why we pay tax

Taxes are collected from citizens by the government to accomplish a series of objectives, namely:

• To correct externalities: taxes are collected on goods or services where the social cost is not reflected in the private cost. For example, tobacco is heavily taxed due to the health problems it causes and because the cost associated with health care is usually borne by the government. Should this be the case, production is not a social benefit.
• To provide public services: taxes are collected for expenditures that would be less efficient should they be provided privately (defense and other partially public expenditures such as health and education).
• To redistribute wealth: the collection of taxes itself serves as a means of redistribution, as does social spending on programs designed to overcome poverty and inequality.

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