The Reality of Taxation and Money
Placing value on the right things
The saying goes that taxation is the price we have to pay for civilisation. It is accepted now, almost without question, that individuals and organisations within a society must pay taxes to fund the provision of public goods by the government. In reality, it is not the members of society contributing willingly to the government purse, but rather the government taking by force what they deem to be each member of society’s so called fair contribution. The taxes may be in the form of income taxes, sales or value added taxes, excise taxes, or tariffs. Naturally, those members of society who have the resources to do so, make an effort to minimise the amount of taxes they have to pay. These members of society, typically big businesses and wealthy individuals, are usually accused of not contributing their fair share.
Money and Value
In this article, I will ask the user to put aside what they think taxes are and what it means to contribute to the provision of public goods. There are two important things you must understand. First you must rid yourself of the notion that money in an economy represents real value. Money is a potential for value or alternatively a proxy for value. If I give you say a hundred dollars, I haven’t directly given you anything of value. Rather, I have given you the opportunity to obtain something of value from some third party. This thing of value may be some resource or knowledge, good or service. It is important to understand who provides real value in each exchange. I probably gave you the hundred dollars because you provided me with some good or service. In the exchange between us, you provided me with something of value and I gave you a hundred dollars. In your latter exchange with the third party, it was the third party who provided you with something of value. The third party can also take the hundred dollars you gave him to obtain value from a fourth party, and so on. Key point here is that real value is in resources or goods or services, not money.
Contributing to Society
The second thing to understand is the idea of what it means to contribute to society. There are two aspects to this point. The first is that contributing to society does not just mean contributing to government. If you contribute something to just one other individual, that is also a contribution to society. In any exchange, whoever provides something of value (resources, knowledge, goods, or services) to another party is making a contribution to society. There are a multitude of exchanges taking place in society, and the effect of your contribution to even one other person will filter through the economy and affect so many more people. The second aspect has to do with money being a proxy for value as mentioned before. When you give money to someone in exchange for a good or service, that person is providing you with something of value. In other words whenever you spend money you are taking value from society. Conversely, when you receive money, it is because you have provided value to society. There are exceptions of course, as money may be received as a gift, for example. But even then it can usually be shown that the person giving the gift got some value from the receiver, for example a parent receiving a child’s love.
The reason for encouraging you to think this way about money is that it changes your perspective on taxation and what it means to contribute to society. A person or business doesn’t need to contribute directly to the government in order to contribute to society, and most importantly, their real contribution isn’t in money, but in the goods and services they provide to others in the society. When you go to your job and provide services to your employer, that is your contribution to society. When you go to the grocery store and the store owners provide you with your groceries, that is their contribution to society. When a company like Apple provides all these technological gadgets to people, that is their contribution to society. It is disingenuous to turn around and say that any of these people or organisations, are not contributing enough simply because of the amount of money they pay to the government. They don’t have to contribute directly to the government to contribute to society. That is the beauty of indirect exchanges.
Real Compensation for Public Services
Now with this understanding, it becomes clear that real taxes are actually paid in goods and services rather than money, and the real contribution to public services is made only by the people who actually provide those public services. Government workers pay the real taxes with the services they provide to the public. With public projects, for example building a road, it is the services of the contractors and the workers who actually build the road, the machinery used, and resources like the concrete and asphalt used that constitute the actual taxes that go towards building the road. The people who provide these resources must be compensated, but it is obvious that you do not need to go around and get a monetary contribution from every member of society to compensate them, as we do now. As I said before any contribution to one or more members of society is a contribution to society. These government workers and people who contributed to the road must be compensated not in money seized from all members of society, but in real resources, goods, and services which they can acquire from those members of society who have what they need. Public Service Credits, which I have discussed previously, replace the current monetary system and provide a way to compensate public service providers without resorting to taxation. To illustrate, if P provides machinery for building a road, he is given Credits for his public service. He can use those Credits to purchase new supplies from Q, where the new supplies are the real compensation he gets for his contribution to the road. Q now has contributed indirectly to the road, and can use the Credits he received from P to obtain real value in goods and services from R, so that R also becomes an indirect contributor to the road. Similarly, R can use those Credits to obtain value from S and so on. Eventually, some of those Credits might end up in the hands of your employer who uses them to obtain your services. Thus the services you provide to your employer indirectly contributes to the provision of the road. You may also take those Credits and use them to purchase a gadget from Apple, for example. Then, Apple providing you with that gadget, is their indirect contribution to the road that was built. Notice how that loop of exchanges is closed and everyone in the loop provided and received something of value. P provided a road to Q, R, S, …, your employer, you, and Apple. Q provided something to P, R provided to Q, S provided to R, and so on until you provided to your employer, and Apple provided to you. This is how everyone contributes to public goods and services. P contributed directly, and everyone else contributed indirectly, but they all contributed to society.
We see now how all these exchanges in the economy are linked so that people contribute to the compensation of public service providers automatically by just participating in the economy. The services you provide to your employer, the groceries the shop provides to you, the gadgets that Apple provides you; when you understand that they are the real contributions of the participants in the economy, you see that they already go to compensate the providers of public services without they need for taxation. Of course to make this actually work properly, you need you use Public Service Credits since fiat money is not created as a side effect of the provision of public services. The current system of governments taxing people to pay for public services constitutes a real drain on the economy. When you contribute goods or services to others in society, you are actually paying a tax by this act. It is unfair, and constitutes a double taxation, for the government to take a portion of the money you are given as evidence of your contribution to society. Because that’s what money is. It is not wealth but a potential for wealth. The money you have, represents what you have contributed to society, and hence what you can take back fairly from society. If big companies and wealthy people have a lot of money, it is generally because they have provided a lot of value to society. Most of the time these individuals and organisations will never redeem that money for real value from the society. In other words, they contribute much more to society than they will ever take back.
Fair Share
The whole idea that some businesses or people are not contributing their fair share is based on a misunderstanding of what it actually means to contribute to society. People have it backwards and think that people contribute in monetarily when in fact the real contribution is in terms of resources, goods, and services. Apple, for example, provides hundreds of billions of dollars worth of value to society annually. Your grocery store may provide millions of dollars worth of value annually to society. And you may provide tens of thousands of dollars worth of value to society through your employer. These are the real contributions, and they filter through society via economic interactions so that they ultimately impact the whole society and help ‘pay’ for public services. The money that you, the grocery store, or Apple have, is just evidence of your contribution to society, and you shouldn’t be penalised by having a portion of it taken away by the government. Everyone contributes to the best of their ability, and there is nothing unfair about their level of contribution. Not everyone has to contribute directly to the government or public services in a true free market. The providers of public services are the only direct contributors, with everyone else contributing indirectly through the goods and services they provide to other members of society.
I have addressed the question of what money really is, and the issues of what it means to contribute to society and what it means to contribute your fair share. You have to realise that an economy is about transforming and exchanging value in the form of resources, knowledge, goods, and services, and that money is merely a facilitator of this process. Instead of looking at wealthy entities as people who are rich because they are taking money away from the rest of society, we should see them as people who are adding a lot of value, in the form of resources, goods, and services, to the lives of others in the society. The money they have is just the evidence of what they have given to society, and they will probably never redeem most of this money. Thinking of wealth as things of value rather than money will lead you to thinking of the real purpose of any economic activity you engage in and ultimately the purpose of taxation, which is an economic activity you are forced to engage in. The real purpose of taxation is to reallocate goods and services from private to public uses. Do we really need to take money from everyone to do this?
