Last week I argued that no one actually thinks their own taxes are too low. Laura at 11D says she's willing to pay higher taxes:
Megan McArdle had a post up last week about whether or not people willingly pay taxes. (link when I'm not so tired). I'm willing to pay the higher taxes in New Jersey. I'm getting things for that money -- better schools, a home that holds its value, access to better paying jobs, proximity to New York City, access to grandparents. Taxes aren't always about money for other people; it's also about services for you.
The first question is "higher than what?" New Jersey taxes are lower than those in New York City, which Laura moved out of. Higher than Alabama? Even if she weren't particularly willing to pay them, she wouldn't have much choice, because her husband's job is tied to New York's financial services industry. In that sense, I am willing to pay the higher taxes of the United States in order to avoid living as a stateless person in some refugee camp somewhere, but that's not really a very helpful guide to how I feel about the general level of my taxes.
Does Laura think that her property taxes should be raised? Very few people do . . . and those who do seek an increase in their property taxes are almost always looking to fund large increases in spending on the services they use, like the schools, in the knowledge that many of the people who do not use them will be forced to kick in. This goes to the heart of the argument I heard over and over again: that it's perfectly rational to think that you should pay higher taxes, but only if other people do, because taxation is somehow a collective action problem. A collective action problem, if you're not familiar with the term, is one where there is a potential equilibrium that makes everyone better off, but it's hard to get to because of incentives to defect. Think casual Fridays: most people prefer not to wear suits and ties, but unless there's some sort of enforcement mechanism, the hyperambitious will ruin it for everyone by showing up in a suit. Next thing you know, everyone's back in a Brooks Brothers sweat sack, because they don't want to look less serious about their job than those around them. These problems generally require the creation of some enforcement mechanism--including, but not limited to, a formal law--to punish defectors.
Henry Farrell, for example, compared paying taxes to shopping at Wal-Mart. Far be it from me to criticize anyone who sends me free books, but this does not really work. Leave aside my questions about whether people really prefer downtowns to Wal-Marts, which is hard to agree upon empirically--I say I care deeply about poverty in Africa, but if that's true, how come I bought a new iPod instead of sending the money to Chad? Collective action problems generally apply to situations where the outcome is binary: either you have a Wal-Mart nearby, or you don't. Tax revenue is not binary--it's an upward sloping line. Some of the things the government spends the money on are binary--but given the existing level of tax revenues, this is simply not a reasonable objection to sending the government additional money. People who say they want higher taxes on themselves generally think the government does not have enough money to do the things it is already doing; as long as you think the government has a better (in some moral sense) use for the money than you do, then you have a moral obligation to send it in.
(As an aside, I am afraid that Henry made a common mistake in referring to me as an economist. I am but a lowly MBA, and have never claimed otherwise, but for some reason a lot of my readers are confused.)
But most people do not appear to think that the government (or anyone else) has a morally salient better use for their money than they do; otherwise, they would give that money to the government (which will take it even if there is no "tax me more" fund) or charity. Perhaps you'll argue that people's norms about fairness are so strong that they will not give away their money unless other people do. My response would be to ask: is the unfairness of your paying more than other similarly affluent people greater or smaller than the distributional unfairness that you want the government to rectify? Nor is it plausible to believe that you can, by withholding your extra contribution, force other people to kick into the kitty; your contribution is a drop in the budget of any political entity to which you belong.
[Gotcha! You cry. My money alone won't make a difference! Sorry, but if that were true then you'd be morally justified in cheating on your taxes. The small sum you send them is spent on something you presumably think we need more of.]
Or you might argue that since money is a positional good, it's not reasonable to ask you to reduce your income unless everyone else at the same level does, too. So now positional goods races are an acceptable way to spend your life? So important that they should override your moral concerns about distributional justice?
Perhaps you claim that you don't want to send the government extra money because God knows what they'll spend it on. Well, welcome to the libertarian movement. Your subscription to Reason should arrive in four to six weeks.
No, I simply cannot grant that people really believe that they pay too little in taxes. It seems more like they think the government has a better use for everyone else's money, and should therefore take it. They believe this so strongly that if they have to pay some of their own money to rectify the situation, they will do so. In other words, they don't so much want higher taxes on themselves, as to purchase the good "State coercion of other affluent people". That is not the same moral intuition as "I have too much money, and the government should take it away", however much nicer it would be if that were true.
