Why Do We Pay Taxes?

One of my students posed this interesting question in class one day, and I thought it would be a good topic for me to write in It's Law! blog.

According to Black's Law Dictionary, a tax is a "pecuniary burden laid upon individuals or property owners to support the government..." and it is any enforced contribution imposed by government "whether under the name of toll, tribute, tallage, gabel, impost, duty, custom, excise, subsidy, aid, supply, or other name." 

It means that everyone must pay taxes because the government says so, and the tax money shall be used by the government to pay for things that most people use, for example roads, schools, libraries, enforcement of law and public order, bridges, tunnel projects, and expenditures on war. Governments also use taxes to fund welfare and public services such as  education systems, health care systems, street cleaning, pensions for the elderly, unemployment benefits, and public transportation. A portion of taxes also go to pay off the state's debt.

There are 2 types of tax: If tax is levied directly on personal or corporate income, then it is a direct tax. If tax is levied on the price of a good or service, then it is called an indirect tax.

The first known taxation system was in Ancient Egypt (around 3000 BC - 2800 BC), where peasants too poor to pay tithes to the Pharaoh would contribute by way of forced labour. Taxation was also described in the Bible, where Joseph was telling the people of Egypt how to divide their crop, providing a portion to the Pharaoh.: "But when the crop comes in, give a fifth of it to Pharaoh. The other four-fifths you may keep as seed for the fields and as food for yourselves and your households and your children." [Genesis, 47:24].

In Islamic teaching, zakat is a form of annual taxation on certain kinds of property and the money will be used for charitable and religious purposes, and for the administration of the government. Zakat is obligatory on every Muslim who is financially able and it is one of the five pillars of Islamic faith [Surah An-Nur, verse 56]. In the Qur'anic view, zakat is a way to redistribute the wealth, thus increasing the flow of cash in the economy with a particular interest in the poor and the dispossessed Muslims. Some Muslim states applied jizya on non-Muslim citizens in return of freedom to practice their faith, to enjoy a measure of communal autonomy, to be entitled to the Muslim state's protection from outside aggression, and to be exempted from military service and the zakat taxes obligatory upon Muslim citizens.

According to most political philosophies, taxes are justified as they fund activities that are necessary and beneficial to society. Additionally, progressive taxation can be used to reduce economic inequality in a society.  However, because payment of tax is compulsory and enforced by the legal system, some political philosophies view taxation as theft, or tyranny. Individualist anarchists, anarcho-capitalists, and libertarians see taxation as government aggression. [Williams, Walter E. (2008). "Government theft, American-style"]. Taxation has also been opposed by communists and socialists.  In socialist economies such as that of China, taxation played a minor role, since most government income was derived from the ownership of enterprises. [Li, Jinyan (1991). Taxation in the People's Republic of China. New York: Praeger.]

While the morality of taxation is sometimes questioned, most arguments about taxation revolve around the degree and method of taxation and associated government spending, not taxation itself.