"Would this be more interesting to watch if I read out loud?"

"You should do whatever makes you happy but that sounds lovely."

She will read out loud. Grandparents can be treated to Baby's First Tax Policy Guide.

Hospitals. Schools. Trains. Who keeps them running?

Some countries do not have the government do these things. They still have hospitals, schools, and trains, because people are willing to pay for these things and so private companies will build them. However, most places have decided it is a good idea for the government to pay for these things, because a healthy, educated, mobile population is good for everybody.

Armies. Legal systems. Safety inspectors. Who pays for those?

All countries have the government do these things. No one really wants to pay for them, and everyone has to pay for the country to benefit.

So how do we pay for all of these things? In credit auction countries, these are paid from the money people spend on credits. Credit auction countries have a lot of money. We usually have the best hospitals, schools, and trains, and the best armies and legal systems, because we can spend more money getting them right.

In other countries they are paid with taxes. Taxes are money that goes to the government whenever two people make a deal. When a company pays an employee, payroll tax goes to the government. When somebody buys a sandwich, retail tax goes to the government. You can pay for the whole government that way!

But there is something wrong with taxes. Can you think what it is?

Taxes like this make things cost more money. When they cost more, people will want to do them less. A payroll tax means people will want to work less, and companies want to hire them less! A retail tax means people will want to buy things less, and sandwich store owners want to sell them less!

If you are very clever, you can make your taxes so that this does not happen very much. It will happen a little, but not all the time.

And sometimes this is a good thing. Imagine if people are all buying a drink that might make them sick and make them need more medical care. What can you do? You could ban it. But some people might have a good reason to want it, even if it will make them sick!

You can tax it!

The tax will mean that not as many people buy it. But people who really want it still will. And the money for the tax should be enough money to pay for the care when they get sick! If we set the tax right, we should not care if people buy the drink - the cost of the drink now includes all the bad things about the drink. Because of taxes!

Where else might this apply? It applies to smog! When factories work, they release smog into the air. This is no good - it makes the city not nice to live in. But if you ban smog, all the factories would shut down. So what do we do? We tax smog! We tax smog so it costs enough to make up for all the bad things it causes. 

Even auction countries have bad-things taxes. Bad-things taxes are good for everyone!

What are some other things that you think we should tax?

...she finishes the book and says, "It doesn't seem just as good for people to get sick and then get helped as it is for them to not get sick at all."

"If people think it's worth it to them, and they can pay the costs, then it's not usually a good idea to stop them from having silly wants."

"Why?"

"Because they are likely to replace it with something just as ill-advised, and because then we end up with lots of laws, too many for people to keep track of, aimed at stopping things that don't hurt anyone else."

"Oh. How many laws do we have?"

"That depends how you count them but we try to have it so everyone knows all the laws that might apply to them."

"How do they learn them?"

"In school!"

"Am I going to go to school?"

"Yep! When you are bigger."

"How much bigger?"

"Two more seasons. You can start sooner than that if you would like but school for children your age is mostly just play somewhere else with other children."

"That doesn't sound like it would add anything."

"Some children really like playing with other children but if you don't that is okay."

"I guess I don't know, I don't remember any other children except the other one at the place with the oranges and that was a baby."

"Maybe we can introduce you to other one-year-olds we know and if you really like that we can shop around for schools."

"Okay."

"I loved school. It was my favorite thing, I was sad when I had to go home at the end of the day."

"Why?"

"Because I was having so much fun!"

"...but why?"