Taxation and Skin

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James K

James is a government policy analyst, and lives in Wellington, New Zealand. His interests including wargaming, computer gaming (especially RPGs and strategy games), Dungeons & Dragons and scepticism. No part of any of his posts or comments should be construed as the position of any part of the New Zealand government, or indeed any agency he may be associated with.

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12 Responses

  1. Avatar Art Deco says:

    On the solutions side of things, Elias suggests linking war spending to a dedicated tax, a suggestion that applies the same principle in a narro w domain, if you want a war you had better pay for it – in cash.

    Ptth.

    Military spending has varied wildly according to external circumstances over the last eighty odd years. The arithmetic average since 1929 has been 8.2% of domestic product, with the range running between 0.8% and 44%. Capital projects, resolutions of banking crises, and national mobilizations are the three sorts of public expenditures where you have these sorts of spikes in the propensity to spend. It is sensible to seek voluntary financing (from bond buyers) and then amortize from your tax revenues over a period of decades.Report

  2. Avatar Just John says:

    Things vaguely like this sort of effort at fiscal discipline and transparency have precedents in recent history. The Clinton era “pay-go” policy is an example, and the Obama administration’s citizen tax receipt is another. But it doesn’t seem viable to express tax rates as a percentage of federal spending because neither actual revenues nor actual spending are quite as predictable as necessary for the citizen or the government. Keeping all expenditures on budget so that deficit/surplus reporting is as informative as possible helps, but even then accusations of illegitimate “accounting tricks” are available and its just not so easy for people to agree about the “right” way to count the beans. Consider the controversy(ies) about the Social Security Trust Fund. Not only is that debt that the government owes to itself, but the more that gets socked away in the trust fund the higher the total national debt. Or the controversial relation between specific tax rates or specific spending and the economy’s growth rate. Identifying just what the “next dollar” is not a tidy project.Report

    • Avatar James K in reply to Just John says:

      These are legitimate complications to my fairly simplistic picture.

      Some of the stuff you’re talking about is less of a focus for me because of how government accounting works in New Zealand (for one thing off-Budget expenditure is some combination of illegal and unheard of). But still, there would be a lot of careful construction of accounting rules necessary to implement this.Report

  3. Avatar E.C. Gach says:

    I agree for the most part with your utopian tax scheme James.

    Although I wonder how this would affect people’s month to month behaviors, assuming that this new regime would be more volatile then the current one.

    I imagine checking taxes and rates on an iPhone app every day just like I were checking the stockmarket or exchange rates. A radical exagerration of what you’re proposing to be sure. But I agree that people would then understand what they were paying for.

    Part of why Social Security is so popular. People see what they pay, and have some foggy understanding of what they will get in the future, or a present reminder if they have grandparents/know someone on SS disability.

    At the very least it might help to relieve some of the estrangment between citizens and the federal gov that seems to drive so many people to hate it.Report

    • Yes, I think James’s idea is pretty cool. I would imagine people who know more about this stuff than I do could raise some possible problems/objections, but on first-blush it seems like a great idea. In the American context, certainly, it could potentially have an enormous effect. One of the defining traits of US politics, after all, is that people have almost no idea how their money is actually spent — frequently, they don’t even know how much they’re being taxed!Report

      • Avatar Jason Kuznicki in reply to Elias Isquith says:

        I agree with this, and I can’t think of any remotely plausible case against the so-called taxpayer receipt, which would tell everyone exactly where their money goes, on a dollar-for-dollar basis.

        As Ezra Klein once said, the federal government is more or less an exceptionally well-armed insurance company. (For some reason, he seems to think that taxpayers would approve. I’m thinking they probably won’t.)Report

    • Avatar James K in reply to E.C. Gach says:

      I’m not sure how volatile it would be. To much instability is bad, even if the changes can be described by formula. It’s less complex in New Zealand since all money is appropriated once per year, and expenses and revenues are reforecast twice per year. So really, there are only three times per year tax rates would need to be revised.

      But in the US, things would be more complicated. You might want to revise rates quarterly or something.Report

  4. Avatar Jason Kuznicki says:

    Also, I wanted to comment on this:

    There are some complicating factors such as externality taxes (I would make then fiscally-neutral by using them to fund an annual dividend to all citizens),

    I’ve never understood why, in a Pigouvian tax regime, the government is the chief beneficiary. Shouldn’t it be all of the citizens, collectively? (Do note: That’s not the same thing as the government.)

    Perhaps externality taxes could be the outflow component of a negative income tax system.Report

    • Avatar Just John in reply to Jason Kuznicki says:

      There are two ways that taxation to correct negative externalities benefit all citizens: raising the cost reduces demand, thus reducing the negative externalities; funding action that reduce the negative externalities directly (regulation) or mitigate/eliminate the impact of the negative externalities. Cash payout of the proceeds of taxes on negative externalities to all citizens would reduce the effectiveness of the former and reduce funding availability for the latter.Report

      • Avatar James K in reply to Just John says:

        What you say is true, but:
        1) When it comes to my universal dividend scheme, I would make an exception for taxes being funnelled into mitigation programmes.
        2) From a distributional equity perspective the proper thing to do with Pigouvian taxes is to distribute them to the people harmed by the externality.Report

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