THE PHILOSOPHY OF TAXATION AND PUBLIC FINANCE

Transcription

1 THE PHILOSOPHY OF TAXATION AND PUBLIC FINANCE

2 The Philosophy of Taxation and Public Finance Robert W. McGee JD, PhD, CPA, CMA, CIA, CBA Andreas School of Business Barry University Miami Shores, Florida USA Springer Science+Business Media, LLC

3 The philosophy of taxation and public finance / Robert W. McGee p.cm. Includes bibliographical references and index. ISBN ISBN (ebook) DOI / Copyright 2004 Springer Science+Business Media New York Originally published by Kluwer Academic Publishers in 2004 Softcover reprint of the hardcover 1st edition 2004 All rights reserved. No part of this work may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, microfilming, recording, or otherwise, without the written permission from the Publisher, with the exception of any material supplied specifically for the purpose of being entered and executed on a computer system, for exclusive use by the purchaser of the work. Permission for books published in Europe: permissions@ wkap.nl Permissions for books published in the United States of America: permissions@wkap.com Printed on acid-free paper. The Publisher offers discounts on this book for course use and bulk purchases For further information, send to <kluwer@wkap.com>.

4 TABLE OF CONTENTS Preface vii PART ONE: INTRODUCTION AND OVERVIEW What Should Government Do? 3 PART TWO: WHEN CAN TAXATION BE JUSTIFIED? 2 When Can Taxation Be Justified? 15 3 Is Taxation Theft? 33 4 Should Accountants and Attorneys be Punished for Aiding 41 and Abetting Tax Evasion? 5 Jewish Views on the Ethics oftax Evasion 45 6 Christian Views on Tax Evasion 55 7 Tax Evasion in Islam 67 8 The Baha'i Perspective on Tax Evasion 73 9 Tax Evasion in Emerging Economies 75 PART THREE: PHILOSOPHICAL ISSUES 10 Taxation and Social Engineering The Void for Vagueness Doctrine Is Tax Competition Harmful? Is the Ability to Pay Principle Ethically Bankrupt? The Case for a Maximum Tax Secession as a Tool ofpublic Finance Financing Education Social Security: Reform, Privatize or Abolish? Earmarking Taxes The Supermajority Requirement Should Taxes be Visible or Hidden? 179 PART FOUR: ATTRIBUTES AND TYPES OF TAXATION 21 Tax Attributes The Individual Income Tax The Corporate Income Tax The Value Added Tax The Retail Consumption Tax Excise Taxes Estate, Gift and Inheritance Taxes Capital Gains Taxes Tariffs as a Form oftaxation 247

5 vi The Property Tax User Fees Lotteries PART FIVE: THE TAX SYSTEM OF A FREE SOCIETY The Tax System ofa Free Society 267 References Name Index Subject Index

6 PREFACE Although I had heard of taxation as a child, I didn't take much notice of it until I read Sammy Davis Junior's autobiography as a teenager in the 1960s. His book mentioned the tax audit he was subjected to and the fact that he had to pay more than 90 percent of his income to the federal government. I was shocked that my government -- in the land of the free and the home of the brave -- could get away with that. It seemed grossly unfair that people like Sammy could do all the work and take all the risks and then have to hand over practically all of their earnings to some government. A few years later I read that the Beatles had to pay a similar percentage to the British government and that Michael Caine left England because of its high taxes under Harold Wilson. My interest in taxation was piqued when I received my first paycheck. I wondered what happened to a large chunk of the money I earned because it was not there. It had vanished before I could see it because the withholding tax rules that President Roosevel t signed into law forced my employer to take out a portion of what I earned and send it to Washington. It made me start to wonder whether FOR was as great a president as my father said he was. In a sense, the research for this book began in the early 1970s, when I first started working as an accountant while studying economics in graduate school at night. While working as a bank auditor I learned how people set up trusts to minimize the amount of their life savings that would be confiscated by the government when they died. Through my economics study and extracurricular reading I learned how the tax system was used not only to raise funds for government but also to encourage certain activities while discouraging others. I learned how government at all levels wasted billions of dollars doing unproductive things and things it shouldn't be doing at all. My parents and their friends were complaining about property taxes and the fact that they didn't really own their own homes because they had to pay rent to the government in the form of property taxes in order to keep them. I read that some elderly people in California had to sell their homes because they could no longer pay the property taxes the government demanded. I decided to specialize in taxation, not so much because of the good career path that such a specialty provided but because I wanted to help people to keep as large a portion of the money they earned as possible. I worked in corporate tax and had a small individual tax practice on the side. I

7 viii went to law school and also earned a master's degree in taxation. I wanted to learn as much as I could about taxation so that I could do the best possible job for my employers and clients. As I got older my interests shifted more into economic philosophy and public finance, although I maintained my interest in taxation. This book is the culmination of my years of study, practice and reflection. I hope you enjoy reading it as much as I enjoyed writing it. Robert W. McGee September 2003

8 About the author: Robert W. McGee is a professor in the Andreas School of Business at Barry University in Miami. He has published more than 40 books and more than 300 scholarly papers in the fields of accounting, taxation, economics, law and philosophy. He is a certified public accountant (CPA) and attorney, has taught both public finance and taxation and has doctorates in accounting, taxation, economics, law and philosophy, which makes him uniquely qualified to write this book. Professor McGee was a tax practitioner for many years before becoming an academic and continues to act as a consultant. One of his clients was the United States Agency for International Development (USAID), which sent him to Armenia, Bosnia and Russia to consult on economic reform. He has also served as a nonresident consultant to the USAID economic reform projects in Georgia and Kazakhstan and has done a major study on reforming the Latvian public finance system for the Latvian Finance Ministry.