Tax system and people's living standards

Taxation has always been a big factor that has a very tight link with people's living standards for centuries. Governments need tax incomes to fund their functions, including providing social justice, national defence, and many other important matters. If we believe in a small government, a government still needs to provide national defence, justice (law enforcement), market watchdog these functions. Therefore, taxation is a necessity in our society and its income should depend on the citizens. Citizens have to give their taxes to their government in order to make their government be fair when dealing with the domestic problems and be biased towards its country when dealing with the international problems.

As we know even a small government has to receive taxes from its citizens, it is important to make the tax system fair and easy. Governments have to set correct taxes for their citizens, and even personalise the tax levels for different groups of people to improve social equality. Therefore, governments love to discuss how they want to set their tax levels, whether they will increase or decrease the tax levels. However, there is another important issue in the tax system that the system has to be clear even simple in order to be user-friendly. We have to admit some members of our society are not well-educated or well-informed about their governments' tax policies, and this group is not a minority group, and maybe we always underestimate the proportion of such people in our society. When the tax system is overcomplicated, this group of people may fail to pay right amounts of taxes to the governments, in many cases, they are more likely to pay fewer taxes and unintentionally break the law. This definitely increases the social cost. In addition, people can accept indirect taxes more than direct taxes. More importantly, indirect taxes do not necessarily need people to understand the system completely in order to pay the full amount of taxes.

Overall, a tax system has to be clear and simple and citizens' best interest is to pay the taxes themselves (rather than imagining a system that governments just finance themselves).