Tax relief

We have this thing called tax. Some stuff has to be bought by the government.

People generally complain about it, nevertheless, when it gets down to it, most people recognise that there are some basic functions that are best provided collectively, and that democracy is the best way to mediate just what we are to pay for collectively, and how much of it we will buy.

In order to finance all of this, our elected representatives oblige us to pay a proportion of our income, expenditure and/or wealth. This is called taxation.

And don't we all hate taxation. It is commonly viewed as a great evil. Sometimes and a necessary evil.

People claim all the time to be in favour of a balanced budget, yet they also speak ceaselessly of reducing taxes. I have a piece of news for humanity. There is NO SUCH THING as a FREE LUNCH.

If you want to balance the budget, either be prepared to see government spending fall or taxes rise. Given the scale of the gap in most western countries, you will very likely have to see both.

Which kind of brings us to the expenditure side of things. Government spending, like taxes, is often seen as wasteful and inherently evil. Until you start pointing out the kind of things government spends its money in.

In economic theory there is the concept of a public good. This is good as in 'goods and services' as opposed to the opposite of bad. Such a good can be used by many people, and one people using it is not detrimental to the enjoyment or use of another user. Moreover, once provided there is no way to exclude other people from also enjoying the benefits. (See wikipedia:- http://en.wikipedia.org/wiki/Public_good) Flood defence is a good example. A hundred household living on the coast. One guy decides to build a flood defence. If he asks everyone else to contribute afterwards there is a good chance at least some will decline. Because they already have the benefit of the defence. Such things kind of have to be provided via taxation, or people, being as they are, will always wait for someone else to provide that flood defence, and it will just never get built.

Like the military. This is commonly called defence, even if a country actually attacks other countries more often than other countries attack it. Military forces are also used for UN peacekeeping. That isn't defence either (but it seems less dishonest labelling that as part of the defence budget).

Then there is infrastructure, like roads, telephone and electricity networks.

And then there is education, which most people think should be free for small children, but sooner or later they thing the beneficiary should end up paying for.

Then some people think a rail network should be backed by taxation, and others not. Some people think and urban transport networks should, and others not. Some people think medical help for the old. Others think for families.

There is an endless array of little things some people think should be paid for out of taxes. Taxes that other people should have to pay.

Then there is this concept of tax relief. That if we spend our money on something the government approves of, we will get some sort of tax rebate. So, if I go to church and give them some money, tax relief. Some people even get tax relief on mortgage payments, they actually get a subsidy to buy their own home! Firms get tax relief on some sorts of investment.

This is insane. Why should there ever be tax relief.

Make no mistake, there is no such thing as a free lunch. When someone claims some tax back, they are getting a subsidy of the other tax payers, Now, I like the idea of me paying less tax than the rest. Problem is, so does everybody else. And think of the number of tax officials and accountants getting paid to administer this.

I have this radical idea. Why not abolish, like totally do away with, tax relief. If I make a decision to donate to charity. Good for me. That does not oblige the government to come along and give either me or the charity a subsidy. Try explaining it to a militant atheist, that they subsidise my church. I can understand why it might annoy them.

Or try explaining to a Christian, that they subsidise mosques.

When a company invests, it does so to make profits for its shareholders. Great. Nothing wrong with that. But should I subsidise that from my taxes? What if I think the company is unethical? What if I am a pacifist and they are exporting arms?

We agree a tax rate, that government will raise so much revenue. That everyone should pay according to the rules. Then we start bending these rules every which way. Why? Could it be that politicians are up to that 'bribe us with our own money' thing?

I do not like the idea of subsidising other people's pet causes.
I do not like the idea of subsidising firms' investments.
I do not like the ide of governments offering subsidies for 'good behaviour'.

Besides, all this complexity in the system not only increases the cost, making tax officials much more necessary. It also creates work for accountants. Worst of all, it favours the rich at the expense of the poor. If you are poor and not paying much tax, you have little scope for tax relief. You cannot afford the accountant to claim what small relief you might.

Let the government set the tax.
Let the people pay the tax.
Be done.