Common Sense Comes to Town!

Common sense is the most fairly distributed thing in the world, for each one thinks he is so well-endowed with it that even those who are hardest to satisfy in all other matters are not in the habit of desiring more of it than they already have. (Descartes)

Why I Enjoy Paying Taxes

Posted on | November 3, 2011 | No Comments

With a title like that I won’t make any friends. But to keep on the topics of the previous posts on democracy, capitalism and most of all inequality, it is necessary to talk about the ways in which we can individually and collectively act to prevent it. At the very top of the list, of course, are taxes.

Taxes, and especially progressive taxation systems (the more you earn, the more you pay) and money transfers, rather than services, are thus according to the OECD one of the most efficient ways to lower income inequalities. Even if we notice that inequalities did increase everywhere in the West in the past 30 years, what stands out from this study is that money transfers automatically allowed to partially attenuate this situation.

But why transfer money to the poor? They only got what they deserved, right? Err… not quite. These transfers concern households with children, workers recently laid off during an economic recession, and so on. This said, I know very well that you won’t shed a tear over these nice words, so let’s aim closer to personal interest.

Another study from the World Bank clearly demonstrates the link between income inequality and crime rate. The higher income inequalities are, the higher the crime rate will be. I already imagine your counter-argument: if inequality has been rising in Canada these past 30 years, why is the crime rate plummeting? It so happens that wealth creation has an impact on the crime rate as well. Wealth being equal, a more unequal society risks a higher crime rate.

Ok, you’ll say, but you can’t have your cake and eat it, too. Wealth necessarily comes with inequality, doesn’t it? Wrong! The HEC have actually studied this hypothesis and concluded that there was no causal link between these two factors (page 25). More proseperous societies than Canada (Sweden, Denmark) are a lot more egalitarian. Inequality can be much higher in societies with a lower quality of life (the UK, Italy, Japan).

Ok then, but it is not necessary to give money to the poor… we might as well create good social programs instead? False! Actually, inequality reduces the availability of specialized healthcare and dental care, according to another OECD study. While the presence of universal health insurance plays an important role, it is not as important as income differences. You could even suggest that in a much more egalitarian society we could tolerate a private healthcare system – it would we worth investigating this issue in depth.

All in all, income taxes and transfer payments are necessary to lower inequality, the crime rate and improve the general well-being of citizens in a country. All studies lead to the same conclusion, which itself appears quite sensible. So the next time that the rich will complain about how much taxes they’re paying, do remember to set the record straight!

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