Assessing tax burdens is an inexact science, filled with variables such as a person’s deductions, property ownership, sales purchases and other factors.
The parallel, of course, is that who benefits from a subsidy is not answerable by seeing who gets the money. Grants and loans to college students seem largely to increase the number and the salaries of college administrators, to pick a widely remarked current example.
I'm reminded of a common argument in British politics.
Unlike most US jurisdictions, the UK does not tax ownership of residential property. Instead, local government is funded (in part) by Council Tax. While the amount owed is based (very loosely*) on the value of the property, it is paid by the occupants not the owner if the property is occupied by someone who doesn't own it, and there are various discounts or exemptions based on who the occupants are.
Various people have argued that landlords, not tenants, of residential properties should be liable to pay the Council Tax. None of them have made any suggestion apart from rent controls as to how landlords would be prevented from simply raising the rent to take this into account.
*Properties are sorted into bands based on their value in 1991 (or their hypothetical value in 1991 if they've been built or substantially improved since then). Properties in higher bands pay more tax, but the difference isn't proportional- a property in the highest band pays only 3 times as much as one in the lowest band even though it's "worth" 10 times more.
If there are discounts depending on who the occupants are, that will subsidize some kinds of occupants. The effect is obvious the way things are set up, which may be why they do it that way. But if the tax was paid by the landlord it would be in their interest to offer better terms to favored types of occupants in order to hold down their taxes, so you would have about the same effect although less obviously.
There would be a problem if the landlords were not allowed to advertise different rents for different types of tenants, however.
Friedman: " The point is not limited to such extreme cases. If the tax results in a thousand fewer people becoming physicians that is a cost to a thousand people who are now shifted to their second choice career and the patients they would have seen."
This is an argument against steeply graduated income taxes and, given any income tax, for rates that, beyond some point, fall as income rises. To see this, imagine some highly productive high-income individual (a top-tier violinist or top-tier orthopedic surgeon). For ease of calculation, let's suppose this individual makes $1,000,000 per year and takes two months off to decompress. That's $100,000 per month or $25,000 per week. This person is balanced at the point that an added week of income is worth less than an added week of leisure. Meanwhile, there are cities full of people who would pay $100 for a ticket to see Hillary Hahn. There are people whose lives would vastly improve with knee reconstruction surgery. To get this musician to add another city to her schedule, to get the surgeon to schedule two more knee replacements, you will have to pay more than $25,000. The market sets the price, so the only way to increase the amount that the musician or surgeon receives is to reduce the tax on the pre-tax income on the added week's work.
Some years ago I copy edited a book that quoted Thomas Hobbes's Leviathan. I was surprised to see Hobbes arguing that since the function of the law was to preserve life, and everyone valued their life equally, everyone should pay the same tax. Not the same percentage: the same amount. That would have stringently limited taxation to what the very poorest man could afford to pay. The only other writer I've seen advocate this was Murray Rothbard, who may have been doing it as an intentional paradox.
It was quite a concession from a man generally identified as a proponent of the omnipotent and unlimited state.
Interesting. The efficiency argument for a head tax is entirely conventional. The argument you offered is one argument against it, the more usual one being that poor people should pay less than rich people.
Adam Smith argues that the benefit of government is roughly proportional to income, hence that tax incidence should be as well. A modern argument might be that dollar value of life is higher for richer people due to declining marginal utility so, on Hobbes argument, they should pay more. That gets close to the utilitarian argument for progressive taxation.
I found your classifying my comment as an argument against the head tax perplexing at first glance. Am I right in supposing that you are saying that "[the head tax] would have stringently limited taxation" is an argument against the head tax? I should have supposed it to be an argument in favor of the head tax. But then, as a libertarian, I favor keeping taxes as low as possible.
Those "obvious problems" make the head tax less than ideal. The problem with the argument for graduated income tax rates that, beyond some point, decline as income rises is that the point could well vary from one occupation or individual to another.
Also, I wonder how the argument applies to a regime in which the State makes all its money off a national sales tax.
As an aside, if government were small enough, and the market robust enough, the State could finance its operations by printing money and have no impact on the price level.
A tax is a State-mandated transfer of wealth or income. A fine is a tax. A civil judgement which mandates a payment between private individuals is a tax. When the DEA seizes and destroys ten kilos of cocaine, the dealer has been taxed. Corvee labor is a tax.
Children of low-income minority parents pay a very heavy, very inefficient tax. Compulsory unpaid labor is slavery (definition). In the US today, fifty million children work, unpaid, as window dressing n the massive make-work program for dues-paying members of the NEA/AFT/AFSCME cartel that many speakers of American English call "the public school system".
