Even more practically, there are services that are necessary and which are difficult for one person to arrange. For that reason taxation is appropriate in allowing useful projects. Unfortunately the mass creatures, or "servents of the beast" or whatever you want to call them, have inflicted their pathology on the system and turned useful and necessary things into problems.
Nicely said. On one hand we need some taxes, to buy some things that we as individuals can't afford, but may need it, on the other the taxes are slowly killing us, because they are used to finance things that don't directly concern us or that we don't need.
I'll give you an example. You have a small community of houses, no external taxes, and the houses are surrounded by a valley with a lake and a stream. It doesn't belong to a single individual, but to the community. Now, one of you has an idea to build a power plant on the stream and connect his house, but he hasn't got enough cash and the stream is not his to govern, so he gathers money from all neighbors, builds a plant and connects all their houses to free power. Taxes did their job.
Nearby there's another guy, who wants to regulate the stream and plant bushes near the lake, because he doesn't like how it looks. He comes to you and wants you to chip in, because the land belongs to everyone. You don't want to pay for it, because you like the lake as it is, so he comes with some people and threatens you, because most people paid and you did not, you're stopping the investment. You pay to avoid the beating, and taxes did their job again.
In your example there is one error. When he collected money from all and built a powerhouse that everyone who gave money for its construction must receive electricity for free. In our life we sell electricity. It turns out we're paying twice. And the income goes into someone else's pocket.