The Philosophy of Taxation and Public Finance

302 Pages·2004·32.52 MB·English

by  Robert W. McGee JD

THE PHILOSOPHY OF TAXATION
AND PUBLIC FINANCE
The Philosophy of Taxation
and Public Finance
Robert W. McGee
JD, PhD, CPA, CMA, CIA, CBA
Andreas School ofBusiness
Barry University
Miami Shores,Florida
USA
"~.
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The philosophyoftaxationand publicfinance / RobertW. McGee
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Includesbibliographicalreferencesand index.
ISBN 1-4020-7716-5
Copyrighte 2004byKluwer AcademicPublishers
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TABLE OF CONTENTS
Preface vii
PART ONE: INTRODUCTION AND
OVERVIEW
What ShouldGovernmentDo? 3
PARTTWO: WHEN CAN TAXATION BE
JUSTIFIED?
2 When Can TaxationBe Justified? 15
3 IsTaxationTheft? 33
4 ShouldAccountants and AttorneysbePunished forAiding 41
and AbettingTax Evasion?
5 JewishViews on the Ethics ofTax Evasion 45
6 ChristianViews onTax Evasion 55
7 Tax Evasionin Islam 67
8 The Baha'i Perspective onTax Evasion 73
9 Tax Evasionin EmergingEconomies 75
PART THREE: PHILOSOPHICAL ISSUES
10 Taxationand Social Engineering 83
11 The VoidforVagueness Doctrine 89
12 IsTax CompetitionHarmful? 105
13 Is theAbility toPayPrincipleEthicallyBankrupt? 111
14 The Case foraMaximumTax 121
15 SecessionasaTool ofPublic Finance 125
16 FinancingEducation 143
17 Social Security:Reform,Privatizeor Abolish? 155
18 EarmarkingTaxes 163
19 The SupermajorityRequirement 171
20 Should Taxes be Visible or Hidden? 179
PART FOUR: ATTRIBUTES AND TYPES OF
TAXATION
21 Tax Attributes 185
22 The IndividualIncomeTax 211
23 The CorporateIncome Tax 215
24 The Value AddedTax 219
25 The Retail ConsumptionTax 225
26 Excise Taxes 231
27 Estate, Gift and InheritanceTaxes 241
28 Capital Gains Taxes 245
29 Tariffs asaForm ofTaxation 247
vi
30 The PropertyTax 255
31 User Fees 259
32 Lotteries 265
PART FIVE: THE TAXSYSTEM OF A FREE
SOCIETY
33 The Tax System ofaFree Society 267
References 277
Name Index 301
SubjectIndex 309
PREFACE
Although I had heard of taxation as achild, Ididn'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 landof 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
taxesunderHaroldWilson.
My interest in taxation was piqued when I received my first
paycheck. I wondered what happened to a large chunk of the money Iearned
because it was not there. It had vanished before I could see it because the
withholding tax rules that President Roosevelt signed into law forced my
employer to takeout aportion ofwhat Iearned andsendittoWashington. It
made me start to wonder whether FOR was as great apresident as my father
saidhewas.
In a sense, the research for this book began in the early 1970s,when
I first started working asan accountant while studying economics ingraduate
school atnight. While working asabank auditorI learned howpeople setup
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 topay rent
to the government in the form of property taxes inorder to keepthem. I read
that some elderly people in California had to sell their homes because they
couldnolongerpaythepropertytaxesthegovernmentdemanded.
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 incorporate tax and had a small individual tax practice on the side. I
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 formyemployersandclients.
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
enjoyreadingitasmuchasIenjoyed writingit.
RobertW.McGee
September2003
Aboutthe author:
Robert W. McGee is a professor in the Andreas School of
Business at Barry University in Miami. He has published more
than40books andmorethan 300scholarlypapersinthe fieldsof
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 writethis book.Professor McGee wasa 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 hasalso servedasa nonresidentconsultant
to the USAID economic reform projects in Georgia and
Kazakhstanandhasdonea majorstudyon reforming the Latvian
public finance systemfor theLatvianFinanceMinistry.
PART ONE
INTRODUCTION AND
OVERVIEW