really anywhere else for them to go.  (Well, they could have gone west…but let’s assume that would be ultra-annoying, and fairly dangerous, given the constraints of the time.)

My above argument might not have even made much sense a hundred years ago.  It would start making more sense about fifty years ago.  However, it’s eminently practicable today.

The situation is this: under our graduated tax system, the richer one is, the higher percentage of income that person must toss back to the government, and thus the grumpier that person has the right to be about paying taxes.

HOWEVER, the wealthy and super-wealthy also happen to have the greatest mobility of anyone in the world.  They are the ones who could pick up and move to another city, state, or country (and may do fairly often, thanks to taking new jobs).  They are the ones with the most information, and the most money to pay other people to find information — information that would allow them to calculate where they would pay the least in taxes while maximizing their own revenue, if they’re interested in that sort of thing.

Therefore, the people with the most legitimate claim to disliking taxes are also the people most able to avoid paying them.

Instead of looking at taxation as some great evil, we might consider that it is, in fact, a manifestation of classic supply-and-demand forces.  You want to live in California, not South Dakota?  Oops, you might pay higher taxes.  You want to live in San Francisco, not Bakersfield?  Okay, more taxes.

The fact that people make these trade-offs, time and time again, demonstrates that higher tax rates are not the devil: they are simply the cost of living in the most desirable areas.  In today’s information age, in which a random island in the South Pacific could still have T3 and 4G, those most affected by tax increases have the freedom to reject said increases more than they ever have before.

Let’s take, for example, the city of Miami.  It’s glamorous, it’s fun, it has a great art scene, and a fairly thriving business culture, to boot.  It also levies taxes (though, as LeBron probably calculated, less than those in some other metropolises).  Miami also happens to be a very quick plane ride, or even relatively manageable ferry trip, from a dozen countries in the Caribbean that are considered tax havens, such as Anguilla, Antigua and Barbuda, The Bahamas, Barbados, the British Virgin Islands, the Cayman Islands, etc.  I mean, would it really be so awful to live in the Bahamas?

And yet — people still live there.  Miami has a bevy of the superrich, who would be able to travel between these islands and the mainland with ease, or who could even do much of their business from an island.  And yet — most don’t leave.

So, maybe instead of considering taxes as bank robbery, we should recognize that those who are most impaired by them also choose to keep paying them.  Maybe taxes aren’t just arbitrary and unjust levies on individuals, but simply the varied costs of living where you really, really want to live.

N.B.

-For all of our whining, the US also does have the lowest tax rates of any first-world country but Switzerland.  (Die Schweiz also happens to be more of a tax haven for foreigners than it is for its own people.)

-Maybe taxes are just giving what you owe others.  Saying that some genius individual could found a ridiculously awesome company and make bajillions of dollars no matter where he lived, or with whom he interacted, is simply ludicrous.  For example, it’s no coincidence that Silicon Valley has become Silicon Valley.  Paying taxes is a way of recognizing, “hey, yeah, I didn’t do this all on my own, and to say I don’t owe my community anything is the height of hubris.”

-I still don’t like paying taxes, but I do enjoy my tax refund and the annual vacation it funds.

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