“Taxes, after all, are dues that we pay for the privileges of membership in an organized society.” -  Franklin D. Roosevelt, 32nd President of United States of America

I recently asked a  friend if taxes are are a good thing and his response was that there is absolutely no benefit from levying taxes. His argument was that tax is a compulsory confiscation of someone else's hard earned money. He argued that the very fact that it's compulsory proves that it destroys value, in exactly the way that rape or robbery destroys value. "It's like saying, what is the benefit of bombing up buildings in the economy? A person might say "It creates a job for a building contractor, and the contractor can then buy a dress for his wife." But that doesn't prove a benefit, because if you hadn't bombed up the building, the owner of the building would still have a building ..and could buy a dress for his wife". That was just silly.

Or so I thought.

Most of the taxpayers in third world nations are tempted to view tax as a burden. . But Taxes are in fact good – they are the dues we pay to enjoy the numerous vital benefits that government provides for our society, that the private sector can never provide. However taxpayers in Kenya feel that it is indeed the methods of tax administration that are not fair. So unfair that  for instance, taxes from faithful taxpayers of this republic are used to pay up our MPs taxes. That's how it is. Their compliance is also made a whole lot hard because we use complicated taxing systems. Our politicians hate tax, and that is just not  cool.

So instead of us viewing taxes as analogous to being mugged by the government, we should see them more like the tithing that many of us do in our churches. Most of us see tithes as charitable contributions to the good religious works and we certainly don’t resent these contributions. The government as an institution is dedicated to doing good work, to promote the public interest and thus we should not resent our taxes contributing to those governmental activities. As a matter of course, we should feel good about all the good our tax shillings are doing for us. In any case, the point is that contributing towards an organization that is promoting the public good should never be viewed as a bad thing. Therefore taxes rock!

In cases where an economy does not achieve economic efficiency by itself, taxes will be of benefit. Also in circumstances where there is a distorted economy with negative external factors, a tax may be welfare improving. This formof tax is called pigouvian* tax. However in practice, there are no perfectly undistorted economies. The economy will not provide certain public goods such as courts, roads, or schools either because they cannot be run profitably, or because the government has a monopoly over these institutions.  Also, progressive income taxes have the benefit of operating as automatic stabilizers, helping to smooth the business cycle while reducing the size of boom and bust activity.

Altogether taxes are good. Look at it this way: Taxes are sources of government revenue and government revenue buys public goods. Public goods enhance positive externalities and we all know that positive externalities are obviously good! To put it another way, you can’t support the things the government does, like caring for the elderly, establishing justice, providing public education, fighting terrorism in Somalia as well as protecting lions from brave morans. And yes, paying MP's but you can always vote them out in the end.

*An externality is a consequence of an economic activity that is experienced by unrelated third parties. An externality can be either positive or negative.
*Pigouvian tax is a tax applied to a market activity that generates negative externalities. The tax is intended to correct the market outcome back to efficiency.