Sadly, no one seems to know any more. In simpler times, it was the method(s) chosen to raise the money necessary to operate the country. Most of it came from tariffs. Now income and sales taxes gather the most, but with lotteries, taxes on alcohol, tobacco, gambling and soon marijuana becoming a meaningful amount.
The government is running out of revenue tools so tax policy will become arbitrary and disjointed.
There is an easy answer. Tax policy should be such that the necessary money is drawn from the economy as a whole in such a way that there are no barriers to achievement.
Under an ideal tax policy, the value of what governments does with the money exceeds the cost to the economy to provide it.
No tax policy will work while spending is less than ideal. There is no tax, fair or efficient, that funds wasteful spending.
The conflict comes when we realize that the fun in government is spending money, not working on systemic efficiency. Efficiency is hard work and who wants that. Better a grant for something of little value that no one wants save the recipient and the bureaucratic overseers. Especially if the optics of the grant are good. Waste doesn’t matter when the optics are good.
Governments spend money on things they don’t use and they use other people’s money to do it. If you were buying something for a stranger, using someone else’s money, you would not pay much attention to either the price or the value of what you get back.
Governments must spend less time and trouble on tax fairness, tax reform, and revenue tools. Spend time instead on spending money better, much better. When governments cost more than they are worth, chaos eventually ensues.
Chaos may not happen as quickly or to the extent it has happened in Venezuela, but it is inevitable.
How far must we decline before governments become contributors to our well being instead of an anchor on that?
Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario.
In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.
Please be in touch if I can help you. firstname.lastname@example.org 866-285-7772