These objections might hold if we were attempting to establish a tax system from scratch, against a background of no previous taxation. If the number of potential taxpayers were small enough, you might then convincingly argue that you need to withhold your taxes until everyone else pays in in order to avoid the free rider problem. But against the background of our current, already extremely large and well-funded tax system, no one who actually thinks that their taxes are too low has much of an excuse for refusing to fork over.
Megan,
You're not simply an MBA. You're a Chicago MBA, which means that you are steeped in analytical economics in a way in which many, many PhD's in econ aren't. I speak from experience having weathered the Hyde Park labor camp. (Your Penn econ undergrad deosn't hurt, either.)
Accordingly, it's abundantly clear from your essays that you have a grasp of econ that exceeds that of most pundits on the subject.
Just setting the record straight. Self-deprecation is unwarranted in this area.
Splendid post, BTW.
"New Jersey taxes are lower than those in New York City, which Laura moved out of."
For now, at least. Megan, you should look into the fiscal train wreck Gov. Corzine is steering NJ into, with an enormous increase in debt and tolls, plus higher taxes. Corzine is the Shemp of Goldman Sachs alumni in politics (though Robert Rubin isn't looking so hot either these days, with Citigroup's sub prime disaster happening while he was enjoying an 8-figure sinecure there).
Fred:
Corzine is trying to get Jersey out of the dumps. You understand that New Jersey has a $30 billion deficit, right? He's trying to correct the mess of Christie Todd Whitman(among others). That doesn't say he is going about it the right way.
Bill:
Are you serious?
Megan, Megan, what were you thinking?
Reason is a free-market operation. It's not enough to profess libertarianism. (though I'd reccomend that anyway) You also need to send them a check.
Cheers.
It seems like a lot of your binary examples don't hold up. "Either you have a Wal-Mart nearby, or you don't." But "nearby" is not a binary value. I don't even think it approximates binary (i.e., the number of people willing to drive to Wal-Mart drops off sharply when the drive exceeds 20 minutes).
Neither are casual Fridays. It's true that some asshole will come in a suit, but office fashion has a pretty subtle gradient, too, hardly khakis-and-polo vs. 3-piece.
But in general, I think you're spot on. People who want to raise taxes have an idea that it is a good investment for them - by giving $1 to the government, they'll get some marginal benefit of perceived value greater than $1. This extra benefit of value over $1 is taken from someone else, whose $1 is not giving them a marginal benefit of $1.
Megan, Megan, what were you thinking?
Reason is a free-market operation. It's not enough to profess libertarianism. (though I'd recommend that anyway) You also need to send them a check.
Cheers.
A completely spurious contention. It makes no logical sense for me alone to give more money to the government and expect it to provide services to everyone. Government can only provide services to everyone if everyone contributes. That's also known as "fairness" in my book.
Precisely.
Uh, what? What is "distributional unfairness?"
Just to take a stab in the dark, in health care you've talked about the "unfairness" of healthy young people paying for care for sick old people. Is that what you're talking about? You consider it unfair to kick in to government so it can provide services from which you may not directly benefit?
It would seem, under that definition, that there is plenty of "unfairness" in the system already. The entire insurance industry business model is predicated on people paying money into the system that they will never take back out of it in benefits. Therefore I assume you are in favor of getting rid of the insurance industry. (Me too, at least in health care, but for different reasons.) If there are no wars I do not directly benefit from defense spending. If I am not mugged I do not directly benefit from spending on police (a good number of people who ARE mugged don't directly benefit from that spending either). Yet no one is seriously suggesting abolishing the Defense Department in times of peace or doing away with the police force and FBI. So there must be some public benefit to providing these services that don't directly benefit every individual all or even some of the time.
Because you expect that the government, who you have appointed your agent to deal with foreign policy, will use some of the tax dollars you pay to send some money to Chad. Or you kick in extra to a charitable organization to go beyond what the government fails to do on your behalf (perhaps because you didn't permit it to collect enough money in taxes to be able to send some to Chad). But the $20 you give to the United Way (or whatever NGO) is not in itself sufficient to do much of anything; you only give that money to the United Way because you know that many others will also be giving them money, and therefore you will be part of a collective effort that has some chance of success.
Well, I didn't ask you to grant that. What I am asking you to grant is that people expect their government to act on their behalf, and that action requires collection of taxes. If people ask their government to provide more services, taxes must increase. Surely you can grant that.
