I choose Sweden!
August 19, 2010 10:03 AM
What logistical hurdles exist for implementing a differential taxation system where the level of government services you receive is determined by the taxation rate you choose to pay?
Inspired by the deleted Sacramento post noting that "Counties Creating Least Revenue Use Most Services"
Assume three bundled taxation options, basic, standard, premium. (Equating to, say, US, British, and Swedish levels of taxation) An IRS issued card based on your taxation level will determine which services you receive. What are the basic logistical difficulties of implementing such a system?
Inspired by the deleted Sacramento post noting that "Counties Creating Least Revenue Use Most Services"
Assume three bundled taxation options, basic, standard, premium. (Equating to, say, US, British, and Swedish levels of taxation) An IRS issued card based on your taxation level will determine which services you receive. What are the basic logistical difficulties of implementing such a system?
Doesn't this have the same problem as any system of use fees? Rich people who would never dream of visiting a library, much less riding a bus, will all choose the lowest level and poorer people will choose the higher levels, but to maintain even the US level of service requires some redistribution, so your system will never be able to pay for itself.
posted by enn at 10:10 AM on August 19, 2010
posted by enn at 10:10 AM on August 19, 2010
Wouldn't the fundamental problem be that people who need government services the most (say, the unemployed, those with long-term illnesses, students) would also tend to be the people who are least able to pay for those services?
posted by Urtylug at 10:11 AM on August 19, 2010
posted by Urtylug at 10:11 AM on August 19, 2010
I'd say the main hurdle would be overcoming the problem of moral hazard. If this system were to be effective, the government would need to be ruthless in refusing services to those who did not opt-in for "premium" treatment. If people are "bailed out," the incentive to buy "premium" services would be undermined and the system would collapse.
I know this isn't a logistical response, but I think it's a pretty central problem with this scheme.
posted by BobbyVan at 10:11 AM on August 19, 2010
I know this isn't a logistical response, but I think it's a pretty central problem with this scheme.
posted by BobbyVan at 10:11 AM on August 19, 2010
Right, but that actually isn't the case when you look at voter preferences. Rich folks, clustered on the coasts tend to vote democrat, even though it's against their economic interests. Folks at Goldman Sachs, Microsoft, etc. vote democrat, not republican. The folks who don't need the services actually appear to support them.
posted by leotrotsky at 10:13 AM on August 19, 2010
posted by leotrotsky at 10:13 AM on August 19, 2010
Folks at Goldman Sachs, Microsoft, etc. vote democrat, not republican.
Citation needed.
posted by almostmanda at 10:14 AM on August 19, 2010
Citation needed.
posted by almostmanda at 10:14 AM on August 19, 2010
It's a myth that Republicans don't like big government. What they like, though, generally is not what Democrats like (social programs and the like).
posted by dfriedman at 10:15 AM on August 19, 2010
posted by dfriedman at 10:15 AM on August 19, 2010
But that's not how you framed the system, leotrotsky.
posted by muddgirl at 10:15 AM on August 19, 2010
What logistical hurdles exist for implementing a differential taxation system where the level of government services you receive is determined by the taxation rate you choose to pay?I like paying higher taxes because they help other people receive services that they may not otherwise be able to afford, on top of the benefits to myself.
posted by muddgirl at 10:15 AM on August 19, 2010
"And yet the exit polls show, the rich—and yes, if you make $250,000 or more you're rich—went for Obama by bigger margins than did the merely well-off. If the exit polls are to be believed, those making $200,000 or more (6 percent of the electorate) voted for Obama 52-46, while McCain won the merely well-off ($100,000 to $150,000 by a 51-48 margin and $150,000 to $200,000 by a 50-48 margin). "
posted by leotrotsky at 10:16 AM on August 19, 2010
posted by leotrotsky at 10:16 AM on August 19, 2010
Rich folks, clustered on the coasts tend to vote democrat, even though it's against their economic interests.
That's begging a lot of questions.
There are lots of not-rich folks who live on the coast and not in the Valley.
Many people with lots of money see higher taxes as an economic benefit to them - they may see it as meaning that services are better (better schools, better infrastructure, etc.) in ways that they could not provide solely for themselves.
posted by rtha at 10:17 AM on August 19, 2010
That's begging a lot of questions.
There are lots of not-rich folks who live on the coast and not in the Valley.
