Given the state of the global economy, the massive debts and deficits run by governments, and the requirement to either raise revenues or cut taxes, it appears that people are stuck in an unimaginative tax or no tax debate. In the United States, congress is divided over whether to raise taxes on the wealthy or close loopholes in the tax code. The Occupy movement has consistently advocated for higher taxes on the 1%. Warren Buffett has weighed in, claiming that he should pay rates that are at least as high as his secretary.
Piers Morgan provided a perfect example of the current debate when he declared that he was willing to pay higher taxes and then asked Newt Gingrich if he, too, was willing to pay higher taxes. Pro-tax people often echo Morgan's sentiments, recommending that people (rich people, mostly) pay their "fair" share. This frames the debate in a fashion that is very prejudicial to anti-taxation individuals, and closes off many valid points by implying that taxes are the price we pay to live in a functioning and peaceful society. That's a great way to practice politics, where division of the community can pay great dividends, but its a poor way to solve problems.
The problem with the approach is that it's based on some false assumptions. First, there is the assumption that taxes are the cost of a functioning and peaceful society, which leads to the conclusion that anyone who resists taxation must not value a functional, peaceful society. Second, there is the twin assumption that taxes are good, full stop. Third, there is an assumption that taxation is the only way to fund government, with an understanding that government is the best solution to the problems faced by the community.
None of these assumptions are solid, and they fly in the face of what we see in our daily lives.
Let's look at the first assumption, that taxes are necessary to maintain a peaceful, functioning society. This assumption appears to be based in comparisons between first world developed nations and under-developed nations. First world societies have paved streets, garbage collection, clean water, street lights, security and all the things that make life safe and enjoyable. Under-developed countries don't have these things, and the conclusion is that they don't have these things because the government does not get enough tax revenue from the citizens.
According to World-Wide Tax.com, the tax system in Brazil is progressive, with rates ranging from 7.5% to 27.5%. This should, according to the assumption that taxes equate with a peaceful functioning society, mean that Brazil is a safe place to raise a family. In fact, it leads the world in numbers of murders per year (over 40,000/year by the most recent count) and is far higher, per 100,000 people (21.0) than, for example, Andorra, which has no income tax and only a 10% corporate tax, and had 1 murder during the same period. The British Virgin Islands, with no corporate or income tax (they do have payroll taxes) is similarly peaceful. Taxation, even progressive taxation by left-wing governments, clearly does not necessarily lead to a peaceful, functioning society.
The second assumption, that taxes are good, is essentially the same as the first, without the qualifier that they lead to peaceful functioning societies. The idea is that taxes are just good, in and of themselves. The idea that something is good, in and of itself, is ludicrous. Good is a relative term, and what is good for one thing or person is not necessarily good for another. Taxes are good for those receiving the taxes directly, or those receiving the benefit of the taxes. They aren't good for those who do not receive a benefit. They are not good for businesses, which generate the profits and employ people, which is why even the most tax hungry governments will reduce taxes on specific industries that they wish to see succeed (for example the film or high-tech industries, or specific auto manufacturers) while maintaining regular tax rates on non-favorites. When even the tax man recognizes that taxes are detrimental to the economy you have to wonder what motivates those who assume taxes are a good thing.
The most common assumption of our day regarding taxes is that we require them to fund government and that government is the solution to our problems. The first part of the assumption may be true, but it's irrelevant. The second part of the assumption is the important part, and it's simply wrong. Modern government is not concerned with solving problems; it's concerned with maintaining them to advance its own interests and those of its supporters. During our lifetimes government has vowed to win the war on poverty, drugs, homelessness, pollution - you name it, they vow to wage war on it. The problem is, they never win, or even finish, the war. And in many, many cases, from the federal down to the municipal level, government actually gets in the way of solving the problem.
The reason for this is that taxation is not cooperation. Cooperation between people leads to peaceful, functioning societies. Taxation does not. Cooperation is the product of free association between people with common goals and interests. Taxation is a way for governments to legalize the enforced confiscation of private wealth.
The confusion arises from the assumption that we live within a social contract, and that taxes are part of that contract. This is incorrect. The social contract is a theory or a concept. It existed before taxes, and can exist without them. It simply requires freedom of association, and any freedom of association includes the freedom to not associate - in other words, to opt out of one or more social contracts. Taxation as we know it is not voluntary, nor is it a theory or concept. It is confiscation of private property, time and personal liberty. You cannot opt out of taxation. It does not require cooperation. If you withhold your cooperation you will be forced into compliance.
Is there an alternative? Perhaps not an absolute one. However, it is possible to recognize taxes, like government, as a necessary evil, one that should be limited as strictly as possible. This, I think, is the most important thing for us to consider. We live in an age where governments grow bigger by the day, where they intrude in our lives more, and where they spend more and more money, regardless of political stripe. The outcomes have not been good. At the same time, technology has democratized communication and cooperation in ways that have revolutionized how we accomplish difficult goals. Compare the success of decades of foreign aid with the success of micro-finance operations like Kiva.org More taxes mean more government, and more government means more control and less liberty. Less government means more liberty, and more liberty doesn't mean violence, war and death. It means more cooperation. Taxation is not cooperation. Taxation is theft.