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ELL Blog

Ethics of Taxes

Warning: this is a brain dump without editing

A lot of people believe that taxes should be increased just because tax revenue will increase. This is no different from capitalists paying minimum wage just because they can get away with such a low cost or slavers trading and using slaves just because they can. It’s not a logical argument because it completely disregards morals and ethics.

Reasoning of Taxation

What is the point of taxes? Tax is used to function function a society, or a nation. Therefore, taxes should be set at a level that covers the functions of a nation.

Ethical Taxation

Ethical taxation is taxing without reasonable discrimination. Discriminatory taxation means taxing a citizen more than the other due to prejudice or envy and not based on improving society for everyone.

One such taxation policy would be Canada’s luxury tax. The tax applies to cars over 100,000 and planes or boats over 250,000. Why is this tax unethical? It’s unethical because it punishes citizens for having different spending tastes and isn’t taxing based on real wealth. A person buying a $100,000 car could most definitely be using money that would otherwise have gone to housing in a more popular area. This tax policy basically promotes the opposite of housing affordability because people’s reasonable material wants are being taxed.

The case for progressive taxes is that the cost to live is a certain number so to benefit society, its better that the lower income people have an easier time attaining an affordable lifestyle. Since progressive tax rates just means difference in tax on additional units, there isn’t much discrimination since everyone is paying the same tax till the cost of living.

What progressive tax rates shouldn’t do however is dissuade people from working harder in the short-term so that they can benefit in the long term. I think 2.5x the median income is a good gauge. Double means that one person can accommodate two people, and the extra .5 is a buffer for different areas.

I also think ethical taxation means making tax payable to a single entity. So for a federated place, the provincial government should be responsible for paying taxes to the federal. The province can collect the taxes and the federal government charges each province per person. This way the federal government can’t discriminate individuals in their taxing policies.

Functions of a Nation

  • education: giving each citizen the means to live
  • welfare: giving each citizen a hand when they get unlucky
  • defence: giving each citizen peace of mind in their day to day lives (internal and external threats)
  • pooled benefits: things that only a few citizens require but cost insane amount
    • Healthcare (services as well as medicine)
      • Cosmetic surgeries should not be funded unless there is serious quality of life improvements (e.g. nose job, mole removal, laser eye surgery)
    • natural disaster insurance and services
  • regulations: giving each citizen protection from the consequences of their own and others’ actions
    • cigarettes
    • drinking and driving
    • alcohol
    • hard drugs
    • guns (gun liberty strongly depends on the quality of policing; if policing and laws do not protect citizens, guns are good, otherwise guns aren’t useful)
      • of course some guns are for sport, so for sport, the government should designate enough gun use areas
  • permitting collective resources
    • each citizen should be compensated for not owning their right to collective resource
      • put simply, if you are using more resources than the amount of resources that the share each citizen basically owns through the government, you should pay more
        • private property is a permit to use certain land in exchange for collective benefits
        • if you don’t get collective benefits, then there’s no permits either (e.g. sovereignty)
    • collective resources include land, radio waves, air (maybe), water, minerals

I believe I got most of the functions of the government, but I probably need to do more research.

Some of these functions can be funded on a use case basis. For example, if there is a behaviour (driving cars) that costs the government more to provide than if people didn’t drive cars, the people of that behaviour should be paying more for their fair share. This is different from luxury taxes where the government is not spending more to provide luxury cars than non-luxury cars whereas governments are spending money to provide roads used by drivers. If there were less drivers there would be less need to spend on roads. People who take public transportation are saving the government money, therefore a higher share of the cost of the roads should be paid by car owners rather than public transportation users. In other words, all roads should be tolled if reasonable public transport alternatives exist. So say the main highway that runs along the GO train. No I don’t believe it should be taxed because public transport is slower by more than an hour. If public transportation can get you to a location with a time difference of no more than 30 minutes to an hour max, then a case for taxation can be made.