Arnold Kling  

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Megan McArdle notices a story that Virginia has a voluntary taxation program with little uptake. She writes,


This is what economists call "revealed preference". What most of us are really in favor of is higher taxes on other people. If we wanted higher taxes on ourselves, we'd give the money to charity.

Imagine if the government were limited to collecting no more than 10 percent of GDP in taxes, with 5 percent at the Federal level, 4 percent at the state level, and 1 percent at the local level. But governments at all levels could hold bake sales at any time. That is, any government could compete with nonprofits for voluntary contributions.

By the way, I am guessing that local governments would have an easier time raising funds, because people can relate more to local government services.


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CATEGORIES: Fiscal Policy



COMMENTS (7 to date)
Joshua Holmes writes:

Most people don't see the government as a service provider. If a CEO went on TV and talked about the socially redemptive powers of buying his product, we would laugh. When Obama does it on the campaign trail, people swoon.

Nyle Kardatzke writes:

A number of years ago the Wall Street Journal reported that the Treasury Department was actually receiving hundreds of donations per year from private citizen to pay off the national debt. There must be a moral in that story somewhere.

John Fast writes:

I'd love to see the State's theft and waste (i.e. its total share of the economy) limited to 10% of GDP; remember what Grover Norquist said about "get(ting) it down to the size where we can drown it in the bathtub"?
However, I think that the lack of contributions to the Tax-Me-More Fund is almost entirely an example of a rational response to the free-rider problem. If people were asked "Would you be willing to pay more taxes if everyone else had to do the same?" then a lot of them -- perhaps a majority, depending on the size of the tax increase and whether they thought it was necessary in order to save the Social Security program, or the Statue of Liberty, or reduce crime, or prevent people from literally starving to death in the street -- would say yes.

CDeBoe writes:

John Fast: "Would you be willing to pay more taxes if everyone else had to do the same?"
No--why would I be? I get no benefit from other people paying more taxes, and I do get hurt when I have to pay more. If the government could convince me that I'd be getting my money's worth, it wouldn't have to tax me; it could just charge user fees or some such and I'd be willing to pay.

Nyle Kardatzke : Note that that's hundreds, out of a country with hundreds of millions of citizens.

Allison writes:

The goal proposed to the public by the government in reference to taxes is that the money is going to specific things that need it. In looking at other countries things are done differently. In Sweden and other countries in Europe, the value of their currency is higher. The taxes taken from the general public are extremely high compared to that of America. However, the taxes go to something more specific like socialized medicine. This way, the public is given more services for their taxes. Why is the value of their currency higher than ours? The fact is that when income changes, the demand for normal goods rises and the change in income is quite elastic. This sounds quite contradictive to that of other countries like Sweden. When further investigated, the public often feels as though the destination of their taxes is not profitable in their eye like it is in other countries.
With more thought, the idea of the government putting a price ceiling on taxes may be profitable for individuals versus the government as a whole. The goal is to find a best way to spend money under the right influences. Using socialized medicine is proven to make a lot of problems in the spending of money for health and malpractice not an issue for the public entrepreneur. This rises another issue that people worry about where the government might be given “too much power.” Therefore, the goal is to properly balance the two and put an ideal cap on taxes while using the money properly. Therefore, fundraising may not be popular, but sounds like a safe and honest method for the government to use.
If some states or the federal government do not find it profitable to receive donations versus raising taxes, the individual consumer will see a change in day-to-day life. Therefore, the idea of donations may become a greater public interest and may actually increase public involvement. The fact is that the public is not very involved because they don’t see the “big picture.” When the “big picture” effects the small picture, the public will become more informed and involved. After all, the immigrants left Europe to get away from high taxes and find a more people oriented nation. This might be a very profitable step for both the government and the average consumer

CDeBoe writes:

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paul mckellar writes:

I agree. Taxes have and always will be a major issue which Americans always have and always will face. The government has implemented time and again tax cuts, higher taxes, and everything in between. I agree that people and citizens and relate more to local government better and therefore are more willing to support it. The face of the matter is, is that there is too much talk and not enough doing. What is the solution? An Increase in taxes at a Federal, State, or at the local level or are all of these things ineffective tools to make our economy into an efficient tool to produce and eliminate unemployment.

Paul Mckellar

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