How to Solve the Problem of Taxation in Less Than an Hour
The new Australian Prime Minister, Malcolm Turnbull, is boasting that business confidence is up merely because he’s talking positive. It’s a “Don’t worry folks. I’m here now. My government will make us all wealthy.”
In order to understand the promises of government, we go back to the classroom, this time with 22 students. The students are to elect a 2-person ‘government’ from among themselves. The remaining 20 of the students are given two $1 coins (notes if you’re in the USA). The two students who are ‘the government’ are given no money, but they are appointed ‘the government’ so they can tax and spend.
Before anything takes place, have the students add up how much money is in the room. The answer should be $40.
Tax time has arrived, and ‘the government’ taxes each student $1. Have the students add up how much money is in the room. The answer is still $40, but now it is distributed differently. Each student now has only $1 while ‘the government’ possesses $20. That is, the two students in the government have available $10 each. Not a bad position in comparison to everyone else.
Well, ‘the government’ can’t just keep the taxes. They have to spend. The give it to some of the students, but only the needy ones, They don’t distribute all of it, holding back at least 25% for themselves as administrative fees. So, they distribute $15 to say 10 students, who get $1.50 each. Now 10 students have $2.50 each, the other ten have $1 each, and ‘the government’ has $5. How much money is in the room? Why $40 of course.
In this exercise, 12 students (i.e. including ‘the government’) are better off than they were before taxes. But their improved wealth came at the expense of the remaining 10 who saw half of their wealth taken and given away to their neighbor.
This is grossly unfair, naturally, as the students who are the losers will soon tell you. Perhaps there can be another round of taxes and distributions to even the wealth. Oh, but that is not possible, because ‘the government’ retains 25% of all it collects in taxes. So the real winners are ‘the government’ every time.
With this exercise, the students can see the folly of re-distributive taxes. Ask them how to ‘solve’ the problem of mal-distribution, and they should be able to say “never start government taxing and spending”.
I know this is a limited and controlled exercise to make a point. But with this exercise under their belt, the students are going to be better equipped to ‘solve’ the economic problem than the economists or the politicians.
Again, it appears, we are asking the wrong people to solve the economic crisis that is looming, caused by government taxing and spending.
Ian Hodge is an accomplished musician and music teacher, an executive manager and a management consultant to business owners.
Dr. Hodge began his working career as a professional musician. His interest in Christian economic theory, however, led to a move into the investment industry, where he made his way to the ranks of executive management. His first position as a CEO outside of his own company was a turnaround situation, and he found this was “his” place in the business world. For the past 16 years has been a business consultant to help turn around struggling businesses. He has clients in USA, Australia, New Zealand, and Canada.
He actively uses his consulting skills to help train church pastors, elders and deacons in leadership and church growth practices.
As a musician, he worked with several singers around Australia and the South Pacific as their accompanist and music director.
A current project is the development of SonCross Academy, an online school that starts with the Bible, providing lessons in music theory and piano, economics, business, history, philosophy and theology for ages 8+. www.soncrossacademy.org.
Ian Hodge received his Ph.D. degree from Whitefield Seminary in “Christian Intellectual Thought – Economics”. He has written over 500 articles on topics such as business management, economics, education, law, finance, health, philosophy, politics, theology, and music as he explores the application of a biblical world view. He runs his own blog at www.biblicallandmarks.com.
He is the author of:
· Why Would Anyone In Their Right Mind Believe the Bible? An introduction to the Christian Faith.
· Baptized Inflation: A Critique of “Christian” Keynesianism.
· Is This The End of Religious Liberty? The Declaration on the Elimination of All Forms of Discrimination and Intolerance Based on Religion or Belief.
· Making Sense of Your Dollars: A Biblical View of Wealth.
· How To Be Diabetes Free . . . For Life. An analysis of the biology of diabetes, and how this disease can be prevented and even halted.
· Ian Hodge’s Read, Write & Play Music, a self-teaching program that instructs young students on how to write (compose) music.
· Powerhouse Piano, online video and live lessons in classical piano.
· Publisher, editor, William the Baptist. A classic in Christian literature, reissued with an introduction by Dr. Hodge.
In his spare time, Ian can be found actively debating atheists on his city streets and elsewhere (anywhere) whenever the opportunity arises.