Oh Canada!
In an editorial in the Globe and Mail Jeffrey Simpson reported that Canadian Prime Minister (yes, Canada!) Stephen Harper stated that he doesn’t “believe that any taxes are good taxes.” While this is a fun political statement, and a nice sound bite, it’s hard to believe that the Prime Minister of Canada does not believe that some taxation is good. After all, most reasonable people — and many unreasonable ones — acknowledge that we need some form of government (see Somalia), and governments must be funded by taxes. His hyperbole deserves some discussion, however.
Economists understand that, except in special cases, taxes do create an initial economic loss. Taxes distort the price mechanism, and the result is that some money simply disappears from the economy. In this sense taxes, though not all taxes, are bad. Of course, we know that taxes can do all sorts of good, on net. Without taxes government would not have the money to fund roads, schools, national defense, research, police, social services, and all the other things that it funds. These things are paid for by taxes, and this is the real object of those “bad” taxes.
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