All nations require revenue in order to buy armaments and pay for defense, maintain and expand their infrastructure, keep the health care system and social security intact, support the justice system, pay employees, and so forth. A dilemma in democratic states is how to raise these revenues in a fair and equitable fashion, though no matter what is ultimately decided by the governments, there are always individuals and groups who are dissatisfied, believing they have been unreasonably targeted. There are also organizations, such as the Tea Party and the Club for Growth in the U.S, who are basically opposed to taxation and fight for smaller government and less spending, focusing on the waste that occurs with the massive bureaucracies in the modern state. In addition to revenues required to support the central or federal governments, money is also needed to run the state or provincial governments, county and municipal governments, and school districts. Revenues may be shared among these entities in some nations, or may have to be raised separately.
Multiple sources exist in all nations that can be utilized to extract revenue for the governments. These include taxes on personal income, taxes on corporate income or profits, estate taxes when a person dies, wealth taxes on an individual’s or family’s total assets, consumption taxes, sales taxes, value added taxes (VAT), property taxes on major items like homes and automobiles, gasoline taxes, so-called sin taxes on tobacco products and alcohol, royalties from mining and drilling on public land, and so forth. Tariffs can also be levied on goods imported into the country, which was a major fount of income for the early United States along with the sale of public lands. In addition, tolls can be charged for automobiles and trucks that travel on public highways, and use bridges and tunnels.
A major question of contention that arises in democracies is whether revenue should be utilized in a redistributive fashion, providing income to those who are less wealthy, derived from those who are affluent. Virtually every democracy does this to varying degrees, providing subsidies of some sort to those citizens who are unemployed or less well off. Political parties on the left in most democracies tend to be more generous than right-leaning parties in redistributing incomes through higher taxes on the affluent and grants to the poor. In addition to furnishing income to help poor people survive, the aim of the levies is to reduce inequality to some degree among their citizens. However, the conservative parties on the right claim that this action stifles initiative and entrepreneurship, and that people feel less of a need to work and make money if the government supplies them with an income. Often, when a right-wing government comes to power, it will lower taxes on the wealthy and subsidies for the poor, a ping-pong game with the left that goes on continuously to different extents in different democracies.
Part of the problem in determining just tax and revenue policies in a democracy is that the voters have little or no knowledge of economic theories or finance. They may vote for candidates who advocate certain strategies because they believe it is in their interest and will help the country, when actually it does not benefit them or the nation and even undermines them. But candidates may couch their policies in terms that appear hopeful to the average voter and fools the majority of the electorate into supporting them. And it must be remembered that in America in particular, the affluent and special interests spend huge sums of money to promote policies that will favor them, though perhaps injurious to the poor and middle class citizens. Many voters who are uninformed believe the advertisements and absorb the sound bites sponsored by the moneyed interests, convinced that they are voting for candidates and policies that will be advantageous for them and the nation as a whole.
Raising adequate government revenues and establishing equitable tax strategies will continue to be an unending struggle for democratic states, as fairness in taxation is in the eye of the beholder (taxpayer). There is no solution that will satisfy everyone and the battle between the left and the right over taxation will never end.
Resurrecting Democracy
www.robertlevinebooks.com
Political junkie, Vietnam vet, neurologist- three books on aging and dementia. Book on health care reform in 2009- Shock Therapy for the American Health Care System. Book on the need for a centrist third party- Resurrecting Democracy- A Citizen’s Call for a Centrist Third Party published in 2011. Aging Wisely, published in August 2014 by Rowman and Littlefield. Latest book- The Uninformed Voter published May 2020