Now you're venturing dangerously close to straw man territory. It would be one thing if the middle class was asking for their taxes to be eliminated while increasing taxes on the wealthy to not only make up the difference but to provide additional services. Nobody is asking that. What is being asked for is some restoration of progressivity ("fairness" if you like) in the tax structure, which has been eroded over the past 30 years through successive tax cuts at the top marginal rates.
You mean the one that has enjoyed huge (if not record) deficits over the past 7 years? That well-funded tax system????
Would you consider someone with an M.Sc. in economics to be justified in caling themselves an economist?
Liberal Rob,
So why do you pay taxes at all? Your contribution, as Megan said, is only a drop in the bucket. You answer, "That is my obligation." I say well then if you think that the government can use your money better than yourself, then you should OBLIGATE yourself to pay more.
If you really thought that your money didn't matter, you wouldn't send it in.
I think a lot of left-wing belief systems are built up on a certain suspension of doubt and critical thinking.
I have plenty of friends who make 250k+ here in the metro area who do everything they can to try to lower their taxes, from timing their sales of stocks around the long-term holding window to the usual aggressive business-owner accounting tricks (aggressive deductions, personal expense / business expense merging). But they all railed against the "Bush tax-cuts" for the rich.
MMcA writes:
Collective action problems generally apply to situations where the outcome is binary: either you have a Wal-Mart nearby, or you don't. Tax revenue is not binary--it's an upward sloping line. Some of the things the government spends the money on are binary--but given the existing level of tax revenues, this is simply not a reasonable objection to sending the government additional money. People who say they want higher taxes on themselves generally think the government does not have enough money to do the things it is already doing; as long as you think the government has a better (in some moral sense) use for the money than you do, then you have a moral obligation to send it in.
This post makes sense only in the hypothetical universe where there are persons who favor higher tax rates because they think of government services as an undifferentiated good that they want more of. (Right-wing radio commentators who sneer, "Liberals, they love government. They never met a government program they didn't like. Give me more government, that's what those liberals say, etc, etc.," appear to think that we actually live in that universe.)
In the real world, people who favor higher taxes do so because they recognize that specific governmental commitments of funds which they favor -- providing medical care to poor children, building out the Second Avenue subway line, hiring more workers to maintain public parks -- would need to be funded by a consistent source of revenue. The political decisions to undertake those commitments are, for the most part, binary. Sending $20 to the MTA will not get the Second Avenue subway line built. Sending $50 to the Department of Health will not give poor families the security of knowing that they can take their children to the doctor when they get sick. Sending $100 to the Parks Department will not mean that another worker gets hired (even if the Parks Department would get to keep the money, which in point of fact it wouldn't). That's not to say that sending the government a few bucks would be a complete waste of time -- maybe the DMV would get a new box of pens, maybe a park maintenance worker would put in a little more overtime -- but no sensibly operating government would make any significant commitment of resources based on the hope of paying for that commitment with voluntary contributions that might show up in the mail. It's taxes or nothing.
That's not to say that there aren't some circumstances where it makes sense for an individual to make a voluntary contribution to the government. In the 1980s, Donald Trump renovated the ice rinks in Central Park. That contribution made sense because Trump had sufficient personal resources to make a large contribution that overcame the collective action problem.
A number of government institutions commonly receive voluntary contributions -- public universities in particular -- which makes sense because those institutions are empowered by law (or de facto permitted) to maintain control of those contributions. In circumstances where a government institution that might otherwise receive contributions can't credibly commit to retaining control of the contributed funds, supporters frequently create private nonprofit entities to receive those contributions. I think the Central Park Conservancy is an example. Many PTAs might also fall into this category.
In any event this post doesn't sensibly grapple with the collective action issue, and warrants rethinking.
Your bracketed aside -- which (correct me if I'm wrong) seems to be making the argument "if you think taxes are good, but your own tax contribution is so negligable as to not make a difference, then why make a contribution at all?" -- indicates to me that you don't actually understand or (perhaps, more accurately) believe in collective action problems and their plausible solutions. The fact that my own contribution to the collective good is negligable is the reason I might, if contribution were purely voluntary, defect despite the fact that I actually prefer a situation in which the collective good is provided, and despite the fact that I might even be willing to pay for it. (free public good) > (public good that I have to pay for) >> (no public good). The fact that by choosing the behavior that might allow us free access to a public good (the most preferred outcome) we actually ensure that no public good gets created at all (the least preferred outcome) is the reason that those of us who are not libertarians invite the government to compel us to create the second best outcome...