Many people with lots of money see higher taxes as an economic benefit to them - they may see it as meaning that services are better (better schools, better infrastructure, etc.) in ways that they could not provide solely for themselves.
posted by rtha at 10:17 AM on August 19, 2010
leotrotsky, that may be true of people at the very top and of people in certain industries, but, in general, income is inversely correlated with Democratic voting and becoming moreso.
Moreover, I don't think you can really extrapolate from a vote to an affirmative choice to write a bigger check rather than a smaller one at tax time. I'd like to see higher taxes in general, but if I know that people much wealthier than I can get away with paying a low percentage, I'm not really going to want to pay a higher percentage.
posted by enn at 10:18 AM on August 19, 2010
Moreover, I don't think you can really extrapolate from a vote to an affirmative choice to write a bigger check rather than a smaller one at tax time. I'd like to see higher taxes in general, but if I know that people much wealthier than I can get away with paying a low percentage, I'm not really going to want to pay a higher percentage.
posted by enn at 10:18 AM on August 19, 2010
We already have a system where people can choose whether they want to pay for things in accordance with which specific things they happen to want. It's called the private sector. The point of government isn't to be the private sector's twin; it's to fill in the gaps where broadly dispersed services or benefits (or restrictions or penalties), propped up by mandatory taxation, are specifically desirable.
posted by Jaltcoh at 10:19 AM on August 19, 2010
posted by Jaltcoh at 10:19 AM on August 19, 2010
The folks who don't need the services actually appear to support them.
Really? Rich folks drive on highways; rich folks get better employees from public schools. Rich folks also benefit from not being killed by angry mobs of starving people.
posted by Tomorrowful at 10:20 AM on August 19, 2010
Really? Rich folks drive on highways; rich folks get better employees from public schools. Rich folks also benefit from not being killed by angry mobs of starving people.
posted by Tomorrowful at 10:20 AM on August 19, 2010
Wouldn't the fundamental problem be that people who need government services the most (say, the unemployed, those with long-term illnesses, students) would also tend to be the people who are least able to pay for those services?
Presumably, the marginal rates would be scaled in tiers. Leaving aside the EIC, I'm presuming that leotrotsky would be proposing that in addition to the existing 10/15/25/28/33/35, there would be a "basic plan" with tiers at, say, 5/10/20/24/27/30, and a "premium plan" with tiers at 12/18/27/30/35/38.
If you went with the "basic plan," you could only go the DMV in the afternoons, and mail would be delivered only M-W, and emergency services would make you a lower priority. Choose the "premium plan," and you get express service at the DMV, mail 7 days a week (and expedited, if possible) and priority status with emergency services.
Because there would be a basic and premium pricing at each tier, you could select the level of service you wanted no matter what your income.
Of course, people at lower income levels have less disposable income, so they would be more likely to elect into the basic plan (which would likely reinforce the poverty cycle), while the higher earners would just get even better services than they get now. It would be interesting to see what effect premium services has on a lower tier earner--would they come out of poverty with better services? Perhaps there could be contests to get free premium services for a year.
posted by Admiral Haddock at 10:20 AM on August 19, 2010
Presumably, the marginal rates would be scaled in tiers. Leaving aside the EIC, I'm presuming that leotrotsky would be proposing that in addition to the existing 10/15/25/28/33/35, there would be a "basic plan" with tiers at, say, 5/10/20/24/27/30, and a "premium plan" with tiers at 12/18/27/30/35/38.
If you went with the "basic plan," you could only go the DMV in the afternoons, and mail would be delivered only M-W, and emergency services would make you a lower priority. Choose the "premium plan," and you get express service at the DMV, mail 7 days a week (and expedited, if possible) and priority status with emergency services.
Because there would be a basic and premium pricing at each tier, you could select the level of service you wanted no matter what your income.
Of course, people at lower income levels have less disposable income, so they would be more likely to elect into the basic plan (which would likely reinforce the poverty cycle), while the higher earners would just get even better services than they get now. It would be interesting to see what effect premium services has on a lower tier earner--would they come out of poverty with better services? Perhaps there could be contests to get free premium services for a year.
posted by Admiral Haddock at 10:20 AM on August 19, 2010
Sorry, my first paragraph was supposed to be quoted from Urtylug--sorry for the confusion.
posted by Admiral Haddock at 10:21 AM on August 19, 2010
posted by Admiral Haddock at 10:21 AM on August 19, 2010
My sense is that the coastal elites vote Democrat out of cultural/ideological affinity... in many cases in spite of Democratic economic policies. That is to say, they would prefer to have a culturally liberal tax hiker in power than a culturally conservative tax cutter.
sorry, no citations here -- just my personal theory!
posted by BobbyVan at 10:21 AM on August 19, 2010
sorry, no citations here -- just my personal theory!
posted by BobbyVan at 10:21 AM on August 19, 2010
Haddock: that's it exactly. We're also assuming that, just like with the current system, there is no tax paid by an individual earning below a certain level of income.
posted by leotrotsky at 10:25 AM on August 19, 2010
posted by leotrotsky at 10:25 AM on August 19, 2010
Right, but that actually isn't the case when you look at voter preferences.
