Sunday, March 18, 2012

Thoughts on "tax choice": is it just anarcho-capitalism?

I've been seeing comments a lot recently by a guy named "Xerographica" on the idea of tax choice. At first I thought it was a really dumb idea - then after he clarified some stuff I'm somewhat more positively disposed. But I still feel like I don't entirely get it, but perhaps we could find out more. The Wikipedia page isn't very helpful, unfortunately.

"Tax choice" as Xerographica explains it, is just what it sounds like - you get to allocate where your tax dollars go. It's promoted as a way to bridge the genuine problem posed by public goods and the genuine calculation problem (to me, they are closely related - far from "not getting" the calculation problem, we who advocate government allocation in some cases are recognizing what goes in to economic calculation and making assertions about public vs. private goods on that basis). My first thought was that this does nothing to address public goods at all. I am one little drop in a masive bucket of American taxpayers. If I had complete reign over what to do with my taxes, I'd allocate it to a transfer back to the Kuehn household! We just got a pre-approval on a mortgage yesterday (yes, I'm very excited!). The more money for a down payment the better! That's what I'd do.

That's what a lot of people would do, which means that "tax choice" would just turn into anarcho-capitalism. Which, if you're an anarcho-capitalist is fine, but it doesn't solve precisely the problem it's supposed to solve: the public goods problem. And it fails to solve it for precisely the reasons we all know: the Kuehn household (and presumably every other household) tries to free-ride off of others for public goods. I like my down payment, and I like public goods, but my tax dollars (which are all I have control over) will do me a lot more good invested in a down payment than they would in buying a fraction of a battleship that I have to share with the other 299,999,999 million of you (not to mention those NATO freeloaders).

So that didn't seem very helpful. But then Xerographica assured me that that's against the rules. OK - I don't know why exactly but at least that doesn't end the prospect of "tax choice" immediately. It does raise other questions for me. Are any transfers allowed? Because if I couldn't give a transfer to my own household, transfers to households with unemployed parents of young children would be very high on my list of places to send my tax dollars. Is that allowed? Would that just be sending my tax dollars to the Department of Health and Human Services or the Department of Labor? I guess so.

At this point, "tax choice" becomes more reasonable. It's just extending democratic principles, which I am strongly in support of. Two concerns loom large for me, though, which prevent me from jumping on board:

1. Weighting of the vote. Basically, the public goods that will get provided are the public goods that rich people like. In this sense, the system isn't democratic at all - it's hardly "one person one vote". It directly contradicts democratic principles in fact. In democracies, we accept a couple things. First is the idea that there is some kind of community that has certain collective needs and that it is legitimate to collectively provide for. Second is the idea that in deciding what that community needs, everyone has an equal say. "Tax choice" does not support these points, because the government would essentially be run by the guys that pay the most, even though it seems democratic.

2. Second is information problems. I feel like I'm pretty well informed about what the government does. I don't make these dumb mistakes about 15% of the budget going to foreign aid. I know the basics of how all the major social programs operate. I have some decent insight (in a lot of cases through Kate) into the way the military is structured and how the acquisition process works. And I feel pretty well informed about the short and long term pressures on the budget on both the revenue and expenditure side. I'm a pretty decently informed citizen. But I don't think I have nearly enough information to allocate my taxes properly across all these functions even the ones that I find perfectly legitimate (which to be honest is most of them). Others are going to struggle with this too. And that information problem could come up with some perverse results. You may get a massive EPA budget, far beyond what makes sense, because people can't really grapple with all these trade-offs but they know they want to "protect the environment". What does that really help? You probably stop doing the environment much good pretty quickly, you suck funds away from other uses, and you're probably going to hurt the economy if you beef up the EPA's regulatory capacity.

So I like the basic idea of tax choice, but there are at least two big problems with it too. And both of those problems point to one solution: have representatives of the people, elected with every citizen having an equal vote, get together and work full-time on weighing these trade-offs against each other. Which kind of sounds like the Congress, right?

It's important to keep in mind that institutions emerge and evolve naturally in human society. This is the sort of thing I'm refering to when I complain about "libertarian social engineering". You get these big ideas that would do away with government, and they sound great on paper - but then you think about it and there are all sorts of ways that it wouldn't work, in practice, with individual agents. But more often than not if you think about it society has already addressed a lot of these concerns, slowly and painfully, adjusting things and tweaking things along the way - long before any of us were even born. The system we have now may look like a mess to you, but a lot of emergent orders look like a mess. We have an emergent order when it comes to the provision of public goods that I think stands up pretty well. You don't see the government funding indisputably private goods here, and you don't see a complete lack of rhyme or reason to how things are allocated. The things that bug Xerographica are real - but I think we should take it as an opportunity to make further tweaks - namely to push some democratization and devolution. That I could get behind. But "tax choice" seems to me like a dud.


  1. ~~It's important to keep in mind that institutions emerge and evolve naturally in human society. This is the sort of thing I'm refering [sic] to when I complain about "libertarian social engineering".~~

    And they emerge at least in part through the competition of ideas. "Libertarian social engineering" sounds a lot like what everyone does in a pluralistic society.

    ~~You don't see the government funding indisputably private goods here...~~

    Seems to me such a claim leads down a definitional rathole at best.

    ~~...namely to push some democratization and devolution.~~

    I see, so can we call this "Daniel Kuehn social engineering," just to be fair?

  2. Thanks so much for the critique! It's really appreciated! Here's my response...Daniel Kuehn's Critique of Pragmatarianism.

  3. "they sound great on paper - but then you think about it and there are all sorts of ways that it wouldn't work, in practice, with individual agents."

    So given my opinions, have I never "thought about it?" Or am I just defective?


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