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State imposes tax. The imposition is systemic. The earnings of capable individuals go to the State’s coffer. In democracies like India, the planning of spending those funds happens through people’s participation. But it’s a paradox when we ascertain what it is meant for, or when we delve into the way it should be spent in.

People often worry if it’s fair for the State to accumulate our individual resources that are earned through hard work. Many also wonder if it’s justified for the State to provide subsidy to those who barely contribute to the accumulated fund. Some pay and others enjoy – a continual struggle of opposing thoughts.

As human, we are worried about our own thing – groceries, clothing, a good house, or a lovely car. There are so many of these. It’s difficult to put all in a single sheet of paper. But then, such an expansive list creates a strong deterrent for us as individuals to think beyond. And that’s fair too.

On a different note, we have seen hunger and poverty in our neighbourhood. We have seen injustice all through our lives. It’s usual. It’s typical of our society. And there is a thin line between economic injustice and social disparity. They play the game of cause and effect across geographies and through the history of humanity.

These above two perspectives are well exploited by economic theorists to cast the process of taxation as the means for growth of the State, or for welfare of its citizens, or even both. The last view makes them risk-free though.

Let us now come to the crux of the process. The State appropriates tax from general public in different ways. Here too, people, who can pay, will only pay. But the entire population becomes the beneficiary of this fund. And this results in divergent views.

One – we should first keep our source intact. People who pay must be given adequate patronage so that fund can flow next year too. If the paying people grow their economic capabilities, the earnings of the State increase. This creates an obligation for the State to provide adequate benefits in the form of infrastructure and synergetic policies so that paying individuals prosper. The next goal may be to bring more people into the paying bracket. This is the growth-oriented economic approach. Non-paying population are expected to assist the paying individuals or groups. Growth first, welfare later.

The other approach is to make the accumulated fund with the State available for the entire population, both paying and non-paying. And the priority is to bring non-paying population into the paying bracket. Well, I have already told that the line dividing poverty and social disadvantage is rather blurred. So, the focus of public fund is to bring more people out of poverty, and thus to relax the social disadvantages. Welfare first, growth later.

It does not matter which side you are on. Growth and welfare will go competing today, and also in future without fail. People will raise their voice on either side based on individual comfort and ideological lineage. The State, particularly the nation state, will continue appropriating earnings from citizens to keep itself healthy for eventful situations like war or natural calamities, and to maintain its system of administration or status vis-à-vis other nation states. This all will happen apart from simple focus on growth or welfare. As I told, we may not transcend the barrier as individuals. But we, as nation state, will always think and plan on broad canvas.

1 COMMENT

  1. One on hand, without any tax, governments will not have the money to run the country and they will fail resulting in each citizen worrying about general law and order situation, safety and basic rights. On the other hand, taxation by government, without appropriate accountability, creates heartburn among the honest taxpayers, specifically in a country like India.

    Most of the tax money is diverted to support welfare of the nation (which is consumption oriented) and very little is used in investment (capital expenditure in building infrastructure, road, transport systems). Hence the country still remains underdeveloped even after 68 years of independence.

    The crony capitalists in collusion with corrupt bureaucrats and politicians (95% of them are corrupt to the core) are taking the country for a ride. So citizens like us need to pay taxes, boost our tax-to-GDP ratio and demand transparency into all government expenditures to make sure our tax rupees are spent judiciously. I remain hopeful that the country can be fixed one day, even it happens after our lifetime.

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