Actually, it is. Though the data is a bit out of date, see for example the bottom of the last chart here. You are introducing an unnecessary and unwarranted complication by trying to correlate party-geography-income, when you should be looking at the party-income correlation directly.
As to the original question, there's also the issue of verifying the level someone has chosen; how to prevent forging of service-level cards, or whatever identification method you're choosing? It's perhaps not an insurmountable problem, but it's not a trivial one either.
posted by DevilsAdvocate at 10:26 AM on August 19, 2010
Actually, it is. Though the data is a bit out of date, see for example the bottom of the last chart here. You are introducing an unnecessary and unwarranted complication by trying to correlate party-geography-income, when you should be looking at the party-income correlation directly.
As to the original question, there's also the issue of verifying the level someone has chosen; how to prevent forging of service-level cards, or whatever identification method you're choosing? It's perhaps not an insurmountable problem, but it's not a trivial one either.
posted by DevilsAdvocate at 10:26 AM on August 19, 2010
You could certainly have a system in which social security benefits and medicare/medicaid benefits vary according to the amount that the individual had previously paid into the system. However, these programs were set up in order to avoid having elderly people become destitute, homeless, starving, or unable to obtain medical treatment for their illnesses. Give that up and you are going to see terrible social problems. Or consider school funding. If parents in a given school district pay less taxes, their children will receive less education. Then those children will grow up to have more limited job opportunities and less income, hence they too will pay less taxes. People become trapped in their economic class. Eventually they become Maoist rebels.
Government defense spending, to the extent that it is successful, defends everybody, regardless of the taxes they pay or do not pay. Government built roads can be travelled by all, regardless of how much taxes they have paid (even tourists who have paid no taxes can travel on the roads or sidewalks). There are many other examples of government services that benefit the community rather than specific individuals.
What about law enforcement? Do we tell people, the police will protect you from crime, but only if you have paid them enough in taxes? I don't think we want to live in a society in which people can be murdered, robbed, or raped at will, unless they have paid a sufficient amount of taxes. This would seem to be a violation of human rights. Similarly, since the cost of incarceration is very high, as is the cost of elaborate trials and appeals, those would be reserved for wealthy criminals, while the less wealthy are summarily executed to save on expenses. Of course, once we go that route we again wind up with a very angry underclass and a risk of violent revolution (or perhaps terrorism, which is very much in vogue these days).
Government is intended to provide people with necessary services, not optional luxuries. If those services are truly necessary, then everybody needs them. And if they are not truly necessary they are just wasteful spending and boondoggling, and should be cut entirely.
However, there are still some special benefits which might be awarded to those who pay more than the average amount of taxes. It has sometimes been suggested that instead of just giving all adult citizens a single vote, people could be allowed to cast a number of votes in proportion to the amount of taxes that they pay, let us say, one vote for each thousand dollars paid in federal income taxes. While this makes the nation into a plutocracy rather than a democracy, it does have a certain element of fairness. Let those who pay the taxes decide how that tax money should be spent, right?
posted by grizzled at 10:27 AM on August 19, 2010
Government defense spending, to the extent that it is successful, defends everybody, regardless of the taxes they pay or do not pay. Government built roads can be travelled by all, regardless of how much taxes they have paid (even tourists who have paid no taxes can travel on the roads or sidewalks). There are many other examples of government services that benefit the community rather than specific individuals.
What about law enforcement? Do we tell people, the police will protect you from crime, but only if you have paid them enough in taxes? I don't think we want to live in a society in which people can be murdered, robbed, or raped at will, unless they have paid a sufficient amount of taxes. This would seem to be a violation of human rights. Similarly, since the cost of incarceration is very high, as is the cost of elaborate trials and appeals, those would be reserved for wealthy criminals, while the less wealthy are summarily executed to save on expenses. Of course, once we go that route we again wind up with a very angry underclass and a risk of violent revolution (or perhaps terrorism, which is very much in vogue these days).
