The earliest known instance of taxation dates back 5,000 years in Egypt. I suppose the pharaohs needed it to finance those pyramids. Before that, death was the only thing that was certain; after that, taxes became as certain as death. Good ol’ Ben Franklin noticed that.
The Encyclopedia Britannica describes taxation as “imposition of compulsory levies on individuals or entities by governments. Taxes are levied in almost every country of the world, primarily to raise revenue for government expenditures, although they serve other purposes as well.”
It goes on to add that:
Taxes differ from other sources of revenue in that they are compulsory levies and are unrequited—i.e., they are generally not paid in exchange for some specific thing, … While taxes are presumably collected for the welfare of taxpayers as a whole, the individual taxpayer’s liability is independent of any specific benefit received.
What makes taxes special is that it is imposed by the state, and it is not optional. To understand what that implies, we have to note that the state (or the government) is that entity that claims a legal monopoly on the use of violence in a specific territory (a la Weber).
The fact is that the state has the use of violence as its instrument, and therefore behind every dollar that it extracts from the public in taxes, it does so at the point of a gun. The state demands you pay, and if you don’t comply, it sends its minions to your door; and if you refuse to pay, they arrest you and throw you into a cage; and if you attempt to resist arrest, they shoot you.
After collecting the taxes, first the state pays itself. That is, the politicians and the bureaucrats help themselves to as much of the tax collections as they wish. Next, the state pays the armed minions it hires to collect those taxes. And whatever remains after that — not much — the state then uses for various activities, only some of which may be of some benefit to the taxpayers.
But as the Britannica notes, “the individual taxpayer’s liability is independent of any specific benefit received.” Maybe there will be benefits; or maybe not. Who knows. But we know for sure that part of the taxes paid by the taxpayer goes to buy the bullet that will be used if further payment is not forthcoming from the taxpayer.
Why is the state necessary? One of the functions of the state could be to efficiently provide protection to the citizens. It could maintain law and order within the borders of the nation, and defend against aggression from outside the borders. It seems reasonable to expect the state to discharge those two functions because they both involve the use (or threat) of violence, and as we’ve noted before, the state has the monopoly in the legal use of violence.
Because the state has the guns, it must be involved in those activities that involve guns — a person or a country attacking another person or country. And precisely for the same reason, the state must be prohibited from engaging in any activity that does not involve guns. Constitutional rules must constrain the state because the power to tax can be misused to exploit the citizens.
Let’s consider the following brief set of activities:
Education, social welfare, charity, manufacturing, agriculture, transportation, telecommunications, roads, ports, railways, hotels, hospitals, retailing, restaurants, commodities markets, banks, financial institutions, research and development.
I contend that the state must be prohibited from engaging in those (and many other) activities. If the state involves itself in any activity other than the limited one of providing protection from aggression, then the state invariably eventually degenerates into a tyrannical institution that harms society.
The power to tax must be severely limited if society has to flourish.
 The deliberations of the Constitutional Convention of 1787 were held in Philadelphia at the Independence Hall behind closed doors. When the convention ended, one Mrs. Powel of Philadelphia asked Benjamin Franklin, “Well, Doctor, what have we got, a republic or a monarchy?” Franklin replied, “A republic, if you can keep it.”
The US republic has survived so far. And with a little bit of luck, it will endure for a bit longer.