Governments survive out of taxes. Income taxation alone accounts for more than 50% of the revenue of many governments (e.g. Besley and Persson, 2013). However, more taxes is not always better. On average, countries that do not tax income are wealthier than countries that tax income, in terms of GDP per capita. Many countries that do not tax their citizens' income or have low tax rates have less unemployment and higher economic growth than the world's average (Hines, 2005). Out of the 10 richest countries in the world, 8 have low or no-tax for individuals and/or companies. Governments often justify tax increases to make people's lives better, but they often make our lives worse. As 1976 Nobel Laureate Milton Friedman says, "the government solution to a problem is usually as bad as the problem."
Governments that have a central role in the economy also have a significant record of reinforcing market problems, like inequality, possibly making it even worse than it would be under free-markets. For example, it has been shown that one of the major reasons why African countries are still so poor is because their governments redirect taxes from the population to the benefit of the rich, making the rich get richer and the poor get poorer (Bates, 1981). In the US, the government has done the same to a significant extent (Stiglitz, 2012). Politicians in Washington have allowing or even giving monopolies to companies that fund their election campaigns, reducing competition, and blocking more efficient foreign firms from entering their markets. For example, while in Europe you have dozens of airlines companies, many of which allow you to flight internationally for the price of a McDonalds' Happy Meal (e.g. Ryanair, EasyJet, Wizzair), in the US you usually need to pay more than $100 for any domestic flight because only US companies can fly US routes. The same happens in the telecommunication, finance, healthcare, and many other sectors. This has led to higher prices and lower quality products for US citizens and higher gains for the wealthy. According to the University of California - Berkeley Professor Gabriel Zucman, "in 1980 the average income of the bottom 50% in the USA was 16,000 dollars. In 2018, the real average annual income for this bottom 50%, i.e. after adjusting for inflation, is still 16,000 dollars. [...] So, although the US continued to grow all this growth has been taken by the top half. The bottom half of the American population has been shut off from economic growth in the last 30+ years." Once asked what is causing the missing middle-class problem in the US, Keynesian icon Paul Krugman (the 2008 Nobel Laureate) answered: "5 percent globalization, 10 percent automation, and the rest is all various kinds of political change." To an extent, the US government is taking from the poor to give to the rich. Currently, more Americans are renouncing their citizenship than ever before mostly due to Uncle Sam's draconian tax laws. Extremely high levels of inequality can lead a country to become a "rentier state," i.e. one in which the government buys its political supports in exchange for benefits like public positions, monopoly rights, and bribes, much like many countries in the Middle East (e.g. Davidson, 2013; Beblawi and Luciani, 1987; Mahdavi, 1970). As I argued previously, the way to solve this inequality problem is not through higher taxes but political reform.
An argument can be made that European governments are not as bad as the US or African governments. However, I would say that European governments are not as good as many people think. The Euro currency, for example, was a political project. In economics, it has been long established the euro was a terrible idea. Robert Mundell won a Nobel Prize showing that the unified ("pegged") currency work in the highly homogeneous region or places with major wealth redistribution, fiscal union, and easy mobility of labor. The eurozone has none of that. It is a highly heterogeneous region, where the rich countries (Germany, Netherlands, Finland, etc.) do not want to redistribute wealth for the poor countries (Portugal, Spain, Italy, Greece, etc.), while the poor countries do not want to give their fiscal autonomy to the rich countries. In other words, there is no fiscal union or major redistribution. Not to say that Spain, Italian, and Portuguese people cannot easily find a job or fit in the culture of the rich countries since they usually do not speak English or any other Germanic language. This has led eurozone countries to underperform non-euro countries since the introduction of the euro and Southern Europe best-educated individuals to emigrate and pay taxes to the rich euro countries. Meanwhile, lower education southern European, who cannot find a job elsewhere, remain to supposedly pay for the public education of the ones who emigrated. This economic calculation cannot lead to good outcomes. Southern Europe has an unemployment rate of about 15% and it is economically stagnated for more than a decade. To recover growth, southern Europeans will likely have to unilaterally quit the euro. If the last country which unilaterally quit a pegged ("unified") is a parameter, countries like Italy, Spain, and Portugal will have to suffer a huge short-term economic downturn, like 30%+ GDP loss, to leave this long-standing economic stagnation (For more on the euro check "The Euro is Dead"). Moreover, the major economic welfare programs that Europeans tend to be so proud, also have very significant social and economic costs (See "The American Socialist Utopia").
In extreme cases, paying large taxes to the government and allowing it to have a vital role in running the economy can lead to complete catastrophes. The most recent case would be Venezuela but many other extreme cases can be found throughout history. Maybe the most famous would be nazi Germany or fascist Italy, where governments claimed that individual freedom must be restrained - in part with higher taxes - for the "benefit" of the country (Hayek, 1944). Benito Mussolini himself stated, "the more complicated the forms assumed by civilization, the more restricted the freedom of the individual must become.” Well, we all know how that turned out for Germany, Italy, and all fascist regimes. In countries with little taxes, such tragedies are much less likely to occur since governments are not powerful enough to lead the whole world to tragedy. Last but not least, the population's tax is also sometimes used to direct the monetary benefit of politicians and their already wealthy family, i.e. corruption. Latin American governments seem to be great "champions" on that. The recent Operation Cash Wash in Brazil, for example, has found a decade-long corruption scandal which moved dozens of billions of dollars out of taxpayer money and state-owned companies for the individual pleasure of the rich.
The goal of this post is not to say that taxes are always bad, especially because governments are necessary to fix some market imperfections, such as externalities (like monopolies, pollution, climate change). However, in summary, this article highlights that large and powerful governments that play a central role in the economy is not always desirable. Free markets are not perfect but they are often better than the government. The vast majority of the government's revenue and power comes from taxing their citizens. Therefore, in many cases, by legally decreasing your taxes duties, you can make not only yourself better off, but the whole society. As we have already pointed out, there many legal ways to legally avoid taxation, (e.g. through the shell and shelf companies, buying passports and permanent visas, or simply moving abroad). In a worst-case scenario, you can renounce your citizenship. Governments cannot tax you if you do not want to be taxed.