Saturday, July 2, 2011

The Least Likely and Most Awesome Tax System Ever

Looooooong time readers will remember my "fair tax" proposal, the only one that is truly fair. But with Independence Day coming, I thought I'd try for another (ridiculous) tax idea. It wouldn't be fair in any sense of the word; it'd be better than fair, though.

As Barbie knows, a government's authority should derive from consent of the governed. The government never has the entire country's full consent, of course, but it does things that are more or less popular, like social security, health care "reform" or giving money to gang members.

So, how about this: How about no taxes?

Now, I realize they tried this with the Articles of Confederation, and it was a great weakness. But at the time we were a lot more States and a lot less United.

"But Blake," you say, "that would be the end of the government!" 

"You have something on your cheek," I say. "Also, stop texting and driving."

It wouldn't be the end of the government if the government had the consent of the governed. I'm pretty radical, I know, but even I wouldn't want to see the government to go away completely. But when we allow the government to set its own levels of taxation, well, we get the current state, where we all pay about half of everything outright to various agencies with an added bonus suppression of our economic activity worth another half or more.

Run the government on donations. Run all of them on donations.

Also, allow taxpayers to allocate their money. Hate war, love handouts? Allocate your tax money to Welfare. Or, if your preferences are reversed, send it to Defense. Maybe even take it to the micromanagement level: Allow your donation to social security to be used for poor handicapped kids, but not rich old people. Or support the war in Afghanistan but not the one in Iraq.

Now, would this lead to some phenomenally bad decision making? Oh, yes, guaranteed. I don't know if we could have won the war in Iraq had we not persevered through unpopular times. On the other hand, we probably would have won Vietnam. Also, maybe Iraq wouldn't have been so unpopular if the administration had known that their success was tied to its popularity, and put some effort into explaining it.

Americans tend to be isolationists, though, so I suspect we'd see a quick drop in overseas military bases. Foreign aid—some of it would drop dramatically, of course, but some might actually go up.

War on drugs? I don't think there'd be huge support for it. But maybe if funds were limited, they could focus on the really bad stuff, and stuff aimed at kids.

The sort of business-squashing regulation industry that's bloomed over the past 100 years would be interesting. How many people would pay to support that? The real danger there would be that various industries would put a lot of money into regulation, then use that squash the competition.

Kind of like they do now. So, it's not a panacea. We'd still have to be paying attention. (Eternal vigilance, eh, what?) But, wow, what a feeling it would be. You'd really feel like you had some control. And various government agencies would bloody well have a good reason to treat you like a customer rather than a subject, wouldn't they?

I mean, hate the DMV? Don't fund it. If it has to shut down, the state could make a different plan up to better serve people. The IRS (and various state mini-IRSes) would be completely gone. Absolutely no need for a tax authority. The TSA would be a bad memory.

Tax time would be whenever you felt like it. The government could produce estimates of how much it needed to collect, monthly, quarterly, yearly. There'd be strong motivation to save a little cash in reserve for lean times.

Oh, yeah, the government would absolutely not be able to borrow.

Me? I'd pay $3,000-$4,000 a year for government. Maybe more. It's a little hard to gauge, since if it were drastically smaller, I'd be drastically better off, and feeling way more benevolent toward it than I currently am.

If you're thinking, as a lot of people probably would at this suggestion, that there's just no way that a government can exist without using force to collect money from people, I submit to you that no government really has the consent of the governed or could.

Now, if you want to argue that it's not fair, I agree. There would be tons of free-riders, just like the 50% or so of the population that pays no Federal income tax, or actually gets money back. I suspect, though, that quite a few of that 50% would donate. A lot of rich people wouldn't, probably more than the number of rich people who find ways out of paying taxes now.

But it would all be voluntary. A select few carry the burden of national defense for all of us. It's horribly unfair, but the only times you hear people complain we need a draft are when they want our national defense to be unpopular. (That's why some agitated so strongly for a draft at the height of the Iraq war's unpopularity.)

Some people would be exceeding generous while others would simply not donate at all. But there could be few complaints if none were forced into paying for things that they didn't want. And in this age of high-speed information, it's eminently do-able.

And if this couldn't work, the more interesting question become why not?


  1. Thought provoking. I had a brainstorm a while back that gave no guidance on how the tax system would work, but the right to vote and how many votes you get was based on your taxes.

    You would get one vote in national elections if you pay federal tax on net. That is, you could receive some kind of subsidy like earned income or food stamps, but as long as taxes paid, such as SSI and medicare were larger, you would still get to vote. For regular taxpayers, one additional vote would be granted for each thousand dollars paid in.

    My idea was that the people who are putting the money in should get to decide how to spend it. This is like the ideal of corporate governance where each share of stock gets you one vote. Not perfect, but at least it takes away the perverse incentive for tax eaters to keep voting themselves more goodies.

  2. dbp--

    I've thought of that, too, but it could create the same incentives on the other side. In other words, where now the very rich buy themselves Congressmen and Senators, I'm not sure we wouldn't see more moderately wealthy people get in on the action.


    The problem of course isn't in the system. As we've seen, if some people don't like the laws, they just change the meanings of words so the laws can mean whatever.


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