How Taxes Help You

Many people complain about taxes, but most don’t realize that taxes are beneficial to society, and thus you.  The way I see it, taxes are taking a step backwards initially.  But because it brings out good benefits, the result is taking five steps forward.  For example, we pay a lot of taxes for our freeways.  So that’s a step backwards because we, the citizens, have to pay.  But think of the benefits: you can travel across the state with ease, you don’t have to take back roads to get to a far destination, you don’t have to stop at a stop light every five minutes, you’ll reach your destination probably four or five times faster, and it boosts the economy because working people can now work at other places and not be confined to their town.  So this one step backward was a cost, but you got a huge benefit from it, which is probably equivalent to taking ten steps forward.

Another way to see this is using the Laffer Curve but in all aspects.  To sum up, the Laffer Curve was an idea made up in the 1980’s and they suggested a way of maximizing results from certain costs.  For example, the government needs to collect taxes in order for it to spend on governmental projects.  If the tax rate was 0%, there would be no revenue because everyone would keep their money and the government would get nothing.  If the tax rate was 100%, there would still be no revenue because if you had to give all of you money to the government, then there would be no incentive to work and thus, there would be no taxes to collect.  So here’s the question: what is the maximal point at which you’ll get the greatest revenue?  And if you tax more, at what point would you get less revenue (a diminishing return, in other words)?  Most economists and scholars say it’s around 30ish%.  So around 30ish% is the point where you take a step back (by paying taxes), but you take some steps forward (the maximal gain from governmental projects).  And since you’re part of society, you would benefit too.  So let me bring up some examples of which I consider take a step back (again, by paying taxes), but you get an advantage from that cost:

1. Medicare
2. Medicaid
3. Social Security
4. public schools
5. libraries
6. public universities
7. parks
8. zoos
9. museums
10. freeways
11. foreclosure bail-out plan
12. federal student loans
13. police departments
14. fire departments
15. sanitation department
16. Veterans Benefits
17. military
18. prisons

I’m not saying that everything in this list has obvious benefits, but I’m sure if we research it, we can discover how these are benefits to society.

Now, I can imagine a critic saying, “but Shaun, why should my taxes pay for public schools?  I don’t have children, I’m educated, and I don’t care about how our children are doing.  So why should I care?”  Let me reply with two answers:

  1. Bentham gives this argument.  Suppose you don’t pay taxes for public schools.  What would happen?  Well, most children wouldn’t be able to go to school and become educated.  If they’re not educated, then they’re not going to help out society.  After all, the reason why you benefit is because of people in society.  How did you get your car, computer, house, utilities, etc.?  Someone had to learn this stuff.  So helping out children in your society actually benefits you.  Let’s say that from a scale of 0-100, you NOT paying taxes would put you at a 45.  Now, with you paying taxes, that boosts everyone (including you), and you personally would probably be at a 60 because you contribute to an educated society.  Hell, in places where you work, you’d want smart people working either for you or with you.  We don’t see this because I think people emphasize on the negatives and the costs (paying taxes) and hardly pay attention to the positive outcomes.  After all, if the economy is good, we really don’t praise anyone.  But if the economy is bad, immediately someone is to blame.  We focus on the negatives and not on the positives.
  2. For my other example, take a look at your computer.  It probably costs around $1000 (with the internet, printer, and other stuff).  Let’s say that Bill Gates decides that he wants to get richer and he charges $5000 for a computer.  Now, I bet with that, you couldn’t afford it.  In fact, a lot of people can’t because it’s too expensive.  It seems that only the super-rich can afford it.  But if a smaller percentage of people can afford it, then that means Bill Gates won’t get a bigger profit.  So going back to the Laffer Curve, let’s say that a computer can cost from 0-infinity dollars.  Well, if it’s $0, Bill Gates won’t get any profit and he won’t get any incentive to work, which means we might get crappy computers.  If it costs infinity dollars, no one could literally afford that, not even Bill Gates.  So at what point would Gates get a maximal profit without diminishing returns?  Probably at the price it’s at right now.  The cost of selling cheap computers has a great benefit because almost everyone can afford it, and Bill Gates can still get rich.  If he charged more, he would get diminishing returns and not be as rich as he is right now.  Henry Ford had the same idea when he made cars.

Where am I going with this?  Let’s talk about Health Care.

So what are the costs?  Obviously, you have to pay higher taxes.  What are the benefits?  Every American is covered.  So back to my school analogy: if everyone is healthy, that benefits everyone (including you) because society can function better if they’re healthy.  So the cost of paying a higher tax is lower than the benefit from everyone being healthy?  Again, with the analogy, it seems that the status quo puts you at a 45 on a scale from 0-100.  With a nationalized health care system, you would probably be at a 60.

Of course, there’s other arguments like how the market works and the incentives of doctors and nurses.  But I want to stick with this line of reasoning for now.  Thoughts?

