Pros And Cons Of Paying Taxes – Taxes are vital in any government. Both democratic and military governments require taxes from the public so that the government can run smoothly and efficiently. The current democratic system has two types of taxes, direct and indirect. However, there are some advantages and some disadvantages of paying taxes.
Advantages of paying taxes:
Funding to the government:
The most obvious advantage of taxing is that the government can receive funds from the public so that the government can run the country. It gives the government a free hand to carry out basic operations for the country. Article 1 of section 8 in US laws states that the government is allowed to impose taxes on its citizens and the foreigners living in the country.
The constitution of unites states also provides taxation reasons. One reason is building an army for the security of the country. Moreover, there are other operation facilities that the government has to fulfill by using the funds received through taxes. The administration that runs the country would not even exist if there were no taxes. As the government pays its administration to control the country and pass legislatures.
Equal wealth distribution:
Taxes also provide the people with an advantage. That the funds collected by the government are spending on the people equally. However, there is inequality in receiving taxes from the public as the government forces the rich to pay more taxes and the poor to pay lesser taxes. The distribution of wealth is equal. Moreover, progressive taxation is a branch of tax collection. The people who support progressive taxation are thinking the right way. It helps in promoting economic and social equality.
Moreover, the United States of America has wealthy people and because of those wealthy people. The government can distribute the wealth equally and provide the poor with necessities of life such as food, clothes, and home shelters. The taxpayers with the most money are restricted by the government to pay for different economical programs launched for the poor. As these wealthy taxpayers help the government in funding the poor people. These programs allow the middle class and the poor class to become stable.
Most of the time government does not require extra funds, but it still applies heavy taxes on certain products. They do this because those products are harmful to the health of the people. By imposing heavy taxes on those substances. The government tries to discourage people from buying such stuff that is unhealthy for them.
The youth is the most vital age group for any county. And it is mostly the youth that gets involved in such lawful but harmful activities. The government cares for its public, and so it imposes charges on these products. The state applies taxes to cigarettes and alcohol so that they can minimize their use.
Furthermore, the taxes the government received from these harmful substances are used in raising awareness of the harms of these products. The government carries out various campaigns against fighting cigarettes and alcohol addiction.
Moving on, the state also applies heavy taxes on gasoline. Although some people might say that gasoline is used in greater quantity. And can earn the government funds that is not the case as the USA does not produce gasoline. Which is enough for the country. So it has to import fuel, which increases the debt of the country. So the government applies heavy taxes on gasoline so that people can limit its use. It benefits the government as it reduces the import bill. And it also benefits the environment as lesser pollution is caused.
The government system is divided into many small parts. It is because this helps in governing the country more easily. One type of government is the local government. The government includes the municipal governments and federal governments. These local governments also rely on taxes to fulfill their functions.
The taxation is divided into several bodies. These bodies are states, cities, counties, school districts, and fire districts. All these bodies are responsible for funding the government. And they fund everything from fire departments to schools and local shelter homes.
Municipalities play a vital role in efficient governance. I will explain this using an example. The municipalities have authorities to regular tax rates, so if a specific area has a low population. It can lower tax rates so that more people can come and live in that area. It gives a great advantage to the economy of the country.
You must have seen politicians ranting about building new things for the public when the elections are near. These residents then vote for such politicians so that they can construct these special projects. The government may fund the residents of that area more for a short time. So that they can collect funds for the project and make it for them. The residents are given a chance to choose if they would want the tax raise or not. So they carry out a small ballot election to decide. Some examples of these special projects might include public transportation, infrastructure, new schools, and improving roads.
A country will have good security only if it has the money to build new weapons or import them from other countries. The citizens of the United States pay a lot in federal taxes. And that is the reason why the United States of America has the best military defense system in the world.
Federal taxes cover costs such as military programs to improve the situation of security both at home and abroad. Moreover, these federal taxes also pay for multiple social security payments and various health insurance programs. They also fund other programs which help the public in fulfilling necessities in life. Some health insurance programs include Medicare, Aetna, Cigna, Humana, and united health care.
Apart from border security, these funds also help in improving the quality of police in the region. The police department requires state-of-the-art technology to trace criminals and bring justice to the innocent. And this will not be possible if the funds are not allocated to the police sector. Moreover, the police have to pay for the men that work for them. And the different accessories they will require when they are on duty. These accessories include uniforms, guns, safety gear, shoes, and vehicles.
Moreover, the function is also required for maintaining the police stations and their vehicles. Sometimes when vehicles are outdated, mechanical problems arise, so they have to be fixed. So that they do not cause any hindrance while the policemen are on duty
The public of the United States of America also pays a hefty amount of state taxes to the government. But have you ever wondered how these taxes are spent on you? The funding that the government receives is spent mostly on education for the people. Most middle class and poor people can not afford education. So the state taxes collected from the wealthy people help in providing education to the underprivileged kids. State taxes also help in providing health assistance for people in underdeveloped states.
