Taxes, Fees, and Candy Bars

I’d like to present three arguments for why taxes are an illusion, government spending is a psychological problem not an economic one, and the money on your paycheck was never yours to begin with.

Argument 1:You walk into a candy store with a dollar in your pocket. You walk down the aisle to find a bar that costs a dollar. You pick it up and eat it, right there in the aisle of the store. Now think about the money in your pocket: who does it belong to? You? Or the owner of the store?

This is a legitimate philosophical question, and I expect there to be disagreement. But even if you think that the dollar is still yours right up to the point where you choose to give it to the cashier, I want you to consider for a moment, at least, the alternative position. Specifically: you could look at the situation in a way where the dollar isn’t yours any more. You have, after all, consumed one dollar’s worth of value belonging to the owner of the store. The presence of the store and the usual social operations that go on there create an implicit agreement in our culture: that you are willing to give up your own cash in return for goods in the store, should you find anything worth having or consuming. You couldlook at the situation and say: the moment you ate that candy bar, you incurred a debt to the store owner, and by the implicit agreement of “store transactions” in our culture, that dollar now belongs to him.

At least, you couldlook at it that way. I want you to keep that in the back of your mind as we move on to the next argument.

Argument 2: Ten years ago airlines gave you a lot more on your flights than they do today, but they never charged you explicitly for them. When you paid for your airline ticket, you didn’t get an enumerated list: $5 fee for the blanket, $5 fee for the pillow, $15 fee for the meal, $2 fee for periodic trash collection by the attendant, $20 fee for showing you a movie, and so on. These fees were always built in to the cost of the ticket. They just didn’t tell you about them. They said these services were “free”, but in fact there was a kind of “tax” being levied on you and attached to your plane ticket. Whether you used a pillow or not, you paid the pillow “tax” as part of your ticket price.

Now, with fuel prices rising airlines are scrambling to do anything they can to keep their ticket prices lower. So now they have decided to reveal this internal, hidden tax structure and to convert it into a fee on an as-needed basis. To keep the ticket prices low, we will now charge you to get a blanket.

People are outraged! “This used to be FREE, and now they are charging!!” But in fact, this “problem” is a psychological one. The airline companies screwed themselves from the get-go by pretending that the services were free. They were never free, they were taxed. Whether you used a pillow or not, you paid a small “pillow service tax” as part of your airline bill. It was factored in.

We could do the same thing with federal taxes, too, if we wanted to, you know. The highways and libraries are there for you to use. The national parks and recreation centers are there for you to use. The public schools are there for you to use. And you do use them. (You’ve eaten the candy bar in the store.) You use some of them, anyway. And you could use all of them, if you wanted to. The government doesn’t need to be taxing your income. It could be charging you a “being American” fee. And everything else would simply be rolled into the price of the ticket. Just like the airlines used to do.

Would that make you feel better?

Argument 3: The “gross pay” line on your paycheck is literally a complete fiction, because it is only the amount that your employer “agreed to pay you” given your employer’s knowledge of what the income tax rate is. Suppose our government shifted policy and said, “From now on, no more income tax! We will get all of our revenue by charging employers a percentage of our payrole!” If your gross pay was $100,000 and your after-tax pay was $60,000, don’t be under any grand illusion that under the new policy you would be magically seeing that $100,000 in cold hard cash. Oh, no. All that would happen is that your employer would say, “Well, I can only afford to loseĀ $100,000 on you, so I’m going to reduce your gross wages to $60,000 so that my final outlay is still $100,000! And oh by the way, stop your whining because I know that’s exactly what you were living off of before!”

The difference between a system where the government taxes YOU from a gross pay of $100,000 down to $60,000 and a system where the government taxes your EMPLOYER so that your wages are suppressed to $60,000 is no difference at all. It’s a difference in narrative, not numbers. From a purely practical standpoint, you are already living in the world where your wages are your net wages. The gross wages were never really yours to begin with: except on a fictional balance sheet created by your employers who knows what the tax rate is and takes it into account in its calculations.

So those are my arguments. To sum up: You’ve eaten the candy in the store, a tax is like a hidden fee but with more psychological damage, and your salary was fictional to begin with.