We are approaching the deadline for filing income tax returns, and advice and – sometimes - anxiety abound about the ways to deal with this annual civic obligation.
Apart from the practical issues of the tax season, the question occasionally arises, "why do we pay taxes"?
I vividly remember when, as a social science student at Bern University, I had to take an obligatory law course and chose tax law. Revered tax law professor Irene Blumenstein made it clear in her first lecture that the answer to the above question was that the state has the sovereign right to impose taxes. Period. In fact, this, along with the monopoly on the use of force (Max Weber), defined a state.
In the United States, the most often quoted rationale is that of Supreme Court Justice and legal scholar Oliver Wendell Holmes (1841-1935): "Taxes are the price we pay for a civilized society." Experience showed that the law provided the means of ensuring a modern, well-organized society.
That realistic view has not stopped periodic extreme viewpoints, such as that of the ultra-laissez-faire Ludwig von Mises Society that taxes hindered economic growth and should thus be abolished. In fact, the tax revolt of the 1970s in the US - which at first focused on real estate taxes in California - embraced precisely this premise, with catastrophic consequences for house prices and/or neglect of infrastructural maintenance across the nation.
But for most citizens what counts is the exchange between taxes paid and services received. Are we being charged too much or are we getting a fair deal?
Switzerland and the US share many similarities when it comes to taxation. Both collect more direct taxes than indirect ones compared with other OECD countries because Switzerland has a low value-added tax (VAT), the US none.
Taxes on personal income amount to 10.2 per cent of gross domestic product (GDP) in Switzerland, 8.9 per cent in the US, which is a little higher than the OECD average in the case of Switzerland and about average for the US (all data from a 2004 OECD comparison).
Taxes on property are slightly higher in America, but both countries have levels above those of other countries. Social security contributions are considerably lower in both Switzerland and the US compared with other European nations: 7.1 and 6.6 per cent, respectively.
And, finally, both countries are relatively friendly towards corporations, which are taxed only at the rate of 2.5 per cent of GDP in Switzerland and 2.2 per cent in the US.
On balance, one might say that in both countries most citizens largely get what they pay for. They tolerate a somewhat higher personal tax burden along with a better deal for corporations because the latter add to competitiveness and wealth.
Lower social security taxes than in other economically advanced nations means less in the way of benefits, but that seems okay to citizens if the system is thus more sustainable. And relatively low indirect taxes means more fairness, even as the greatest bargain accrues to the highest-income taxpayers; the curve of progressive taxation has been flattened considerably at the top since the 1960s.
Completing the form
In the current tax season, much of the discussion of the process in the media has dealt with explaining the complexity of filing a tax return, with considerable attention paid to possible exemptions and deductions.
Also of great interest are the computer software tools allowing one to cope with the declaration, and with the electronic filing itself. We face a system so intricate that we are glad to get at least some help to cope with it, and we tend to push aside questions about its rationale.
Thus tax issues are bracketed within the system as it actually exists. A macro-level example is the current controversy between Swiss and European Union authorities about tax competition in the form of lower corporate taxes in some cantons. It may, in the best case, end with an agreement to disagree.
A micro-level example is the opportunity for low-wage workers in the United States to file their tax return and not pay taxes, but get money back in the form of the Earned Income Tax Credit, a provision that survived the brutal welfare reform of the 1990s. Around 22 million families are paid an average of $1,800 each. It shows that even a complex system is no mere Leviathan, but good for something, even if you are poor.
The views expressed in this column are not necessarily those of swissinfo.
Every month retired professor, Jurg Siegenthaler, compares and contrasts aspects of life in Switzerland with that of his adopted homeland, the United States.
He emigrated to the United States from Switzerland in 1967, and is now a retired university professor living close to Washington, DC. He is a graduate of Bern University (Dr.rer.pol., 1966).
His fields of teaching and research encompassed economic history, social theory and social policy analysis. Throughout his career, he has maintained close comparative research interests in the US and Switzerland.
He is associated with the Institute for Socio-Financial Studies, a research non-profit that has done a lot of work improving financial literacy at the community level.
Since his retirement, Jurg Siegenthaler has broadened his involvement in community organizations and in the arts. He is married and lives with his wife Linda in Silver Spring, Maryland.
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