Government is intended to provide people with necessary services, not optional luxuries. If those services are truly necessary, then everybody needs them. And if they are not truly necessary they are just wasteful spending and boondoggling, and should be cut entirely.
However, there are still some special benefits which might be awarded to those who pay more than the average amount of taxes. It has sometimes been suggested that instead of just giving all adult citizens a single vote, people could be allowed to cast a number of votes in proportion to the amount of taxes that they pay, let us say, one vote for each thousand dollars paid in federal income taxes. While this makes the nation into a plutocracy rather than a democracy, it does have a certain element of fairness. Let those who pay the taxes decide how that tax money should be spent, right?
posted by grizzled at 10:27 AM on August 19, 2010
and mail would be delivered only M-W,
Taxes don't go to USPS; it's already set up that the more you pay (eg. standard vs express) the better your service.
posted by inigo2 at 10:39 AM on August 19, 2010
Taxes don't go to USPS; it's already set up that the more you pay (eg. standard vs express) the better your service.
posted by inigo2 at 10:39 AM on August 19, 2010
Trotsky, you might get some interesting insights if you email Paul Caron of the taxprof blog at Cincinnati. I suspect that this has been considered before by some tax professor, and Caron would surely be able to point you in the right direction, if so. (Or you could just try searching on Westlaw or Lexis, but emailing Caron would be much more interesting).
If no one else has delved into this, you should write a note on it! Or are you done with school now? I can't keep track.
posted by Admiral Haddock at 10:41 AM on August 19, 2010
If no one else has delved into this, you should write a note on it! Or are you done with school now? I can't keep track.
posted by Admiral Haddock at 10:41 AM on August 19, 2010
[This needs to remain an ask metafilter question, not a general discussion, if this is going to have a reason to stay up. Answering the question is fine, getting into a conversation or throwing related articles around not so much. This is not a proxy for the deleted thread on the blue, period.]
posted by cortex at 10:42 AM on August 19, 2010
posted by cortex at 10:42 AM on August 19, 2010
I suppose, grizzled, is that there are economies of scale in certain services that we might consider 'non-essential' which could benefit all (e.g. the pooling of risk for insurance) and that could be provided by a non-profit entity like the government in lieu of a for-profit. Not everyone would want these services, but some would, and would be willing to pay extra for them. The benefits of pooling resources would mean that people actually would get more out than they are paying in.
I'm thinking of things like: childcare, # of days of leave per kid, reduced university costs, etc...
posted by leotrotsky at 10:45 AM on August 19, 2010
I'm thinking of things like: childcare, # of days of leave per kid, reduced university costs, etc...
posted by leotrotsky at 10:45 AM on August 19, 2010
Nope, still in school. Doing research for a tax prof over the summer, as well as working in the law library.
posted by leotrotsky at 10:46 AM on August 19, 2010
posted by leotrotsky at 10:46 AM on August 19, 2010
lalex: let's reduce complexity for the purposes of individuals better answering the question and preventing the dreaded chat-filter.
Income Taxation only.
Federal Taxation only.
posted by leotrotsky at 10:50 AM on August 19, 2010
Income Taxation only.
Federal Taxation only.
posted by leotrotsky at 10:50 AM on August 19, 2010
I know you structured the question with your first comment to avoid "basic infrastructure", but you are going to have to deal with that at least in analogies.
The city I live in has optional levels for trash collection, $15, $25, and $35 cans. Those ten bucks mean little to those on one side of town, they can afford cans they only fill twice a year. On the other side people have to store the garbage for several weeks after Christmas or a party or doing some gardening. Does this effect the whole town? Yes, yes it does. It wasn't that long ago that some small cities (+100k) still had private trash collection and the effects on rodents is well documented. And it wasn't just the poor or working classes that tried to save money, the rich, with big lots, let the crap and rats pile up along their back fences. But we repeat the mistakes.
So where does 'basic infrastructure' stop, and 'extra services' start? The rich hate paying for public schools; hell, their kids go to Day Prep Hall, and pay a lot for it. But there is nothing as important to a society as universal education. Look at the oligarchies that do not have it; Afghanistan, Brazil, ... Yeah, many of the rich would like to live there - hey, cheap maids - but they don't really, or they do only when they can take the fortunes made in industrialized societies with them. Those low per capita incomes make it hard to get into the upper levels, and the lack of skilled employees and customers with expendable income make running a business harder.
