For and against Taxation

For and against Taxation

Taxes are hiding in our everyday life. If we go shopping, we are paying not only the price of the products and services but this price will include the value-added tax (In Hungary the VAT is 27% which is the highest in the world). If we get our salary or wage in the beginning of the month we should know that our employer has to pay social contribution (27%) and vocational training contribution (1,5%) from our income and we (the employees) have to pay pension fund (10%), health insurance contribution (7%), labor market contribution (1,5%) and personal income tax advance (16%).

So what are taxes? Why do we have to pay them? What do they do for us? Why are a lot of people who do not agree with taxes fight against government taxation? At most basic level, taxes raise money for government services. Taxes are used to promote the well-being of society. For example: education, healthcare, public safety, national defence. So taxes can be used as a way to redistribute wealth in a society from people who have more to people who have less.

However, there are excise taxes which try to get people to reduce the cigarette or alchohol, fat, fuel consumption. Besides that there are environmental taxes in Hungary on battery, packaging products, other petroleum products , electrical, electronic equipment, tire which particulary harm the environment. We can group taxes in multiple ways. On one hand the direct taxes which people pay on wages and saleries or on company profits and the indirect tax paid on property, sales transactions and imports.

On the other hand economists also make a difference between the regressive and progressive tax. Regressive tax is a tax that takes a larger percentage from low-income people and from high income people. Regressive taxes for example : gas tax, cigarette tax. A tax levied at a higher rate on higher incomes is a progressive tax, for example: wealth tax and property tax.

There are always arguments around taxes. Some people do not agree with the progressive taxation because they feel it is a discrimination against higher earners. They feel it is unjust. They think that it would be the best if they had freedom to choose how to use their income. (In Hungary, since 2011, there is no progressive but flat rate personal income tax.)

Others often feel that the governent can not deal with money properly because the education, healthcare, public transport and roads are in really poor condition. All in all I think we pay a lot of taxes in Hungary. The saleries and the wages are low but the taxes are high. The main problem is that very few people pay a lot of taxes (unlike in the USA, where it is more evenly distributed among people). In my oppinion the government should solve this problem in the future.

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