Moreover, these taxes are also used in funding various transportation projects for the public. These transportation projects might include fixing the roads or establishing a new transportation service for the people. The state taxes are also used in improving the situation of jails in smaller states. Other facilities are also fulfilled by these taxes.
Economic development in underdeveloped areas:
The local government, such as the municipality has the authority to impose taxes on the locals that are in their jurisdiction. Local taxes comprise funds from property taxes, sales taxes, and taxes on the income earned by the locals. Such funds are used by the local government to finance projects for the welfare of the locals. The authorities say that it also helps in development in that areas, and as a result, it attracts other businesses.
These funds are also used to help function educational and extracurricular activities in the region. This local tax also helps in maintaining the roads and parks in the small neighborhood. And helps them in preserving natural resources in that area.
Taxes also help in controlling inflation. Inflation is caused when the product which is daily used by the public becomes scarce. It may be due to an increase in prices, or the country faced a shortfall in producing that product. It causes the product to become expensive and hence causes inflation.
Inflation can be controlled by imposing taxes on that specific object. So what happens is that when the government imposes payments on that product. It becomes more expensive, so most of the public refrains from buying it. It will lead to an increase in the quantity of the object, and hence inflation is reduced.
Custom duties play a vital part in improving the financial condition of the country. Most people in a country become fed up with using the same products all the time; so instead, they reach out for alternatives such as imported products. It is dangerous for the country as it leads to very high import bills.
If the government imposes heavy custom duties on products, it helps to reduce the import bill. When taxes are imposed on imported products, their price increases, so the public refrains from buying such products. They have no other choice but to focus on locally produced goods, and it helps the local economy.
Provides a sense of equality:
Taxation also plays a good role in improving moral obligations between the people. Everyone has to pay taxes according to their capacity, and so this installs a sense of responsibility in everyone. It makes them realize that they have to put equal effort into running the country.
Disadvantages of taxes:
Affects consumer spending:
There are multiple advantages of imposing taxes on the public, there are also some disadvantages. One disadvantage is the irregularity between consumers spending. Taxation is harmful to the business sector as it can potentially decrease consumer spending. It is because taxes can snatch money from consumers, and it can lead to lower disposable income. It happens if the government makes wrong decisions and imposes incorrect business laws.
When the consumer spends lower money, it can affect the business as it will receive lesser revenue. It will ultimately lead to high pressure on hiring and investment. It can lead to many industries shutting down and eventually affecting the economic growth of the country. Due to this reason, sometimes the government has to take instant decisions. And reduce taxes during the tough time to improve the situation of the economy.
Moreover, some experts do not agree with the idea of taxation. As they believe that it reducing the reward of direct financial income.
Increase in business expenses:
Businesses follow a tough financial plan, and it can be disrupted when the government imposes heavy taxes. Heavy taxes increase the expenses of the government and, so it makes it difficult for them to generate a profit.
Businessmen already have to pay many taxes such as taxes on the payroll of their employees. Property taxes, business taxes, and other fees for permits and licensing. If additional taxes are applied to the businesses, they might go into loss, and the company can shut down. It also prevents businesses from investing in other stuff. And restricts them to not expanding their business to other parts of the country. All these factors will affect the GDP negatively and can also slow down growth.
Redistribution of wealth:
Sometimes people say that the government treats a specific group unfairly and benefits other groups. The government may impose taxes that might benefit the rich and can be unfair for the poor. In the united states of America, the federal tax system is progressive. It means that the rich have to pay more taxes as they have more wealth. And the poor have to pay fewer taxes as they have less money. Moreover, any person who does not have any income can take financial help from the government. Experts argue that although it provides a regular flow of money, it is morally unfair.
Increase in government power:
Government has the authority to raise and lower taxes on literally anything or anyone in the country. It makes the government more powerful. Than ever as they can focus only on those industries that provide revenue and ignore other industries.
Some say that the regulation of taxes should be handed over to the private sector. As they say that the government can be influenced by external factors such as politics. Special interest groups, and most importantly money. The private sector should be given the responsibility of handling taxes. As they are mostly profit-focused and will take great care in using the resources efficiently.
The tax evasion problem:
Yes, we all can agree that somehow taxes can be beneficial to the public. But they also have some faults in them. Tax evasion is a big problem in the United States as businessmen tend to make offshore companies. So that they can not pay taxes to the government. The government of the United States does not have a proper legislature for dealing with people who cause tax evasions. Moreover, even if they are caught, they bribe the government and come out clean. As a result, this causes harm to the economy of the country. So experts argue that there should be a better system for handling funds collected from the public. So that they can be used totally for the benefit of the country.
Sudden tax decisions:
Sometimes to the government takes drastic decisions to curb the economic downfall. They bring changes to tax rates. When they rise those tax rates instantly. The industries do not have enough time to change the prices of their products quickly. So they have to shut don’t production for a day or two and revise the prices on their products. A closure of one or two days can cost the company thousands of dollars. And so industrialists are not the favor of taxes. Some weak and feeble industries have the risk of shutting down. It not only affects the workers of the factory but causes harm to the overall economy of the country.