5. Economic effects of taxation
5.1 There is no serious academic attention on the positive or deleterious effects of taxation in the country. Even if they are they are gobbledegook without the simplicity that requires to be addressed to the polity or to the citizens.
5.2 A common phrase with the polity and there by common to citizens today represents negative thinking and cynicism: The comment is " What you say is fine in theory, but it is not practical in this country" - Theory and Practice - Economics is not astro-physics. It deals with the day to day problems of man and society. If economic theory does not throw light on the problems of life, which confront the nation, or the firm of which the economics may be a part, he may be wasting his own time and that of his audience. Equally, there can be no such thing as a certain proposition being correct in theory; but the opposite proposition may be applicable in practice. What is wrong in theory does not become true in practice. We may have the best results when theory is well informed with the realities of life; and policy measures are well informed with guide-lines which theory may provide. Prof . B .R. Shenoy
5.3 Government failure arises when state actions fail to improve economic efficiency or when the government redistributes income unfairly. Samuelson.
5.4. Deficit budgets and wrong areas of emphasis in planning have ruined the fiscal affairs of the State.
5.5 Taxation on products has been killing economic efficiency and expansion of economic activity. Modern economic theory presents options to the polity that excess taxation opposes economic efficiency. It also presents that state intervention expands the economy to a higher level than that of leaving all state, social and economic activity exclusively to the citizens.
5.6 The power to tax is the power to destroy - Oliver Wendell Holmes
5.7 The purpose of tax is to produce revenue and to do so with the fewest social and economic side effects . - P. Drucker New realities page 68 Limiting Government How low should taxation be? Is it not possible, consistently with logic, to prescribe any arbitrary level to which Revenue collections must be scaled down. A guideline for such scaling down may be for the Government to retire, progressively to its more natural duties. The State should undertake such activities, which are essential to modern living, and which private enterprise may be unwilling or unable to provide. To this category belong law and order; defence from external aggression; public health and sanitation; an honest money medium standards of weight, length and measure; basic transport, communication and marketing services; compulsory primary education; and agricultural extensions services. The State would progressively withdraw, through a phased programme of denationalisation, to these limits of its functions. Underline the basic truth : The State is an evil when it strays beyond its allotted functions. - Prof. B.R. Shenoy The people in Government should realise the limits of Taxation and stop endless taxation out the Policy in pressurising the People for more and more. Beku beku bekideniginnondu Bekenutha bobbiduthaliha ghatavenidanu Ekindu rachisidano bommanee beku japa Saakenipudendigelo manku thimma DVG
5.8 While there is necessity to balance between the two, the Indian experience proves a runaway unpleasant picture that defies any economic, political or sociological theory or experience.
5.9 If at all an economic evaluation of the policies, actions and inaction by the State and their results is done, then a new theory would come into place. The economist Schumpeter had coined a phrase "creative destruction" in an innovative and entrepreneurial economy.
5.10 If the Indian economy is evaluated today then a new theory called "evaporative destruction" would emerge, where monetary resources and economic value just evaporate due to massive waste and negligence, human effort is destroyed along with loss of values. This again, is not confined to the public sector but unfortunately part of the private sector too. By evaporation it is meant not merely a transfer from one person to another. There at least the value is retained. By evaporation it is meant the total destruction of the resource by an irreversible damage or where the loss of value cannot be recovered over a period of time.