I think you have a good point here in that there isn't much of a clear line between taxes and other regulations. E.g. if in one jurisdiction I have to pay €2000 in taxes and €1000 in rent and in another I have to pay €1000 in taxes and €2000 in rent (say because of regulations on construction), to me, as a consumer of jurisdictions, those two scenarios are pretty much equivalent.
To you it is the same, but the government gets more money in the former case. If you believe the government will spend the money in ways that benefit you, then it is not the same to you.
Of course, the regulations on construction are theoretically to produce a better house. If that's true, then you are getting something back in that case as well.
Yeah, e.g. if I have a strong preference for living in a beautiful town, then the benefits of construction regulations may even be greater than the cost to me – or e.g. if i get my income from the government, then I may even be getting more benefit than cost from higher taxation. But I think that in general a rational consumer shouldn't try to calculate such things or compare tax burdens, but should just compare the costs and benefits of living somewhere as a whole.
And the effect of fines and taxes are the same: to discourage some activity (e.g., sin taxes, traffic fines). Sometimes, legislators say this directly (e.g., tobacco taxes).
Here in Mexico, here is a tax called IVA, a 15% sales tax.
It's reasonably hefty, and avoided (if not completely, at least partially) by most small merchants, by using cash. I haven't figured out if the small places that use 3rd party cc processors also avoid this, it seems the little mom and pop places don't add the 15% (but that doesn't mean, of course, that they necessarily don't pay off the receivables they process, but if so, I'd be surprised that they wouldn't add it to the bill).
Some restaurants/bars will not even take a debit/cc and deal in cash only. As far as memory goes, these places give you a bill and you pay the bill as is, no additional taxes.
Certainly none of the small outdoor merchants add 15%.
What I've noticed is that when I'm short of money, I lean toward smaller restaurants/shops/services noting in my mind it'll be cheaper, both because it's cheaper up front, but also, they don't add on the tax.
Nonetheless, at a 15% rate, I do notice its impact on larger purchases, such as nice meals or filling up the truck, and it does have some incentivizing effect on me.
The parallel, of course, is that who benefits from a subsidy is not answerable by seeing who gets the money. Grants and loans to college students seem largely to increase the number and the salaries of college administrators, to pick a widely remarked current example.
I'm reminded of a common argument in British politics.
Unlike most US jurisdictions, the UK does not tax ownership of residential property. Instead, local government is funded (in part) by Council Tax. While the amount owed is based (very loosely*) on the value of the property, it is paid by the occupants not the owner if the property is occupied by someone who doesn't own it, and there are various discounts or exemptions based on who the occupants are.
Various people have argued that landlords, not tenants, of residential properties should be liable to pay the Council Tax. None of them have made any suggestion apart from rent controls as to how landlords would be prevented from simply raising the rent to take this into account.
*Properties are sorted into bands based on their value in 1991 (or their hypothetical value in 1991 if they've been built or substantially improved since then). Properties in higher bands pay more tax, but the difference isn't proportional- a property in the highest band pays only 3 times as much as one in the lowest band even though it's "worth" 10 times more.
If there are discounts depending on who the occupants are, that will subsidize some kinds of occupants. The effect is obvious the way things are set up, which may be why they do it that way. But if the tax was paid by the landlord it would be in their interest to offer better terms to favored types of occupants in order to hold down their taxes, so you would have about the same effect although less obviously.
There would be a problem if the landlords were not allowed to advertise different rents for different types of tenants, however.
Friedman: " The point is not limited to such extreme cases. If the tax results in a thousand fewer people becoming physicians that is a cost to a thousand people who are now shifted to their second choice career and the patients they would have seen."
This is an argument against steeply graduated income taxes and, given any income tax, for rates that, beyond some point, fall as income rises. To see this, imagine some highly productive high-income individual (a top-tier violinist or top-tier orthopedic surgeon). For ease of calculation, let's suppose this individual makes $1,000,000 per year and takes two months off to decompress. That's $100,000 per month or $25,000 per week. This person is balanced at the point that an added week of income is worth less than an added week of leisure. Meanwhile, there are cities full of people who would pay $100 for a ticket to see Hillary Hahn. There are people whose lives would vastly improve with knee reconstruction surgery. To get this musician to add another city to her schedule, to get the surgeon to schedule two more knee replacements, you will have to pay more than $25,000. The market sets the price, so the only way to increase the amount that the musician or surgeon receives is to reduce the tax on the pre-tax income on the added week's work.
