In the days of the Talmud taxes were collected for the purpose of enriching the king. Based on the Parshas HaMelech in Sefer Shmuel, the Rabbis formulated the principle of dina demalchusa dina, literally, the “law of the land is the law”: everyone must pay taxes. In Shulchan Aruch, the Rishonim are quoted as having pointed out that if the taxes are unfair, or discriminatory (which is also unfair,) this would not constitute “dina” demalchusa – “the law of the land,” but rather “gazlanusa” demalchusa – “the embezzlement of the land,” and such tax laws are not binding. A system of graduated income tax is considered fair and reasonable.
There was a theory among some of the Baalei HaTosfos that the idea behind paying taxes is the principle of rent. The land of each country belongs to the ruler (or the government) of that particular country, and the owner of any real estate is entitled to charge rent from all those who want to live on their property. The one exception to this rule (according to this view) is Eretz Yisroel, which the Torah declares belongs to Hashem. Since Hashem is the true property owner, and he has encouraged all of Bnei Yisroel to live in Eretz Yisroel, no government in control there ever has the right to charge taxes (rent,) because they are not the rightful landlord. The Landlord (with a capital “L”) has granted permission for all of Bnei Yisroel to live in His country (what is called the “paltin shel melech” – “the palace of the king.) This view is quoted by the Ran in his commentary to Nedarim. There are many religious people who are not that knowledgeable of any other comments made by the Ran in his commentary on Nedarim, either before or after this and are only familiar with this one position of the Ran. The truth of the matter is that not only has this view not been accepted in Shulchan Aruch, it didn’t even gain honorable mention. The Shulchan Aruch quotes verbatim from the Rambam that one is obligated to pay taxes both in Eretz Yisroel as well as in other countries.
It is important to note that today the basis for taxation is totally different from what it was in Talmudic times. Today, all modern countries provide a variety of services: They provide streets and highways, and maintain forests and museums. They provide fire, police, and military protection. They collect garbage and deliver mail. They do medical research to discover cures for diseases, etc. The taxes are collected for the purpose of covering the annual budget, which pays for all of these projects. The halacha views all of the people living in the same neighborhood as “shutfim” – “partners,” sharing a common need for a shul, yeshiva, mikveh and an eruv, and therefore, the “partners” can force each other to put up the needed amount to further their partnership. So too, all people who live in the same city, state, and country are considered “shutfim” with respect to the services provided by that city, state, and country. The purpose behind the taxes is no longer “to enrich the king” in the slightest. In addition to all the other expenses, the government officials have to be paid as well, but it is because they serve as the employees of all the citizens for the purpose of looking after all these services, and seeing to it that they are properly taken care of. In our modern world, one who does not pay his proper share of taxes is no longer viewed as cheating the king (or the ruler) of the country, but rather as cheating (i.e. stealing from) his partners. The amount of money not paid by the one who cheats will have to be taken care of by having the rest of the “partners” put up more money from their pockets to cover all the expenses of the partnership. And even if much of the tax money goes towards expenditures that are not to one’s personal liking and that one gets nothing out of, such is the halacha of any partnership: the majority of the partners have the right to determine what are the reasonable needs of the partnership. Therefore, this majority has the legitimate right to force the minority to contribute their share towards properly furthering the partnership.