Political advantages of a voluntary tax
Former New Hampshire Governor, Craig Benson, announced in March 2003 that he was setting up a special ‘Tax Me More’ account for those who feel they aren’t paying enough tax. The accounts provide an opportunity for advocates of big government to put their money where their mouth is, by donating to the government.
According to Americans for Tax Reform, five other states – Arkansas, Massachusetts, Montana, Oklahoma and Virginia – have introduced a similar voluntary tax. About a dozen American states have publicly debated the concept.
‘Tax Me More’ accounts would be a useful tool for fiscally conservative Australian politicians (there aren’t many of them) looking for a way to justify tax cuts. The importance of politicians being able to identify, through reference to the accounts in public debate, that increased spending usually equals a corresponding increase in the tax burden, should not be underestimated.
Environmentalists, most of whom prefer the government keep more of our money, could donate publicly so everyone can see the extent of their financial commitment to causes like combating climate change. Any environmental taxes could be voluntary.
Few people are as generous with their own money as they are with someone else’s money. If, as is likely, the accounts receive negligible contributions, we will know with a greater degree of certainty the disconnect between support of a greater role for government, and the actual willingness to sacrifice hard earned cash. This could provide evidence in support of the contention that the supply of government exceeds the demand.
What a magnificent idea.
So if the tax-me-more revenues were feeble that would prove the merits of tax cuts. Its not as if these merits need further proving but nonetheless what an astoundingly good idea.
“we will know with a greater degree of certainty the disconnect between support of a greater role for government, and the actual willingness to sacrifice hard earned cash.”
You are ignoring the free rider problem. People are, ironically, more willing to pay tax when everyone is forced to pay.
You are ignoring the free rider problem
Free riders are not a problem. Those who dislike free riding will be the problem.
But you could always spend the voluntary tax contributions on items that can be restricted to those who have paid for them. The other term for that is user pays.
Interesting that New Hampshire should be the source of this idea. It is a festering nest of libertarian ideas. I’m watching with interest to see how Ron Paul goes in the Republican primary.
Interesting that New Hampshire should be the source of this idea. It is a festering nest of libertarian ideas.
Any state with the motto ‘Live Free or Die’ has got to have something going for it! Interestingly, the motto wasn’t taken in the War of Independence or the founding days as you might imagine; it was taken as a state motto in 1945.
It seems to me New Hampshire and Vermont is the centre of libertarian blue states, while it’s Texas, Nevada, New Mexico for the libertarian red states.
If all these states have now adopted this idea, isn’t there already some data on whether or not the contributions are negligible?
Also, how do you decide what negligible would be, maybe less than 0.01% of total revenue? or less than 0.1% of people contributing?
According to Americans for Tax Reform: “There are currently at least six states that have accounts available for voluntary contributions from taxpayers. The fact that these funds remain fairly dry is indicative of the hypocrisy on the part of those calling for higher taxes. While big spenders are more than willing to talk the talk, one glance at the states’ tax me more funds reveals that talk, unlike government spending, is cheap.”
I haven’t researched beyond this, so I don’t know if that’s an accurate depiction.
I don’t know about free riders and paying riders, but the primary purpose of the accounts is to pressure people like Bob Brown to donate lots of money to the government to prove they’re serious about “catastrophic climate change”. It would be a political tool, not a policy tool. They would be in addition to compulsory taxes, of which there are plenty.
I like the idea… though I don’t think the voluntary tax should have a negative name. If done properly I think it could raise enough funds to be useful.
Another idea is a government coordinated pledge drive. Something like “I will pay 1% of income towards the charities XYZ if other 50,000 other Australians also make the same pledge”. The government might even promise to pitch in a small amount of matching funds and cover the costs of coordination.
That helps to avoid the free-rider problem (which I think is generally over-estimated anyway).
I think the free rider problem is real. However government funded programs also create a multitude of free rider problems of their own. It is not as if taxation solves the free rider problem it merely changes the form of the problem.
I think a voluntary tax is a good idea. If nothing else there should be a question at the end of your tax return that askes:-
Q. All things considered do you think people in your situation should pay less tax:-
Yes/No
1. We should examine public goods and see that their optimal level of consumption cannot be measured by revealed preferences, and so the free riding concept is not entirely useful.
2. Two very good articles on minarchy and very low taxes:
http://www.lewrockwell.com/rothbard/rothbard81.html
“Pennsylvania’s Anarchist Experiment: 1681–1690″
http://www.daviddfriedman.com/Academic/Price_Theory/PThy_Chapter_18/PThy_Chap_18.html
(Get to defense of Hawaii)
3. Thomas Keneally is writing a history of colonial Australian sealers. The virtually had their own minarchist Government, no taxes and run their society on liberally minded Christianity, common sense and common law.
4. Such a tax system with voluntary taxes could have a fund for each level of Government which offset the tax rate for each level of Government.
5. My preferred method of tax reform for Australia is a pure 20% GST (with some administrative reforms to make it easier) split equally amongst each tier of Governemnt, beginning with minor reform such as ending duplication of activities. If the tax/GDP ratio had to be constant along with balanced budgets, the tax could be progressively lowered with economic growth. Demand for social services would fall as incomes rose. The tax could be reduced by 1% or 2.5% per year. Libertarianism by stealth! This should be combined with 4. above.
Thought I might bump this up as some shameless self promotion since we are still talking a lot about taxes…