From that standpoint, the ideal tax is a head tax, since marginal tax is zero. There are obvious problems, however.
Some years ago I copy edited a book that quoted Thomas Hobbes's Leviathan. I was surprised to see Hobbes arguing that since the function of the law was to preserve life, and everyone valued their life equally, everyone should pay the same tax. Not the same percentage: the same amount. That would have stringently limited taxation to what the very poorest man could afford to pay. The only other writer I've seen advocate this was Murray Rothbard, who may have been doing it as an intentional paradox.
It was quite a concession from a man generally identified as a proponent of the omnipotent and unlimited state.
Interesting. The efficiency argument for a head tax is entirely conventional. The argument you offered is one argument against it, the more usual one being that poor people should pay less than rich people.
Adam Smith argues that the benefit of government is roughly proportional to income, hence that tax incidence should be as well. A modern argument might be that dollar value of life is higher for richer people due to declining marginal utility so, on Hobbes argument, they should pay more. That gets close to the utilitarian argument for progressive taxation.
I found your classifying my comment as an argument against the head tax perplexing at first glance. Am I right in supposing that you are saying that "[the head tax] would have stringently limited taxation" is an argument against the head tax? I should have supposed it to be an argument in favor of the head tax. But then, as a libertarian, I favor keeping taxes as low as possible.
Those "obvious problems" make the head tax less than ideal. The problem with the argument for graduated income tax rates that, beyond some point, decline as income rises is that the point could well vary from one occupation or individual to another.
Also, I wonder how the argument applies to a regime in which the State makes all its money off a national sales tax.
As an aside, if government were small enough, and the market robust enough, the State could finance its operations by printing money and have no impact on the price level.
That assumes that private firms are not allowed to compete in the money business.
Why?
Maybe all that's required is:
1. The government pays its employees and contractors in government currency and
2. Fines are payable only in government currency.
A tax is a State-mandated transfer of wealth or income. A fine is a tax. A civil judgement which mandates a payment between private individuals is a tax. When the DEA seizes and destroys ten kilos of cocaine, the dealer has been taxed. Corvee labor is a tax.
Children of low-income minority parents pay a very heavy, very inefficient tax. Compulsory unpaid labor is slavery (definition). In the US today, fifty million children work, unpaid, as window dressing n the massive make-work program for dues-paying members of the NEA/AFT/AFSCME cartel that many speakers of American English call "the public school system".
I think you have a good point here in that there isn't much of a clear line between taxes and other regulations. E.g. if in one jurisdiction I have to pay €2000 in taxes and €1000 in rent and in another I have to pay €1000 in taxes and €2000 in rent (say because of regulations on construction), to me, as a consumer of jurisdictions, those two scenarios are pretty much equivalent.
To you it is the same, but the government gets more money in the former case. If you believe the government will spend the money in ways that benefit you, then it is not the same to you.
Of course, the regulations on construction are theoretically to produce a better house. If that's true, then you are getting something back in that case as well.
Yeah, e.g. if I have a strong preference for living in a beautiful town, then the benefits of construction regulations may even be greater than the cost to me – or e.g. if i get my income from the government, then I may even be getting more benefit than cost from higher taxation. But I think that in general a rational consumer shouldn't try to calculate such things or compare tax burdens, but should just compare the costs and benefits of living somewhere as a whole.
And the effect of fines and taxes are the same: to discourage some activity (e.g., sin taxes, traffic fines). Sometimes, legislators say this directly (e.g., tobacco taxes).
Here in Mexico, here is a tax called IVA, a 15% sales tax.
It's reasonably hefty, and avoided (if not completely, at least partially) by most small merchants, by using cash. I haven't figured out if the small places that use 3rd party cc processors also avoid this, it seems the little mom and pop places don't add the 15% (but that doesn't mean, of course, that they necessarily don't pay off the receivables they process, but if so, I'd be surprised that they wouldn't add it to the bill).
Some restaurants/bars will not even take a debit/cc and deal in cash only. As far as memory goes, these places give you a bill and you pay the bill as is, no additional taxes.
Certainly none of the small outdoor merchants add 15%.
What I've noticed is that when I'm short of money, I lean toward smaller restaurants/shops/services noting in my mind it'll be cheaper, both because it's cheaper up front, but also, they don't add on the tax.
Nonetheless, at a 15% rate, I do notice its impact on larger purchases, such as nice meals or filling up the truck, and it does have some incentivizing effect on me.