Earlier quoted context omitted.
Aside from the fact that there's a subjective definition problem here (how do we decide what people "need"?), I think this an unrealistic view. By this definition, every government that has ever existed or ever will exist is a "bad" government because no government can ever tackle every single problem 100% of the time. Many problems are extremely difficult to solve (e.g. global warming), and others simply cannot be s…
> Sure, you can tax more up to a point, but eventually that tap runs dry and you're forced to reallocate existing resources. Since the 1980s, we have been consistently taxing less. If the tap is dry, it isn't because of over-taxation - it's because there's a reservoir of wealth hoarded by the relatively few. A even cursory glance at the trajectory of wealth distribution will make that clear.
Who is "we"? We're talking about governments in general ("good" vs "bad" ones), and I have no idea what jurisdiction you are referring to.
In any case, I didn't say the tap is dry. I said if you keep raising taxes it will eventually run dry. Or to put it another way, taxes are not an unlimited resource that you can keep increasing as much as you'd like. At some point you'll hit a ceiling where raising taxes any further doesn't produce additional tax revenue.
For example, as you raise income tax rates, people have less incentive to advance their careers (e.g. by chasing promotions or improving their skills), and people have more incentive to leave the jurisdiction and go somewhere with lower taxes. Up to a point, the increase in tax rates produces a net extra revenue for the government. Above a certain point, the number of people who stop paying taxes (e.g. by leaving or by working less) outweighs the gains from those who continue to pay. This is why you'll rarely see any government with excessively high top-bracket tax rates (e.g. 60 - 100%), because it results in tax losses.