Problem
For many people, taxes feel confusing, frustrating, or even unfair. They see money leaving their income but are not always sure why it happens or where it goes. This confusion often turns into fear or avoidance.
Some people think of taxes as:
- Money taken away from them
- A punishment for earning more
- Something to minimize at all costs
Others treat taxes as a distant topic, assuming it only matters to businesses or wealthy individuals.
But taxes are not an optional add-on to life. They are part of how modern societies function. Roads, hospitals, schools, courts, and public safety systems do not exist on their own. They require money to operate and maintain.
Understanding why taxes exist helps remove fear and replace it with clarity. Before learning how taxes are calculated or paid, it is important to understand their purpose.
This chapter explains taxes from a simple, first-principles perspective.
Question
Why do governments collect taxes at all?
More specifically: What role do taxes play in everyday life, and why is paying them considered a civic duty?
Answering this question makes future tax topics easier and less intimidating.
Concept
Taxes are a way for a society to share costs.
Every society needs certain systems to function. These systems benefit everyone, not just one person. Because the benefits are shared, the cost is also shared.
What taxes pay for
Tax money is commonly used for:
- Roads, bridges, and public transport
- Schools and educational institutions
- Hospitals and public healthcare
- Police, fire services, and courts
- Government administration
These are services that individuals cannot easily build or maintain alone.
Why taxes are mandatory
If taxes were optional:
- Many people would avoid paying
- Essential services would collapse
- The system would become unfair
Mandatory taxes ensure that:
- Everyone contributes based on rules
- Services remain available
- Costs are distributed across the population
This shared contribution is what keeps large systems running.
Taxes and fairness
Most tax systems are designed so that:
- People with higher income contribute more
- People with lower income contribute less or nothing
The goal is not perfection, but balance. Taxes help reduce extreme inequality and fund services that support the entire population.
Taxes are not a fine
- A fine is a penalty for wrongdoing.
- A tax is a contribution for participation.
If you earn income, use infrastructure, and benefit from public systems, taxes are the cost of that participation.
Walkthrough
Imagine a city with no taxes.
- Roads break down and are not repaired
- Schools close due to lack of funding
- Emergency services stop functioning
- Public safety weakens
Now imagine everyone agrees to contribute a small part of their income.
- Roads are maintained
- Children are educated
- Healthcare systems function
- Public order is preserved
No single person pays for everything. Everyone pays a part so everyone benefits.
This is the basic idea behind taxation.
Impact
Understanding why taxes exist changes how people approach them.
Financial impact
- Better planning for tax payments
- Less shock when deductions happen
- Fewer last-minute mistakes
Emotional impact
- Reduced fear and resentment
- Clearer expectations
- Greater confidence in handling tax matters
Social impact
- Recognition of shared responsibility
- Awareness of public systems
- Participation in a functioning society
Taxes are not just about money. They are about cooperation at scale.
Let's Do It
Start with mindset, not calculations:
- Accept taxes as a normal part of earning income.
- Separate emotions from understanding.
- Focus first on learning how taxes work, not avoiding them.
- Treat tax payment as planning, not loss.
Clarity reduces stress more than avoidance.
Takeaways
- Taxes fund shared systems that individuals cannot build alone.
- They are mandatory to ensure fairness and continuity.
- Paying taxes is participation, not punishment.
- Understanding purpose reduces fear and confusion.
- Taxes are a basic pillar of modern society.
What's Next
Now that you understand why taxes exist, the next step is understanding how they are calculated.
In the next chapter, we will explore:
- What income tax is
- How tax slabs work
- How income turns into tax liability