Not only is it my obligation, I'm happy to pay them because I expect the government to use that money to provide services I think it should provide. Far from believing that my money doesn't matter, I consider it (for the most part) well-spent. I also give money to the Jaycees and Lions Club, so they can provide additional services that government cannot afford to provide.
JoshK, I see no hypocrisy in gaming the system to the maximum extent to pay the least taxes allowable under the law, and railing against the Bush tax cuts. It's eminently rational behavior. The system can be adjusted to ensure people pay their fair share; just because people can game the system doesn't mean the system should be abolished. For that matter, the Bush tax cuts were some of the most egregious system-gaming I can think of.
liberalrob,
see no hypocrisy in gaming the system to the maximum extent to pay the least taxes allowable under the law, and railing against the Bush tax cuts
First of all, I am also referring to the behavior that is not legal, such as classifying personal expenses as business expenses. Also, taking advantage of the long-term rate when selling is implicitly buying into the newer, lower rates. If one truly disagreed with the tax cuts, then you would sell one day before instead of waiting for one day after.
The only way that this is not hypocritical is if you explicitly recognize that you want others to pay higher taxes, but not yourself.
Yet no one is seriously suggesting abolishing the Defense Department in times of peace or doing away with the police force and FBI.
Evidently you missed the anarcho-capitalists in one recent thread.
"I think a lot of left-wing belief systems are built up on a certain suspension of doubt and critical thinking."
Some might say that applies equally to religious beliefs, which sometimes are found among adherents to right wing belief systems.
But I firmly agree with your point about a disconnect between wealthy people railing about Bush cuts "for the rich" while energetically avoiding taxes on their own quite large incomes. I keep saying to them they can pay more any time they want, but why bother other people, especially people who make less?
Collective action, shared responsibility, etc., etc., they say. Poppycock. They want to take others' money to use in ways they value highly but those others do not. Brian Graham at 11:34 am is dead on.
"Fred:
Corzine is trying to get Jersey out of the dumps. You understand that New Jersey has a $30 billion deficit, right?"
It's a $30 billion debt, actually, and Corzine is planning to increase it by about 50%, IIRC. If he wanted to fix things, he'd reduced spending to sustainable levels and stop chasing productive people out of the state.
liberalrob,
You keep using the word fair in a sense that is not consistent with the notion of fairness that I was taught as a child or the notion that I teach my children. In fact, what you define as "fair" is what I would call "unfair". I've already asked a couple of times but could you define what you mean by "fair" a little better, and explain why what I think of as fair you believe to be unfair?
Also, the unfairness in our current income tax structure is not that it lacks progressivity (The bottom 50% of earners paying no income tax at all while the top 10% paying 71% of the income taxes; the current system is highly progressive) and the dreaded Bush Tax Cuts made the tax code more progressive. The problem is that we're not paying for all the spending that the government does. I agree this is a problem and it is unfair, but it's not unfair in the sense that you say. It's a great deal across the board for people today; it's unfair to the taxpayers of tomorrow who are being obligated to pay for today's consumption.
As an aside, my personal feeling is that a fair tax system would be a flat tax, but the tax would be defined by time. Everyone would contribute the same number of "hours" to the government, where their hours are valued by their total yearly income (including passive income and capital gains) divided by 8760 (24 hours/day * 365 days/year). Tax rates would be the number of hours the government wanted from everyone.
If I understand correctly, Megan feels that if you favor a tax increase and if Congress doesn't comply, you should give the money to the government anyway. As shown by her own actions, she also feels that supporting the Iraq war does not obligate you to volunteer for military service. To me, this seems inconsistent.
Am I wrong?
It's a $30 billion debt, actually...
And that's just the bond obligations. If you add in the projected "post-employment" pension and benefit packages for the next 20 years, I believe it comes to between $120 and $150 billion.
Laura at 11D will definitely see her taxes rise dramatically in years to come. Unfortunately those rising taxes are likely to drive out even more of New Jersey's tax base (hundreds of thousands have already left in the last ten years, including me), undermining the state's ability to seriously increase tax revenue.
I rarely equate "serious" and "anarcho-capitalist."
I forget who it was who recommended I watch "The Commanding Heights" (which was already on my Netflix queue at the time), Jmo or squeak I think, but I've gotten through disc 2. Very good show. Hasn't changed my opinion on the need for government regulation of the free market, of course :)
I rarely equate "serious" and "anarcho-capitalist."