The same thing is true for health care. It effects the cost of every start up, because it diminishes the reliability of low level employees (more sick days without decent primary care) (it effects the income of customers too.).
It is - was - the rise of the middle class that created the modern world, not the greed of the wealthy, markets grow when more people can buy obviously, but still the upper classes had to be dragged into paying workers a fair wage. The same is still true, some think only of their self-interest and the short term, but all they have is the result of and dependent on the whole society that they disdain.
posted by Some1 at 10:55 AM on August 19, 2010
The city I live in has optional levels for trash collection, $15, $25, and $35 cans. Those ten bucks mean little to those on one side of town, they can afford cans they only fill twice a year. On the other side people have to store the garbage for several weeks after Christmas or a party or doing some gardening. Does this effect the whole town? Yes, yes it does. It wasn't that long ago that some small cities (+100k) still had private trash collection and the effects on rodents is well documented. And it wasn't just the poor or working classes that tried to save money, the rich, with big lots, let the crap and rats pile up along their back fences. But we repeat the mistakes.
So where does 'basic infrastructure' stop, and 'extra services' start? The rich hate paying for public schools; hell, their kids go to Day Prep Hall, and pay a lot for it. But there is nothing as important to a society as universal education. Look at the oligarchies that do not have it; Afghanistan, Brazil, ... Yeah, many of the rich would like to live there - hey, cheap maids - but they don't really, or they do only when they can take the fortunes made in industrialized societies with them. Those low per capita incomes make it hard to get into the upper levels, and the lack of skilled employees and customers with expendable income make running a business harder.
The same thing is true for health care. It effects the cost of every start up, because it diminishes the reliability of low level employees (more sick days without decent primary care) (it effects the income of customers too.).
It is - was - the rise of the middle class that created the modern world, not the greed of the wealthy, markets grow when more people can buy obviously, but still the upper classes had to be dragged into paying workers a fair wage. The same is still true, some think only of their self-interest and the short term, but all they have is the result of and dependent on the whole society that they disdain.
posted by Some1 at 10:55 AM on August 19, 2010
And, to keep it concrete so the man doesn't shut this down, your original phrasing was with respect to "logistical" issues, not equity issues--which is an interesting topic in itself.
With respect to logistics, my first thought went to the private fire companies in colonial and post colonial Philadelphia (and likely elsewhere). Those homeowners who paid into the fire department system were given a medallion to mount on the exterior wall of their home. If there were a fire, the fire companies would come to your aid only if you had the medallion. Of course, there were multiple companies, so there would be fights between crews, and if you hadn't paid the right fire company, your home when up in flames.
Obviously, the fire medallion is of limited utility here. I think at the end of the day, everyone would need to be tracked (as with an SSN or EIN) and issued cards (or RFID tags or something)--something would entitle the holder to the appropriate level of service.
Even just implementing those systems at the federal level would surely eat up any additional tax revenues from opting in to the premium service. The IRS still runs legacy systems older than you or me.
posted by Admiral Haddock at 10:55 AM on August 19, 2010
With respect to logistics, my first thought went to the private fire companies in colonial and post colonial Philadelphia (and likely elsewhere). Those homeowners who paid into the fire department system were given a medallion to mount on the exterior wall of their home. If there were a fire, the fire companies would come to your aid only if you had the medallion. Of course, there were multiple companies, so there would be fights between crews, and if you hadn't paid the right fire company, your home when up in flames.
Obviously, the fire medallion is of limited utility here. I think at the end of the day, everyone would need to be tracked (as with an SSN or EIN) and issued cards (or RFID tags or something)--something would entitle the holder to the appropriate level of service.
Even just implementing those systems at the federal level would surely eat up any additional tax revenues from opting in to the premium service. The IRS still runs legacy systems older than you or me.
posted by Admiral Haddock at 10:55 AM on August 19, 2010
A system like the one you're describing would be a nightmare to enforce. You'd need a colossal bureaucracy just to track which people are registered for which service level. You'd inevitably run into problems with ambiguous and edge cases-- the house where one roommate has premium status and the other standard, do they get their trash pickup at the higher or the lower level?-- and there'd be the inevitable slew of expensive lawsuits to sort it all out.
In addition, some non-trivial portion of the public services offered by the government are there not because The People demand them, but because union lobbyists worked to generate those contracts (New Jersey, I'm looking at you). So when you cut down on the services purchased by the government, there's bound to be a lot of flak from powerful unions objecting to the lost work for their members.
