12 July 2020
Eamonn Butler
Director and co-founder of the Adam Smith Institute
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Part 5: Why we so often believe tax is unjust
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An interesting point about presents is that the people who receive them tend to underestimate what they cost. An informal newspaper survey of Christmas presents some years ago put the difference at around 14 per cent.

Likewise, people significantly underestimate the cost of public services. They see the high cost they pay in taxes and the modest level of service they get in return – which makes them conclude that public services are poorly targeted and that the bureaucracy is wasteful and inefficient. They figure, rightly or wrongly, that they are getting poor value from the money they pay in taxes. And the higher that taxes go, the more likely are people to regard them as unjust confiscation rather than a legitimate payment for services. Sometimes, such alienation leads to taxpayer revolts – as with California’s 1978 Proposition 13 initiative.

Likewise, as the range of functions performed by the government grows ever wider on the back of rising taxation, people each see the government doing more and more things that they see as marginal, pointless or even downright undesirable. This again makes them feel like exploited victims of the political class rather than willing contributors.

Moreover, as government programs expand, managing them all becomes harder for the authorities. Mistakes multiply, the scale of the potential shortcomings becomes larger, and gaps, inconsistencies and injustices open up. An overstretched government begins to lose authority, and citizens become increasingly cynical of law and authority.

So as taxes rise, people are more likely to avoid or evade them. The Treasury responds to that by tightening the rules and raising penalties, but this extra coercion breeds even greater resentment, in a downward moral spiral. Will Rogers once joked that income tax had created more liars than had golf. When ordinary people come to believe that taxes are unjustly high, it makes criminals of them.

As the nineteenth century French politician and author, Frédéric Bastiat, pointed out, almost everyone supports the provision of basic services such as defense and the administration of justice. But when people believe that government is plundering, they will inevitably try to avoid or evade the taxes it imposes on them.


Eamonn Butler is director of the Adam Smith Institute and author of The Best Book on the Market. He has a PhD in moral philosophy. In his next piece, he explains why taxes are so often dishonest and why government spending is socially divisive.


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