Oh, they take it very seriously indeed.
Hasn't changed my opinion on the need for government regulation of the free market, of course :)
As I've pointed out in the past, you can't disprove an axiom.
I'm fairly liberal and I would gladly pay higher taxes to support an effective school voucher program, i.e., one that used pretty much all new money for the vouchers and for the time being kept public school budgets at their current levels.
But I'll become one of those fanatic "income tax is illegal" non-tax-payers if Congress passes the type of socially and economically grotesque mortgage bailout that various parties are trying to inflict on us.
Stan: Enrollment in the military is voluntary. Tax-paying isn't.
Thinking a war is a good idea does not obligate one to fight it oneself, since nobody is forced to do so involuntarily these days.
(Nor would it necessarily do so even with compulsory service, since
a) recruitment limits are set by congress, and they simply couldn't enroll every war supporter even if it was a moral requirement to volunteer
and
b) war supporters support any given war, at least partially, believing it's for the good of the nation as a whole, and ...
Some number of them, a number uncertain but non-zero - even taking into account a) - are going to do more good for the nation doing their current work than being a truck driver in the Army.
[Remember, most troops aren't combat arms. I know they've been trying to reduce the ratio, but as far as I know it's still at roughly 10:1 support to combat.]
Try this analogy - everyone's in favor of a fire and police department, but that obligates precisely no specific individuals to become firefighters or policemen merely because they're in favor of someone being such, and even though the jobs are risky.
)
Taxes are always involuntary; thinking they should be higher amounts to thinking everyone [or at least those you wish to be taxed] should be compelled to pay them.
That's the difference, and it seems completely relevant and important to me.
Since Laura is proposing that "everyone" be compelled to let them State take more money from them, I see no reason to not mock her for not leading by example and giving the money right now, if she actually believes it's worth the use of coercion.
Megan, by the same logic, you would argue that no one should ever vote, since the chances of one's individual vote affecting a particular election are small. Yet we still vote.
Would all the anti-taxers PLEASE finally put their money where their mouths are and move to somewhere that "doesn't have high taxes"? (It probably won't have paved roads, a working government, or an economy, but that's ok, right?)
SG:
I thought I had already explained what I defined as "fair," at least implicitly, but I'm happy to discuss it again.
"Fair," it would seem to me, is that if I am required to sacrifice for your benefit, you are required to sacrifice for my benefit. Similarly, if you benefit because of my sacrifice, it's only fair that I should benefit from your sacrifice. That's what I think it boils down to. We've all agreed to be part of a civil society, sacrificing absolute personal freedom of action and freedom from responsibility towards others in exchange for collective security and the strength of collective action. This all goes back through Locke and Rousseau and all the other forefathers and descendants of Enlightenment political theory.
Whether a "flat tax" or a progressive tax system is more "fair" is something I haven't settled on. Both appear to have important aspects of fairness. A flat tax is attractive because everyone contributes on the same percentage basis. A progressive tax is attractive because it increases as one's success increases (success that was presumably guaranteed by or predicated on membership in the larger society; greater benefit should result in a greater return on society's "investment").
What is not in question for me, but seems to be in doubt for libertarians (to say the least), is that government is the appropriate recipient of this taxation. Libertarians believe that government should only provide the minimal services absolutely necessary to the survival of the larger society, and taxation should be capped at the level that enables that minimal provision; everything else should be left to the spontaneous beneficence of individuals. My contention as a liberal is that in practice few or no such individuals willing to part with their hard-won earnings freely actually exist. It is only through required contributions via mandatory (yes, "confiscatory") taxation that desirable services can be provided. Therefore it seems fair to me, if as a society we have decided to provide extensive services, to demand taxation of all members of society to pay for those services.
no one should ever vote, since the chances of one's individual vote affecting a particular election are small. Yet we still vote.
But maybe then we shouldn't vote?
Would all the anti-taxers PLEASE finally put their money where their mouths are and move to somewhere that "doesn't have high taxes"?
There is large migration already to low-tax states from higher-taxed states. But there is a difference between no taxes and high taxes, right? Few people suggest no taxes whatsoever.
http://www.coyoteblog.com/coyote_blog/2008/02/there-are-two-1.html
For those that are interested there is an excellent discussion of this argument in Robert Nozick's fine Anarchy, State and Utopia.
let's try a basic hypothetical and see where it leads.
