no third solution

Blogging about liberty, anarchy, economics and politics

Why Don’t We Like Taxes?

September 4th, 2006

After all, the funds collected by taxation are allegedly used to provide for much needed “public goods.” Without public finance by means of coerced taxation, these goods would be inadequately provided by the market. The argument sets up a perfect world, instructs us that the market cannot provide for such a world, and jumps to the conclusion that coerced taxation coupled with government provision is the solution.

We need to consider why the costs of doing business for public goods (i.e., operating public schools) should increase with inflation. Any reasonable entrepreneur will strive to lower his costs and increase efficiency of production when inflation is projected. Public schools assume inflation as a given, and the only policy response is to increase funding (and taxation) in anticipation of the inflation to come.

But in light of the law of utility, taxes represent an important paradox. Each additional dollar of taxes can necessarily only be spent on a less urgent “public good.” From the taxpayers perspective, each additional dollar of taxes requires that the taxpayer forego the satisfaction of a more urgent desire; one which previously was, but no longer is satiable.

So, we don’t like taxes, because we all recognize (most of us do this subconciously) that an increased tax burden makes us worse-off than we otherwise could have been.

no third solution

Blogging about liberty, anarchy, economics and politics