Public Goods, Taxes and Robin Hood

For most of the people in a democratic country, paying tax to the government is seen as a duty of a citizen. Some, though, simply regard it as a burden.

There are reasoning behind paying taxes. All of us use and consume private goods and services and public goods and services as well. The difference between private and public goods is the benefit. In consuming private goods — and services — we do not share the benefits with others. On the other hand, in consuming public goods, we share the benefits with others.

Visible examples of public goods and services are defense, education and transport facilities. National defense is the classic example of a pure public good. We cannot enjoy the peace and security provided by national defense without giving the benefits to our fellow citizens. Because the benefits of public goods must be shared, an individual does not have to pay the whole cost of them; fair enough.

Society gives governments the power to tax and this taxing authority is the means for getting citizens to share expenses of public goods. That is why, in democratic nations, governments are main suppliers of public goods.

Public goods generate what economists call ‘externalities’. Externalities are the benefits people get from a public good even if they do not use it themselves. An important example is education. Think of what one’s education does for the neighbors, the economy and the society. Think of educated work force. Think of educated voters and educated legislators. We could well be better off by living in a society where we, our neighbors, and leaders are educated. That is why we say schools enrich the lives of those who do not even attend them.

Transportation infrastructure is also a public good citizens share.

Another job that comes along with providing public goods is the government to redistribute income. The idea is as old as Robin Hood — taking some money from those who have it and giving it to those who have little or nothing.

Citizens in a democratic nation have to pay taxes and a democratic government should be able to provide good enough public goods and behave like Robin Hood.

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