1. Hypothetically, I believe that the State of California should not run a structural deficit of about $10 billion per year. It's bad for the long-term economy.
2. The State largely does three things: it educates, incarcerates and medicates. (It also builds things, but that's paid out of bond funds.)
3. Our elected representatives cannot find $10 billion in cuts annually in education, prisons and/or health services.
4. I earn a pretty good living, better than most. If any economic group can afford to pay a little more in taxes, mine can.
5. Therefore, I am undertaxed. Not personally, but as a member of a group that can afford to pay for services that the voters as a whole have demanded.
Now, I'm not particularly thrilled to be advocating for higher taxes for myself. But I like living in California and I want for the State to continue to be economically healthy. If my fellow citizens insist on a particular level of services, and my economic cohort is the only place to find the funds to make up the shortfall, then I need to suck it up and contribute my fair share.
People have different preferences. Some desire better collective services; others would rather sacrifice services to gain independence. That's one of the cool things about federalism. I can choose to live in New Jersey and pay higher taxes to gain some things. Sure, my husband's job makes moving a little trickier, but we could do it. Lower tax people can move to New Hampshire or Alabama.
Actually, I would consider moving to a town with even higher taxes, if it meant a big improvement in my kid's school.
I think the obsession with "fairness" is a little misguided here. The argument that there is a collective action problem when it comes to basing government services on voluntary contributions has absolutely nothing to do with fairness. Yes, behavioral economic introduces some complications having to do with perceptions of fairness (most of which, I think, would support the assertion that you can favor increasing taxes on a population that includes yourself but not just send a check to the government unsolicited). But the idea of the collective action problem comes from the classical, rational, utility maximization theory of human behavior that, correct me if I'm wrong, is the basis of modern libertarian economic thought. And I don't think that any of you who are aggressively shouting "there is no collective action problem here, please stop hitting me with my own hand" are actually taking seriously the arguments of those of us who actually know what collective problem is. If there was not a collective action problem regarding the provision of public goods, and if taxation were not the solution to the collective action problem of funding government's capacity to provide public goods, then not only would we not need taxes, we would not need government. I don't think even Milton Friedman or Ronald Reagan would have gone that far.
How is it fair for me to be obligated to pay for programs that I don't use and don't like and don't support?
I don't want to have another stadium built in my city (for hockey). But the city will buy it and the voters will most likely approve the money. This is how govenrment works, but it's hardly "fair."
If you want to give money to poor people and you and your friends out vote me to tax me to pay for this, how is that "fair"? It feels like you're just taking my money and giving it to someone else without my permission.
If you support some program and feel like you are undertaxed, then donate the money. If enough people feel the same way, then the program will get funded.
I don't mind taxes for vital programs that are not amenable to market solutions. The military comes to mind. As do some other infrastructure programs. Most of the earmarks I've read about are wastes of money or things that the Federal government shouldn't be funding or are examples of corruption. Why would I want to pay more taxes to support corruption and waste?
I will support tax increases when the government cleans up its act and then determines that it doesn't have enough revenue to pay for vital services.
I said this before... most people who support higher taxes believe that the rich should be paying them and that they aren't rich.
So why do you pay taxes at all?
Not only is it my obligation, I'm happy to pay them because I expect the government to use that money to provide services I think it should provide. Far from believing that my money doesn't matter, I consider it (for the most part) well-spent.
Liberalrob, do you give the government extra money on top, as you consider it money well spent?
Or do you think that the government is taking exactly as much money as it should from you, and not enough from others?
If the government raised your taxes by 100 dollars/ month, and you could avoid paying it, would you?
If not, then why should you not pay the extra 100 dollars/ month now?
We could just redistribute all earnings, becoming fully Marxist. The trouble with this is it cuts private capital investment to zero. The Marxists would probably respond that the government will then perform that function. But they have a less than poor track record doing this. The French government gave us the Minitel, when what the world needed was the Internet. Without market forces intermediating the decision making process, failure of new product development is assured.
I live modestly. Most of my savings are tied up in investments. Higher taxes remove this money from the aggregate capital pool and channel it to consumptive expenditures, like the mislabeled 'Stimulus Package.' Taxing capital cuts the economic growth rate and, ultimately, the government's tax take from our highly top-weighted tax structure. Since we're beyond the equilibrium point of the Laffer Curve, cutting tax rates actually results in increased aggregate tax revenue.
