Wednesday, June 13, 2012

Taxes I

The principal point of taxes is raising enough revenue to support the government. That obvious point is forgotten by some tax theorists, especially members of Congress who insist on spending more money than they are willing to collect in taxes. It's also very popular to use taxes for a variety of other purposes, allegedly to punish behaviors thought to be bad or reward those thought to be helpful, but in practice, mainly to reward those willing and able to reward the politicians. It's hard for me to believe that these are often a good idea. The reward part looks pretty dubious to me - I think if you want to subsidize, say, private jets for rich people, you ought to make the subsidy explicit. I'm less sure about "sin" taxes.

Let me put my cards on the table: the other legitimate purpose I see for taxes is redistribution. This, of course, is anathema to libertarians, conservatives, rich people, and anybody else who thinks they might lose money on the deal. It is, however, fundamental to the nature of human society. Most of the time, as in the US at present (or China), most of the redistribution involves taking money from the poor and middle class and giving it to the rich. So it is also with the Euro bailouts, TARPS and so on. In each case, money is being taken out of taxpayer pockets and given to rich people who invested badly.

I much prefer the opposite direction of redistribution. For example, taking money from the healthy and productive to educate the next generation, or to care for the old.

There is a very good argument to be made that human society started with food sharing. Humans are one of relatively few vertebrate species that share food, and we share it far more elaborately than any other species. Most foraging societies share food widely. Food sharing helps limit the catastrophic effects of bad luck in the hunt and builds societal solidarity. One essential criterion for a sharing scheme to work is for there to be a mechanism for punishing cheaters - those who collect a share without contributing or those who take more than their share.

Those principles of organizing a primitive society have an echo in the way I think taxes ought to work.

To be continued.