When asked in a Reddit forum how much he should personally pay in taxes, Microsoft founder Bill Gates said he’s paid about $10 billion in taxes but that he should have paid more on his capital gains.
Gates also said, “As far as I know most billionaires (and other people) comply with tax laws.” This is certainly true in America. Most of our citizens seem to follow Jesus’s admonition to “Give back to Caesar what is Caesar’s” (Mark 12:17). But why don’t more people—including Gates—voluntarily pay more taxes?
I believe Gates is an honest man, but I don’t think he is being completely genuine about thinking he needs to pay more taxes. If he does, then the solution would be for him to give to the Federal government the money he thinks he should have paid. But he doesn’t do that. Why not?
The likely reason is that Gates recognizes his money can be better used in other ways. Gates is the second most generous philanthropist in the U.S. (his BFF, Warren Buffett, is the first). As co-chair of the Bill & Melinda Gates Foundation he has given billions to fund such projects as ending extreme poverty and promoting global health. If he thought the U.S. government could—and would—spend his money more effectively, he’d have voluntarily paid more in taxes.
The reason Gates—and the rest of us—don’t consider the government our main choice for charitable giving is, as Matt Zwolinski once wrote, because we are rationally prudent:
[M]ost people know that there are better and more efficient ways of using their money to help other people than giving it to government. Even Warren Buffett knows this. Otherwise why didn’t he make that $37 billion dollar check out to the US Treasury?
We’re careful about how we spend our own money. Not just when we spend it on ourselves, but when we spend it on others too. Whether it’s consumption or charity, we want to get the most for our money. We’re understandably less cautious when it comes to spending other people’s money, but just because something is understandable doesn’t make it right. If we wouldn’t (and don’t) give our own money voluntarily to government, doesn’t this tell us something about whether we should try to force other people to give more of theirs under threat of legal penalty?