|That time of the year|
Tax time is here, and many
people are wondering exactly what to tell the tax man in their tax returns. For
some, the temptation to move a decimal point to the left or right as they fill
in their income and claim forms it too great to resist. Particularly with many
'middle Australians' being quietly seduced into the
61.5-cents-in-the-dollar-effective-marginal-tax-rate bracket after the last
election's spending orgy. An extra 100 dollars on the 'expenses' column means
an extra $61.50 in the bank account. Not bad for 0.5 seconds work.
But what about the morality? Given the problems with the tax system, is evading
tax merely a right or is it
in fact an obligation?
It's not that taxes are evil
exactly - just that they reduce wealth because so much is lost through the
taxation process. Recent estimates put the immediate overall welfare loss at
20% (ie to spend $1 of government revenue costs the economy $1.20 because of
disincentives, having to pay bureaucrats etc), but that doesn't take into
account the damage that the government actually does
with the money. Paying a bureaucrat to decide whether you can cut a tree down
on your own property, paying someone to decide whether you are being discriminated against
at work, paying someone to decide how much someone else 'should' pay you for
your labor, paying countless petty bureaucrats to run around and issue industry
fines against people for not complying with ever more complex compliance rules
.. it all adds up).
By evading taxes, you are creating incentive for yourself, and therefore you
are likely to generate more wealth, and you stop the government damaging the
economy with your money. This is a win / win. Or at least it would be if it
weren't for the possibility of having to spend time in one of Her Majesty's Hotels sharing a
cosy little cell with that big bloke called Bubba. So evading tax is good for
the overall welfare (ie good for 'society'), but possibly bad
Hard-core libertarians would say
that you don't have an obligation to put yourself at personal risk for the
overall benefit of 'society', so they have no obligation to put themselves at
risk by evading taxes. Many statists however, say that
you have an obligation 'to the common good'.
Hence for libertarians, tax evasion is merely a right. But if you are a good
statist, then tax evasion becomes an obligation.
It's a pity more statists don't realize this.