Taxation is an extensive issue, politically and economically seen. There are arguments which can be made for high taxes and vice versa for low taxes. However, today I don’t want to look just at the economic impact of taxes, but the general affect it has on the people, companies, and so on. Another factor are the circumstances under which the taxes are collected, e.g. the form of government and accountability.
A Necessary Evil
Taxes do not just affect the costs of a company or the net salary of an individual; it also has an impact on society and the opportunities of others who are less fortune. From the physical infrastructure to education, each investment of the government reflects directly upon the citizens of a nation. A healthcare system which is underfunded isn’t able to get a lot of good equipment, i.e. the hospitals either have to buy cheaper and low quality equipment or they only buy a few of the expensive but high quality equipment.
The decision they make, in turn, may decide the outcome of an illness, injury, or else. Option A means that patients do not recover as fast, or not at all; Option B means that some patients can quickly recover while others have to wait, if their conditions haven’t worsened by then. Consequently, not recovering quickly from a disease or only curing/treating a few results in the loss of productivity of the work force – the engine of the economy -. A loss of productivity means that the employer faces more costs, and in a highly competitive market that is sometimes a death sentence for the company owner.
Profit-orientated healthcare systems, like in the US, got another problem: they have to make profit, otherwise they cannot operate within the market and get crowded out. On the other hand, focusing on profit leads to the negligence of patients, and they in turn have to be charged more. Some may not able to afford it and end up in debt or are not covered at all. No coverage and a missing social security net, as well as worker protection, leads to unemployment, an decrease in productivity, and so on.
This example shows us the bigger picture of what happens when the healthcare system is insufficient and/or inefficient.
Equal opportunities regardless of gender, ethnicity, religion, etc. is also an important aspect of democracy, yet only in theory everyone got the same chances. Probably a major reason for that is the inequal distribution of wealth and income in society – a phenonemon which is visible in many nations. Poverty is, of course, also an economical issue as one of my other articles has pointed out („An Economy for the Future“), a report from the US Government Accountability Office from 2007:
“Research shows that poverty can negatively affect economic growth by affecting the accumulation of human capital and rates of crime and social unrest. Economic theory has long suggested that human capital–that is, the education, work experience, training, and health of the workforce–is considered one of the fundamental drivers of economic growth. The conditions associated with poverty can work against this human capital development by limiting individuals‘ ability to remain healthy and develop skills, in turn decreasing the potential to contribute talents, ideas, and even labour to the economy.”
That’s just the economic side of the coin, but there’s also the societal impact: people who live in poverty, or are near poverty, are often unable to get out of the vicious cylce of poverty. For one, because they may need to educate themselves further which is impossible for people who have to work full-time just to stay a float. And another factor could be the location, and since moving to cities is quite expensive, they aren’t able to lift themselves up from the situation they are in. A consequence of that is also less leisure time and therefore a minimum of social activity – if any. Other side effects, among them the increased risk of addiction, are:
- Poverty increases stress. Stress is well recognized as a risk factor for substance abuse and relapse after treatment. Worrying about how to afford shelter, food, and other basic needs causes a tremendous amount of stress. When you’re struggling to make ends meet, there is a great temptation to turn to drugs or alcohol to temporarily escape from your problems.
- Poverty increases feelings of hopeless. When meeting daily expenses is difficult, dreams of attending college, buying a home, opening a business, or traveling the world seem impossible. Feeling as though you are powerless over your own future creates a vulnerability to substance abuse.
- Poverty decreases self-esteem. In a culture that values material possessions and financial success, being poor can feel like a moral failing. This can lead to feelings of guilt, shame, and diminished self-worth. According to Psychology Today, people struggling with low self-esteem have an increased vulnerability to developing substance use disorders.
- Poverty decreases social support. Having the emotional support of friends and family helps people cope with difficult situations in their lives. However, lower income adults are less likely to have strong social support networks simply because they are expending all of their energy on trying to survive from day to day. For example, a UCLA survey* found that lower income adults are less likely to be married even though they value marriage just as much as their higher income peers.
- Poverty decreases access to healthcare. Although the number of uninsured adults has decreased in recent years, the Henry J. Kaiser Foundation found that 45 percent of uninsured adults lacked coverage simply because the cost was too high. Despite the fact that most of these individuals had at least one working adult in the family, 1 in 5 admitted to foregoing recommended medical treatment due to cost. Access to preventative health care is also severely limited for members of this group. Untreated mental health conditions or chronic illnesses that are poorly controlled can lead to the use of drugs or alcohol to self-medicate symptoms.
(*link doesn’t work anymore for some reason)
Then, there’s also the result of less political activity and the possibility to engange actively in politics to fight for one’s rights, promote ideas or engange in discussions. Something that is essential to a democracy can thusly be not accessed.
It’s a lot of talk for a simple statement, but to me the whole picture must be clear to understand how one – in this case me – comes to the conclusion and argues for the necessity of taxation and a fair distribution of health, as well as a strong social security net and other social policies. Of course, how high it should be is also worth a discussion, but I won’t explore it here.
Cirumstances of Tax Collection
The circumstances under which the taxes are collected is also important, since it allows an insight into the government and how the taxpayer money is used. However, I don’t know from which country you are, but I argue from a western point of view regarding the circumstances of taxation and what, in my opinion, should change.
In democracies, there’s usually known what the government spends the taxes on. Governments release a budget and inform the public about it. In the golden age of the internet, there could happen an improvement though. For more transparency, there could be a website for local, state and national governments which tracks where specifically the money flows into (e.g. repairing a bridge). This would allow citizens to learn more about the taxpayer money and, in case a project gets too expensive and the deadline is always delayed, a vote could take place to determine whether it is cancelled and the taxpayer money otherwise used or the project continues.
Next to more visibility, it also increases transparency and may help prevent the misuse of taxpayer money. It basically is more democratization, if you will.
However, in order for all people to get access to it, investments in digitalization must increase. As it is with the other examples I have given, the economy also benefits from it, but I don’t want to write a novel here.
Hint: Estonia
Baroque 