You'd also run into a lot of very sticky issues with the ethics of personal choice; equality-of-outcome supporters would naturally object to a system where individuals were capable of choosing less-than-equal status under the law. And inevitably, lots of people would claim after the fact that they'd made the wrong choice by accident/ignorance/whatever reason, and you'd have to hire staff to adjudicate all those complaints. That's just off the top of my head.
posted by Bardolph at 11:02 AM on August 19, 2010
In addition, some non-trivial portion of the public services offered by the government are there not because The People demand them, but because union lobbyists worked to generate those contracts (New Jersey, I'm looking at you). So when you cut down on the services purchased by the government, there's bound to be a lot of flak from powerful unions objecting to the lost work for their members.
You'd also run into a lot of very sticky issues with the ethics of personal choice; equality-of-outcome supporters would naturally object to a system where individuals were capable of choosing less-than-equal status under the law. And inevitably, lots of people would claim after the fact that they'd made the wrong choice by accident/ignorance/whatever reason, and you'd have to hire staff to adjudicate all those complaints. That's just off the top of my head.
posted by Bardolph at 11:02 AM on August 19, 2010
Since you have raised the issue, I agree that the government works well as a source of insurance. Private insurance companies (and I personally have 11 years of experience in the industry) are horribly inefficient. Vast amounts of money are spent to sell insurance (the biggest cost being sales commissions paid to agents) which would be a completely unnecessary expense if insurance were available from the government.
Given that insurance premiums are not exactly the same as a tax (even if they are paid to the government) I don't consider this to be exactly the same as what you originally asked about, although admittedly it is quite close. People would have the option of deciding what insurance they want, and would pay accordingly, just as they do now in the private sector, except that the insurance would be offered by the government.
Not all forms of insurance are equally necessary. Most people really need some form of health insurance, but many people do not need life insurance (not everyone has dependants). People who drive cars need car insurance, but not everyone drives cars. And so forth. I would want to see different kinds of government support for different kinds of insurance. Health insurance is more deserving of government subsidy than life insurance is. There are lots of details that could be worked out. But in general yes, it's a good idea.
posted by grizzled at 11:06 AM on August 19, 2010
Given that insurance premiums are not exactly the same as a tax (even if they are paid to the government) I don't consider this to be exactly the same as what you originally asked about, although admittedly it is quite close. People would have the option of deciding what insurance they want, and would pay accordingly, just as they do now in the private sector, except that the insurance would be offered by the government.
Not all forms of insurance are equally necessary. Most people really need some form of health insurance, but many people do not need life insurance (not everyone has dependants). People who drive cars need car insurance, but not everyone drives cars. And so forth. I would want to see different kinds of government support for different kinds of insurance. Health insurance is more deserving of government subsidy than life insurance is. There are lots of details that could be worked out. But in general yes, it's a good idea.
posted by grizzled at 11:06 AM on August 19, 2010
To directly answer your question:
An IRS issued card based on your taxation level will determine which services you receive. What are the basic logistical difficulties of implementing such a system?
To a first approximation, there are none. You'd simply have to specify the particular service levels for each taxation level, which is very far from rocket science, and delineate some set of services where differential rates of provision are impossible (ie, nonexcludible services like nuclear deterrence and flood control from dams)
This stuff actually happens to a limited extent; federal funding formulas can reward taxing effort with a higher match rate.
Doing this in a global and individual-level sense would, of course, be Not Smart. It would be easy to do, in the same sense that it would be easy to eradicate AIDS by setting off a bunch of cobalt-jacketed nukes.
posted by ROU_Xenophobe at 11:10 AM on August 19, 2010
An IRS issued card based on your taxation level will determine which services you receive. What are the basic logistical difficulties of implementing such a system?
To a first approximation, there are none. You'd simply have to specify the particular service levels for each taxation level, which is very far from rocket science, and delineate some set of services where differential rates of provision are impossible (ie, nonexcludible services like nuclear deterrence and flood control from dams)
This stuff actually happens to a limited extent; federal funding formulas can reward taxing effort with a higher match rate.
Doing this in a global and individual-level sense would, of course, be Not Smart. It would be easy to do, in the same sense that it would be easy to eradicate AIDS by setting off a bunch of cobalt-jacketed nukes.
posted by ROU_Xenophobe at 11:10 AM on August 19, 2010
Reducing taxation policy to only income-based federal taxation would, in and of itself, create massive logistical problems.
I think trotsky is proposing only that we consider federal income tax in isolation for purposes of answering this question, not that we assume the other systems don't exist.