I percieve that congressional advocates of higher taxes are largely the same group as our congressional class warriors. They love the idea of taking money from those of us who will save and invest it, and to give it to the profligate, who will immediately spend it. But without the productivity improvements our investments generate in the american economy, their schemes all come to naught, as the economy suffers.
liberalrob:
As I understand you, you find free riders unfair. OK, we agree on that. But how are the rich, who you believe to not paying their fair share, free riding on you? What public goods are they consuming in disproportionate amount to their contribution? Also do you consider the lowest 50% of earners who pay no income tax to be free riders? Don't they have a fair share too? Why or why not?
In general, I agree with what you are saying. We should all be contributing to pay for the services that we as a society have decided to provide. But where you steal a base intellectually is when you posit that those who want lower taxes are being unfair (or some other pejorative). I don't recall ever running across someone who wanted lower taxes who also wasn't prepared to accept a lower level of governmental service in exchange.
So basically you're talking about people who don't want some government service and therefore don't want to pay for it. That seems entirely reasonable and fair by any sense of the word. This contrasts with other, who wants additional services and are willing to pay more while requiring others to pay more too. Agreed that that's part of the social contract, but it seems... less fair.
(Note: None of this is intended to argue for or against any particular governmental service.)
My contention as a liberal is that in practice few or no such individuals willing to part with their hard-won earnings freely actually exist. It is only through required contributions via mandatory (yes, "confiscatory") taxation that desirable services can be provided.
Except that, in a democratic government, people do consent to be taxed. Not only that, but lots of charities also exist, and lots of people and businesses voluntarily donate time and money to them. People aren't completely driven by naive self-interest and the evidence is all over the place.
As written your statement is easily refuted. I think it would be more correct to say that "My contention as a liberal is that in practice few or no such individuals willing to part with their hard-won earnings freely at the level necessary to support the amount of services I desire actually exist." That's a very different statement.
I see explanations in both the post and comments that are correct IMO, but are being portrayed as contradictory when they are actually consistent when viewed as a superset and subsets. A taxed, democratic society is essentially a deal-making society. The overarching deal of the taxed, democratic society is, there are things we all agree we need and cannot buy individually, but which we can buy in aggregate. As such, we all agree that some level of taxation is necessary, and we all benefit by the goods and services it purchases. Within that deal, however, are both a collective action problem and a litany of peculiar behaviors.
First: the collective action problem is the superset. We may have agreed to pay common taxes, but that agreement has two competing factors: (a) my contribution is extremely small relative to the scope of the aggregate purchase, and (b) my contribution removes an extremely large portion of my individual purchasing power. In general, an increase in my contribution immediately and noticably reduces my individual purchasing power, and yet is too small to increase the collective purchasing power. So: either everybody pays, or I don't.
Second, there are the subset deals made within the superset, and it is here, I think, that Megan's points are salient. Without being opposed to taxes in general, people will debate, and support or oppose, specific taxes based on what kind of deal they perveive themselves to be getting out of a particular action.
There are plenty of human behavioral psychology experiments to support these behaviors in regards to deal-making. A recurring discovery is that although an even break is universally acceptable, most people will accept unequal shares up to a certain threshold. Beyond that threshold, they are willing to take a loss in order to punish the person whom they believe to be acting unjustly. Since taxes are essentially a deal to remove disproportionate amounts of income in order to receive dirproportionate gains, why would the behavioral mechanisms be substantially different?
To the extent that I=society, I'll accept that formulation. I'll add that I have no expectation that my entire program will be acceptable to all of society.
Everyone wants to quibble about individual preferences: "yes, but what about when my taxes go to a program I oppose and would never benefit from anyway? What's fair about that, hanh?" Look, you're either part of society or you're not. A society where you can opt in or out depending on whether you agree with the collective's goal of the moment is not really much of a society at all. If you opt out on the service I want, then you can be damn sure I'll opt out on the service you want; and once we start drawing those kinds of lines, what's left to bind us together? We go right back to every man for himself and that's nowhere anyone should want to go.
What's fair about it? What's fair about it is if you are forced to kick in to services for me that you don't agree with, I am also forced to pay for services for you that I don't agree with. If you are at a point where you don't need ANY services, yet you want to claim to be part of society, it seems fair to require you to pay in also.
