Why do We Have Taxes?

Taxes, which are the main source of federal, state and local government revenues, pay for buildings, public education, highways, airplanes, rockets, road signs, and the salaries of millions of government employees. Large amounts of tax revenues are raised from levies on personal incomes, including investment income. The federal income tax is structured to tax different levels of income at different rates, on a gradually increasing scale.

Taxes are an important aspect of nearly every person’s life. Your paycheck is adjusted for taxes. Contributions to charitable organizations are no doubt influenced by the expected tax savings. Taxes affect the cost of owning a home, and tax considerations probably also influence the votes that are cast in local, state and national elections. Taxation of investment income is also an important consideration when deciding upon which investments to purchase, especially if you earn a substantial income that’s taxed at a high rate.

Only without governments would there be no taxes; therefore, without taxes there would be no governments. Taxation is one of the several ways by which governments raise money to pay for the goods and services that they are called on to provide. Governments lack the major sources of revenue available to other sectors of the economy and must therefore rely on taxes to finance the majority of their expenditures. Unlike businesses, governments generally produce very few goods and services that can be sold, especially at a profit. In addition, governments don’t have wage and investment income as do individuals and families. Without these sources of income, governments have little choice but to finance their spending needs by assessing businesses as well as individuals.

Governments are continually searching for additional funds to pay for the needs of their citizens, businesses, and bureaucrats. At the local level, taxes support spending for schools roads, libraries, athletic facilities, fire and police services, and the salaries of county and municipal employees. States collect taxes for highway construction and upkeep, public colleges, buildings, and law enforcement. The federal government levies taxes in order to provide its citizens with an interstate highway system, a capable military force, health services, an Internal Revenue Service, thousands of parks and monuments, and scores of other things.

Taxation, however, is not the only means by which governments finance their spending. They also levy a variety of user and service fees to pay for parks, bridges, transit systems, parking complexes and sports stadiums, where the users rather than taxpayers are expected to bear the operating costs of the facilities. These fees, however, are frequently supplemented by special taxes. In addition, governments at all levels regularly borrow funds to augment their tax revenues. In the 1980s and 1990s, the federal government borrowed billions and billions of dollars annually to pay for expenditures that exceeded the billions and billions of dollars that it took in from tax revenues.

In summation, although unpopular (and many may argue, unfair), taxes are a necessity. The standard of living of a modern society demands it; governments must collect the revenues in order to provide the goods and services that their citizens need, want and demand.