Another issue is that most individuals are required to file their taxes once a year (though some, of course, make estimated tax payments). Presumably, if an individual wanted to opt in, she would be subject to wage withholding under Section 3402 at the appropriate rate. So, Ms. X making $80,000 is deducted at the, say, premium rate of 27% as a single individual. Great.
But, she's also earning a total of $5,000 from investments, which will push her into the next bracket (i.e., the 30% premium rate). Because there currently is no withholding at source on dividends or interest (assuming no backup withholding), she's actually underpaying during the tax year--though she'll make up the difference in April.
On some level, this is not that different than getting governmental services today even though you don't pay your taxes until next year--but where your level of service corresponds to the tax tier you elect to pay, it gets more complicated.
If Ms. X is not fully paid into the correct premium tier, it could make a lot of difference if she's injured and needs an expedited ambulance. If she's not paid up and gets an expedited ambulance because of her (undeserved) premium status, someone else could die.
Thus to keep the system working, Section 3402 would have to cover ALL payments, so there would be current tax on everything.
This would make filing taxes easier (or at least, more predictable), but could be incredibly difficult to implement.
posted by Admiral Haddock at 11:12 AM on August 19, 2010
I think trotsky is proposing only that we consider federal income tax in isolation for purposes of answering this question, not that we assume the other systems don't exist.
Another issue is that most individuals are required to file their taxes once a year (though some, of course, make estimated tax payments). Presumably, if an individual wanted to opt in, she would be subject to wage withholding under Section 3402 at the appropriate rate. So, Ms. X making $80,000 is deducted at the, say, premium rate of 27% as a single individual. Great.
But, she's also earning a total of $5,000 from investments, which will push her into the next bracket (i.e., the 30% premium rate). Because there currently is no withholding at source on dividends or interest (assuming no backup withholding), she's actually underpaying during the tax year--though she'll make up the difference in April.
On some level, this is not that different than getting governmental services today even though you don't pay your taxes until next year--but where your level of service corresponds to the tax tier you elect to pay, it gets more complicated.
If Ms. X is not fully paid into the correct premium tier, it could make a lot of difference if she's injured and needs an expedited ambulance. If she's not paid up and gets an expedited ambulance because of her (undeserved) premium status, someone else could die.
Thus to keep the system working, Section 3402 would have to cover ALL payments, so there would be current tax on everything.
This would make filing taxes easier (or at least, more predictable), but could be incredibly difficult to implement.
posted by Admiral Haddock at 11:12 AM on August 19, 2010
If so, I think this makes the logistics even more complicated.
To clarify, I think for purposes of this discussion, Trotsky is asking us to assume that only federal income taxes exist, and federal income taxes pay for all services.
Trotsky, set me straight if I'm misrepresenting your question.
posted by Admiral Haddock at 11:44 AM on August 19, 2010
To clarify, I think for purposes of this discussion, Trotsky is asking us to assume that only federal income taxes exist, and federal income taxes pay for all services.
Trotsky, set me straight if I'm misrepresenting your question.
posted by Admiral Haddock at 11:44 AM on August 19, 2010
Sorry again--I've got a headache an seem not to be expressing myself clearly.
In context, this comment:
I think trotsky is proposing only that we consider federal income tax in isolation for purposes of answering this question, not that we assume the other systems don't exist.
Was a response to this comment:
Reducing taxation policy to only income-based federal taxation would, in and of itself, create massive logistical problems.
Which is to say, I don't think trotsky is asking for responses about the logistics of actually doing away with state and local taxes (on whatever basis imposed) in favor of the federal income tax.
I think we ARE to assume that only federal taxes exist (and that they pay for everything), but I don't think he's asking about the federalism issues and other nightmares that would ensue if we did away with all other systems of taxation, nor does he seem to be asking about hospitals that get a mixture of federal, state and local tax support.
Sigh, I need a nap. All of this may be totally off.
posted by Admiral Haddock at 11:57 AM on August 19, 2010
In context, this comment:
I think trotsky is proposing only that we consider federal income tax in isolation for purposes of answering this question, not that we assume the other systems don't exist.
Was a response to this comment:
Reducing taxation policy to only income-based federal taxation would, in and of itself, create massive logistical problems.
Which is to say, I don't think trotsky is asking for responses about the logistics of actually doing away with state and local taxes (on whatever basis imposed) in favor of the federal income tax.
