THE HIGH PRICE OF TAXES
Most sane people hate paying taxes. They do so because even at the most intuitive level they do understand that they are being robbed. Sure, people always like "free" and will go to great lengths to get "free money" or "free stuff" from the government, but the one thing is "independent" from the other precisely because that's how people have been "trained" to think about it. Politicians want you to believe that if they tax from "other" people, they can rob them in your name and split with you the ill-gotten gains. Thus, if it comes from the government it is "free". The only tiny flaw in this thinking is that what people do not realize, what politicians never refer to is the actual, ludicrous price that everybody (rich and poor alike) pay for that "free" stuff. And we are not just talking about moral or ethical values, we are talking about real wealth.
THE ISSUE
Most brain-washed, brain-dead socialist-types keep drilling younger and unprepared minds with the idea that paying taxes is good "for the greater good" of society. Of course, they never bother explaining exactly who is this "society" or how exactly will you, personally, benefit above and beyond of what you would get in a tax-free economy. Any and all so-called "tax benefits" are always referred to current economic conditions as if the removal of all taxes would have no impact on the economy at all. They say:
- If there would be no taxes, there would be no roads because nobody would be able to afford them (in current economic conditions).
- If there would be no taxes, most children would have no education because nobody would be able to afford it (in current economic conditions).
- If there would be no taxes, there would be no socialized medicine because nobody would be able to afford it (in current economic conditions).
And so on.
And on.
And on.
And on.
Problem is, there is never, ever a shred of evidence about the so-called "nobody would be able to afford it (in current economic conditions)" because "current economic conditions" would not exist in the first place! Yet, every time an economist begins to crunch numbers and takes a hard look at what would have happened (to the real economy) in a tax-free environment, it becomes patently clear that not only people would be able to "afford it" but that everybody would be far, far better off because, as we said, "current economic conditions" would have never happened in the first place!
We have described this effect in our articles Socialism - The Most Addictive Drug, Piketty Fences and Taxes And Myths. Taxes (for which socialism is big) decrease everybody's wealth and this much is obvious; the higher the tax the lower your wealth. Yes, it is that simple. But, there is more. Much, much more.
PLAIN COSTS AND TAX COLLECTION EFFICIENCY
In order to further obscure this reality, many countries collect information about the amount of money it takes governments to collect taxes. Such information is collated by supra-national apparatchik organizations such as the OECD. For example, the graph below shows the percentage of tax collected that is "spent" by governments collecting said taxes.
As you can see the percentage varies from roughly 0.5% to 2.5% (give or take). Based on these numbers the OECD, governments and other apparatchik organizations claim that tax collection is indeed very "efficient" and that there is very little "waste". And there you have it. Proof positive that your government is not wasting your money collecting your taxes. You should be so proud. As a matter of fact, we are so, but so happy with these news that we will, from now on, donate extra money to our tax collector and will urge everybody to do the same!
Or… perhaps we should take a look at the whole data set before making that decision… what do you think? Yeah… lets.
TO BEGIN WITH
To begin with it is interesting to point out that the above the table only measures the amount of money that governments are wasting collecting your money. And this is, taking the data at face value… because… you know… governments would never, ever, ever "massage" data to make them look good. Nooooo… that could never happen. But so that people will not call us names, we will play with those numbers. Let nobody say that we are not good sports.
What no government bothers measuring is how much money and time (which, again, is money) you waste being "compliant" with taxes. This is quite an oversight considering that in almost all countries in the world we, the people, end up collecting and calculating taxes for the government. We all do this at different levels and for different reasons but the most affected group of people are those business collecting taxes for "Value Added" or "Sales" or "Employment" excuses. If we do a quick statistic based on available data, we find out that 90% of all companies in the world do so (and this is quite a conservative figure). Let's say this again; 90% of all companies in the world waste time collecting, calculating and submitting tax money to the government. What this means is that at least 90% of companies in the world are effectively employees of Tax Collection Organizations. Worse. They are unpaid employees of such organizations. Worse. They are "compelled" unpaid employees of such organizations. Go it? Compelled as in a gun to your head.
All this compliance work is obviously not free to us, but it is free to governments and tax collectors because they "externalize" this expense to us. These are off-book expenses that we, the people, keep paying. But this is not all. It so happens that government organizations also have to perform tax compliance tasks (however ridiculous it may sound). This also has a hidden cost that statistics such as the OECD's above graph do not take into consideration. Unfortunately, we don't have apparatchik organizations that are paid to collate or research this data simply because it is not "relevant"...whatever… As such, we have very limited data sources, but not entirely. From time to time independent organizations do perform research in this area. One of such occasions is the Fraser Institute in Canada who came up with a research paper titled "The Compliance and Administrative Costs of Taxation in Canada".
Taking all compliance costs into consideration for all Canadian taxpayers (individuals, business and corporate) they calculated that the total compliance cost to fulfill the Canadian tax mandate for 2007 was between 16.7 and 22 billion CAD. Now let's place this number into perspective. In 2007 the total "tax revenue" in Canada was about 450 billion CAD. According to OECD numbers, the total governmental administrative cost to collect taxes in 2007 was 1.22 %. If we now add the average between the range calculated above by the Fraser Institute (or about 4.3% of collected taxes) we reach the real compliance cost of 5.5% or 25 billion CAD.
In other words, in 2007 Canadians wasted 5.5% of their hard earned already-taxed wealth in tax paperwork alone. Let's be clear. We are not talking about paying an extra 5.5% in taxes; we are talking about burning 5.5% of all collected taxes in bureaucracy that produces exactly nothing! Allow us to ask you this. Would you, willingly, toss into the garbage or burn 5.5% of your income for no reason? Of course not! Then why are you collecting taxes and performing paperwork for the government if this is exactly the very same thing?
We have taken Canada as an example because is not a "unique" country such as US or UK since, tax-wise, it does not hold too many peculiarities in their tax code. If we would have done the same calculation for UK and US the numbers would have been significantly higher albeit they would be less representative. If we perform this very same calculation and estimate what would be the average for all countries in the world we arrive at a figure in the order of 5%. That's right. About 5% of all the taxes collected in the entire world goes puff! into nothingness. At least it did so in 2007. But things have definitively changed for the worse since 2007. New taxes had been imposed because new and gigantic debts have been accrued. As such we must consider this number (5%) as the lower end of waste in 2015.
Note: please see the Glossary if you are unfamiliar with certain words.
