Taxes: Jail the pusher or the user?

In the law-enforcement battle against illegal drugs, there has always been a debate about whether the emphasis should be on stopping the pusher of the drugs or the user. The drug dealer is supposedly the “big fish” and is often protected by the powerful and wealthy. But if you take out the pusher, there are no drugs for the user.

The user is sometimes characterized as a victim of illegal drugs. Law enforcement can more easily catch the user, but there are many more of them, which is both an advantage and a disadvantage. Yet, without buyers and users, the illegal-drug business goes away.

But this is not a discussion of illegal drugs. This is about taxes.

A “tax” is a forced contribution to state revenue and there are two kinds of taxes. Income tax is money taken from you when you earn. A consumption (or sales) tax is money taken from you when you spend. In the battle of government to take your money, there has always been a debate about whether the emphasis should be on taking your money first or later.

Going after the drug pusher could be dangerous, as high-ranking government officials might be involved, and hundreds if not thousands are being paid off to look the other way. The Mexican drug cartels and American organized crime are good examples. It is safer to go after the little guy—the users.

If the government relies on consumption taxes, it is like concentrating on arresting the pushers. The government has to wait to get its revenue and has no certain idea of how much it is going to collect. Big business and others that depend on government contracts are going to be very unhappy and complain.

If the government relies on income taxes, it is like concentrating on arresting the users. It gets immediate results and revenue, and the little fish are probably not going to rise up in revolt. The feeding trough of government-generated business is guaranteed.

Now we can release the ugly demons that are the “experts” as they decide the economic truth of which tax—income or consumption—is better for the economy and the people. “Government experts” favor income tax; consumption taxes are favored by most “economic experts.” But like a discussion on the death penalty, it depends on who is doing the talking. Singapore has the lowest percentage of illegal-drug use in the world, according to the United Nations. But the question is, does capital punishment account for that?

Income tax has the most positive results in the short term, providing immediate funding for government- provided infrastructure and the like. Consumption tax has the most beneficial long-term benefits, encouraging people to save money and for businesses to spend more for capital expenditures.

If crazed druggies are running wild in the streets, you jail the users. If drug abuse is a growing problem for the future, jail the pusher. If the government is desperate for money just to keep its doors open, more income tax. If the government has a sound financial position and is looking for long-term economic investment, more consumption tax. The Philippines is the latter.

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source:  Business Mirror