They are holding on to resources that could be used for the betterment of all, and part of those resources come from me. Instead of directly benefitting me, those resources are reserved for their own personal use. We negotiate loans of their hoarded resources in the form of investments they make, for which they assume risk of loss; but they manage and insure against that risk so as to minimize it and maintain their wealth, in the meantime claiming all the profits from successful ventures (and demanding reduction and elimination of capital gains taxes we use to try to capture some of their success for general use).
Without being opposed to taxes in general, people will debate, and support or oppose, specific taxes based on what kind of deal they perceive themselves to be getting out of a particular action.
Yes, well done deep thinkers. Next up: explaining that people go to the store to buy things.
Look, you're either part of society or you're not.
Wait, that's a choice?
what's left to bind us together?
The "Deal or No Deal" girls?
part of those resources come from me.
More evidence for my thesis that CEO pay is rising because they steal from you.
And yes, I do have something better to do. I just don't want to do it. Thanks for asking.
That's something that sounds easy in theory but in reality doesn't work. Human nature screws it up; we don't make good robots.
I'm not asking for total redistribution. There has to be some happy medium between laissez-faire and Marxism that would allow incentives and market forces to operate while at the same time providing some base level of services for all citizens.
What most of us are really in favor of is military service by other people. If we wanted military service by us, we'd go to the nearest recruiting office.
(Un)righteous Bubba wrote: Yes, well done deep thinkers. Next up: explaining that people go to the store to buy things.
I'll leave that one to a deep, gracious, tactful thinker such as yourself.
Actually, if you look at population migration, people DON'T end up in places with low taxes. People talk loudly about not wanting to pay taxes, but they'd much prefer places with higher taxes, good roads, good school systems, responsive police and fire departments, etc.
And I'll be happy with a "flat tax" if it's a flat tax on capital. Seems fair, no?
they'd much prefer places with higher taxes, good roads, good school systems, responsive police and fire departments, etc.
Really, what the hell do any of those things have to do with the actual way "high" taxes are spent? We could slash federal taxes by probably 50-75% and still pay for good roads, schools, police, and fire. The objection to high taxes is largely that they are spent on things we don't want (chiefly entitlements, at the Federal level).
liberalrob:
[The rich] are holding on to resources that could be used for the betterment of all, and part of those resources come from me.
How did the rich get their resources come from you? Did you freely exchange your resources in exchange for some good or service that they provided? If so, then you made an exchange, and you (ought to) have relinquished claim to whatever you've given up. But since the good or service that they provide was sufficiently valuable that you willingly parted with your money, you got a good deal too, right?
What have the rich taken from you that wasn't given freely by you?
If you think that tax rates have not affected state population migration, have a look at this. I can't post it because of copyright:
The (Tax) War Between the States
By ARTHUR LAFFER AND STEPHEN MOORE
http://online.wsj.com/article/SB119724619828518802.html
These are also interesting:
Growth in Some States Slows
http://online.wsj.com/article/SB119872248705652005.html
States’ Population Growth Amid Housing Slump
http://blogs.wsj.com/economics/2007/12/27/states-population-growth-amid-housing-slump/
Sorry, I know it's tough when data conflict with theory.
"[The rich] are holding on to resources that could be used for the betterment of all, and part of those resources come from me. Instead of directly benefitting me, those resources are reserved for their own personal use."
Others will handle this better, but still: yikes.
"We negotiate loans of their hoarded resources in the form of investments they make, for which they assume risk of loss; but they manage and insure against that risk so as to minimize it..."
Those bastards! (Also, in that sentence, "investment" does not coexist very well with "hoarded", sir.)
wGraves,
Your example of the Internet as a triumph of market forces vs. Minitel as a failure of the state was a poor choice for your argument.
The Internet (or at least all the hardware, software and protocols governing it) was developed by the U.S. government, using taxpayer money, as Arpanet in the 1960s. Further, it only came into wide use following the disastrous investment of free market corporations like WorldCom in fiber optic cable, the bandwidth from which is now once again controlled (effectively, I might add) by a quasi-public agency.
Kind of puts a new spin on the old State vs. Market arguments, doesn't it?
What's fair about it is if you are forced to kick in to services for me that you don't agree with, I am also forced to pay for services for you that I don't agree with.
Does not follow. There is no reason to believe that everyone is getting the same value from the government in benefits.
Especially since it is quite possible that the services for me are such that I could have gotten them cheaper and better without your forced payment, because then I could have gotten them freely.