Tax v. Price: The Morality Cost

2012 could be called, by those with wary eyes toward Washington, D.C., “the year of the tax.” With Taxmageddon, the so-called “fiscal cliff” and of course the Supreme Court’s decision deeming Obamacare’s individual mandate “a tax,” it seems tax increases are on the horizon, whether we like it or not.

Certain legislators and legacy media’s didactic insistence that raising taxes is the only solution reflects their dawning realization as to how much debt the federal government actually faces.

But this attitude disregards the reason they need more money (they spend too much), as well as the source of the money to begin with (taxpayers). Theirs is the kind of desperation of a cornered bandit in an alleyway, reaching for a trash can lid as his weapon.

But even the taxpayers’ money comes from somewhere, and generally it’s from a job and investment – or value, if you will. And what can the taxpayer do with this money? Perhaps they’ll buy a car. Or an e-book. Or perhaps they’ll radically overspend by most people’s standards and buy a $7 cup of coffee. Who knows? The amount of money being spent comes down to how much that individual is willing to pay for something — how much they value something — which we can approximately call that object’s “price.” So in effect, price comes down to personal choice. Someone chooses to participate in the exchange or not.

Not so with taxes. A tax is what the government is willing to make you pay for something. While some people are willing to pay certain taxes, and other people are willing to pay other taxes, it matters little which person you are: At the end of the day, you pay both taxes because you have to. Understanding the value of choice in a moral action makes it easier to understand why market price is, fundamentally, more moral than taxation.

Those who vilify this notion will push it to absurdity and ask then whether any tax is moral, and whether government should cease to exist. In reality, however, we are born to a government that exists for our service, and while we pay for the right, we too rarely get a choice in how it spends our money. More than ever, it seems legislators want to entirely dismiss the “exchange” element in favor of “take, take, take.” (That is: tax, tax, tax.)

Take for instance the heavily lampooned subsidies in Michigan for the Chevy Volt. With an inordinate amount of offered subsidies, potentially costing taxpayers up to $250,000 a piece, the Chevy Volt sold only 6,000 cars by December of 2011. Now, if you compare that to another “green energy” vehicle like the Toyota Prius, you see the stark difference between empowering the consumer and dictating their choice. In 2000, before the federal government got in the business of subsidizing retail sales of electric or “green” cars, the Prius sold twice as many vehicles as the Volt did in 2011 (and it’s now the third best-selling car in the world). One solution is one-sided, the other two-sided: which will be more constructive towards order, peace and prosperity?

The one that honors both participants in the exchange.