When I was getting my education in accounting and economics, I was taught tax policy had two functions: revenue collection and social policy. How taxes are collected affect social behavior. This is an important point and is often overlooked. They economic system will adapt to any changes in the tax code with corresponding social consequences. There is also the issue of unintended consequences.
I believe our spending priorities and tax policies are long overdue for change. If we don’t make choices that will be very unpopular with the large political contributors, we are doomed to wallow in the quagmire of social discontent and suffering for the foreseeable future.
As it is nearly impossible to detach social policy from tax policy, my comments over the next few posts will touch on both. I have several ideas ping-ponging around in my head, which I will be sharing. I haven’t written them down yet, so I don’t know how many there are. I will try to make each post short and digestible because I know the technicalities of tax law can be very boring.
One final note today: When I see lists of Western countries with high tax rates and list of countries whose population is relatively happy, there seems to be a high correlation. One of the axioms of statistics is “correlation is not causation”, but I think in this case, there is. The social safety net these tax revenues can provide relieve general stress levels of most of the population and allow happiness to shine through.