Advertisements

About shaunmiller

I am a Ph. D student at Marquette University. The primary purpose of this blog is to get my ideas out there, and then have other people scrutinize, critique, build upon, and systematize beliefs. This blog will sometimes pertain to what I'm learning in my classes, but it will occasionally deal with non-classroom issues that I'm thinking about as well.
This entry was posted in Government, Health. Bookmark the permalink.

13 Responses to How Taxes Help You

  1. Kevin says:

    I heard about a recent study that showed that self proclaimed republicans don’t use logic when making decisions. They took 50 people that were hard line republicans and showed them clear cut evidence that Saddam Hussein was not involved with 9/11, including Dick Cheney saying he wasn’t. Afterwords they asked them if they still believed he was involved. 48 out of 50 said yes. Next they showed them evidence there were no death panels in the proposed health care bill and asked how many still believed the bill included death panels. All 50 said there were still death panels. So could you find a less logical way to make this argument? Perhaps… God likes taxes? ah… case closed.

    • shaunmiller says:

      Interesting. If you find the study, link it up.

      It’s unfortunate that ideology drives our actions instead of evidence. People should read Clifford’s “The Ethics of Belief.”

  2. Kevin says:

    Here’s where I first heard about the study: http://www.youtube.com/watch?v=rzUzR-ymS2U&feature=channel_page

    And here’s an article about it as well:
    http://www.livescience.com/culture/090826-healthcare-debate.html

    I haven’t found the actual text of the study, I’m not sure if it’s published, but it was done by Steve Hoffman, a sociology professor at the University of Buffalo. Oh, and people should just read, I don’t care what it is. If more people actually devoted some time to researching what they think they believe, more people would have a better informed opinion and change their mind. Like Norm, our old co-worker, though of himself as conservative and against gay marriage. He recently read JUST the constitution, not even a persons interpretation of it, just the text itself, and now views himself as liberal and pro gay marriage. It’s amazing what the smallest amount of education can do.

  3. thekillerj says:

    Your line of reasoning holds if we assume all your presumptions to be true. I just don’t like the idea of paying for other people to be healthy/covered by health insurance. Screw other people! I’ll take care of me and my family; save your waiting lists, shoddy care, and death merchants for Europe.

    I don’t benefit by helping fat, smoker Joe get gastric bypass. If he dies, he dies. If I get a terminal illness, I wouldn’t expect my neighbor to help. Whatever happened to accountability?

    • shaunmiller says:

      Sure there’s going to be some freeloaders here and there, but I bet you those are the minority. Again, I bet if there’s some universal health care, you will also benefit from it even if there are freeloaders. Think of it like this: you pay taxes for the library. You yourself don’t go to the library. However, you benefit because people are reading and thus, getting educated from it. Are there going to be freeriders and freeloaders? Sure, but I bet they are only 10% of the population. We just hear about them frequently because that’s what’s always being portrayed.

      My question is this: What’s wrong with free riders? If I can pay for a service from which I receive benefits and if the service is fully supported, why not allow free riders also to have that service? The challenge is to separate the free riders from the freeloaders.

      Also, if you’re going to attack the argument, look at the argument itself. I recognize free riders, all systems do, but it’s still to the benefit of you. Sure we can get rid of free riders based on principles, but if you do that, you wouldn’t benefit as much as you would if we had a system where there were free riders. So think of it like this:
      Option A: you get the same benefits as you do right now.
      Option B: you get better benefits (as does society), and a side effect is that free riders are going to increase.

      I’d rather go for option B.

    • Kevin says:

      People shoplift from stores, should I stop shopping since the stores factor in the cost of measures to prevent shoplifting into their prices?

  4. Kevin says:

    What benefits the herd, benefits the individual.

  5. shaunmiller says:

    Paul Krugman has a great essay on why the market isn’t the best way to deal with health care: http://krugman.blogs.nytimes.com/2009/07/25/why-markets-cant-cure-healthcare/

  6. “Hi:

    Two things

    1) I’d like your permission to (re)print your article on Fareed Zakaria for our website

    2) I was hoping we could use your ‘scribing’ talent for our website.

    The Best Shows Youre Not Watching (dot) com [all one word]

    ‘The Clone Wars’ is one of our featured shows. We’re hoping to round up a few people who can occasionally contribute perspective (via an article/blog) on the shows – maybe a recent episode, future direction, plot shortcomings etc.

    What’s in it for you?
    Primarily a larger audience back channeled to your blog. We don’t pay but the site has a lot of promise and we’re pretty excited about getting it off the ground. Let me know what you think.

    Thanks

    • shaunmiller says:

      Hello,

      You may reprint the article if you wish.

      As for number two, I must decline because I don’t want to watch TV shows and then write about them. I write whatever is on my mind.

  7. Pingback: What I’ve Learned this Past Year — 2009 Edition « Shaun Miller’s Weblog

  8. Pingback: My Thoughts on Passing Health Care « Shaun Miller’s Weblog

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s