Improving Our Standard of Living (Wattpad Edition)

Chapter 17: Is Taxation Theft?

Most tax revenue is used to fund social programs that benefit working class people—especially those that receive low wages. Examples include public healthcare, public education, public childcare, food assistance, public housing, paternity/maternity leave, and so on.

The working class includes most middle class individuals. They too rely on social programs, especially the kinds we don't call welfare but actually are. Public education for instance.

The working and middle classes combined comprise 80% to 90% of the population. I refer to them both as the working class. They're the demographic that produces most of the goods and services in the world, yet own the smallest percentage of business assets.

In some countries, the working class also receives the smallest share of national income, though it produces most of the wealth. That's why taxation of higher income earners is justified.

While most people pay taxes to help fund public programs, most revenue comes from higher income earners. That's because they have most of the money. They also own most of the business property. According to G. William Domhoff, Research Professor at the University of California, Santa Cruz, the richest 10% of Americans own up to 94% of stocks, bonds, trust funds, and business equity.

According to the Heritage Foundation, the richest 10% of Americans pay 68% of the total tax dollars, though they acquire half of the nation's income [1]. The poorest 50% of the population pay 3% of the taxes, though they receive only 12% of the income.

That's worth repeating. Half the population receives 12% of the country's income. That's why they pay so little in taxes and why they qualify for welfare benefits.

The richest 10% of Americans receive half the nation's income. However, there's much disparity within that group. The wealthiest 1% alone take 21% of the income. The richest 5% combined take 36% of the income.

Wealthy individuals enjoy some public programs. But the primary beneficiaries are working class people because they compose most of the population while paying the smallest share of the tax burden.

This is true of all public programs, not just welfare.

For instance, most of the revenue for public roads comes from high-income earners. But public roads benefit working class people more because they use them the most while paying the least for them.

For another example, most public school students belong to working class families.

Most individuals that benefit from the services of police officers and firefighters are among the working class.

And so on.

Public variants of healthcare, roads, electricity, education, housing, consumer protection, the police force, the fire department, etc. benefit working class people more than any other demographic. Yet these social services are primarily paid for by the richest 10% or so of the population.

Put simply, taxes and public spending are a form of income redistribution.

Are taxes a violation of property rights?

That depends on the extent of inequality before taxes and transfers. A small minority may receive most of a country's income, but that doesn't mean they're entitled to that amount. Especially when you consider that the working class produces most of the wealth in any given nation.

If taxation was a violation of property rights, then one would expect to see a negative correlation between taxation and national scores on economic freedom indices. But there's a moderate positive correlation between them. Nations with the strongest property rights according to the Market Freedom Index are often those with the highest tax rates on millionaires and billionaires. The Nordic countries for instance.