I think we ARE to assume that only federal taxes exist (and that they pay for everything), but I don't think he's asking about the federalism issues and other nightmares that would ensue if we did away with all other systems of taxation, nor does he seem to be asking about hospitals that get a mixture of federal, state and local tax support.
Sigh, I need a nap. All of this may be totally off.
posted by Admiral Haddock at 11:57 AM on August 19, 2010
Haddock is spot on, though I think we've rolled off the page.
I'm not interested in the difficulties of transitioning from our current model to a proposed all federal tiered benefit model, these would obviously be vast and profound.
I'm just trying to reduce the complexity of the problem by considering only an implementation at federal income tax level, where all taxation is federal taxation. I'm doing this because it would be impossible to answer with any sort of specificity if we go into the Byzantine minutia and detail of current federal and state taxation policy. Some abstraction is necessary.
posted by leotrotsky at 12:23 PM on August 19, 2010
I'm not interested in the difficulties of transitioning from our current model to a proposed all federal tiered benefit model, these would obviously be vast and profound.
I'm just trying to reduce the complexity of the problem by considering only an implementation at federal income tax level, where all taxation is federal taxation. I'm doing this because it would be impossible to answer with any sort of specificity if we go into the Byzantine minutia and detail of current federal and state taxation policy. Some abstraction is necessary.
posted by leotrotsky at 12:23 PM on August 19, 2010
In a very, very loose sense, we already do this at the state and local level in the US.
Some parts of the country have higher taxes than others. That tends to correlate with the quality of the infrastructure they can afford to build, and the services they can afford to provide.* When people move to another state, or move from a city to the suburbs or vice versa, part of what they're doing is choosing between "basic" and "premium" local government. Consider, for instance, new parents who make a point of moving to a high-tax district with good schools. They've essentially signed themselves up for the "premium" tax package instead of the "basic" one.
Of course, for a lot of people, federal taxes are heavier than local ones anyway, and this means that moving doesn't change their tax bill all that much. So if you were interested in increasing people's ability to choose their tax burden, one way to do it would be to cut the federal budget and let the states pick up as much of the slack as they wanted. Presumably, some states would pick up more than others — meaning that the choice between one state and another would have a larger impact on your total tax bill than it does now.
Still, there's a problem here: the assumption of perfect mobility. In fact, it is much, much harder to up and move across the country if you're poor — or even to move across town. The less money you have, the more you depend on friends, on family, on local ties and local knowledge. (This is, for instance, the reason a lot of life-long Detroiters stay in Detroit. Maybe they could get work and afford housing in other parts of the state, but they'd be giving up their social safety net, and that's too big of a risk to contemplate.) So you would wind up with a large underclass of people whose choice between "basic" and "premium" states would not be free in any meaningful sense, simply because they couldn't afford to move.
This means that another thing to do, if you wanted people to be free to choose their tax burden, would be to make it easier for poor families to relocate. I'm not sure how you'd do that, especially without the ability to throw money at the problem in the form of "Federal Relocation Grants" or whatever, but maybe you'll think of a clever solution. (Back when the frontier was still open, what made it possible for the poor to relocate was cheap land, though that's not an option now — the government doesn't have much arable land left to give out — and in any case, it only worked if you were moving east-to-west. But one way to look at it is, what's the modern equivalent of cheap land?)
posted by nebulawindphone at 12:52 PM on August 19, 2010
Some parts of the country have higher taxes than others. That tends to correlate with the quality of the infrastructure they can afford to build, and the services they can afford to provide.* When people move to another state, or move from a city to the suburbs or vice versa, part of what they're doing is choosing between "basic" and "premium" local government. Consider, for instance, new parents who make a point of moving to a high-tax district with good schools. They've essentially signed themselves up for the "premium" tax package instead of the "basic" one.
Of course, for a lot of people, federal taxes are heavier than local ones anyway, and this means that moving doesn't change their tax bill all that much. So if you were interested in increasing people's ability to choose their tax burden, one way to do it would be to cut the federal budget and let the states pick up as much of the slack as they wanted. Presumably, some states would pick up more than others — meaning that the choice between one state and another would have a larger impact on your total tax bill than it does now.
Still, there's a problem here: the assumption of perfect mobility. In fact, it is much, much harder to up and move across the country if you're poor — or even to move across town. The less money you have, the more you depend on friends, on family, on local ties and local knowledge. (This is, for instance, the reason a lot of life-long Detroiters stay in Detroit. Maybe they could get work and afford housing in other parts of the state, but they'd be giving up their social safety net, and that's too big of a risk to contemplate.) So you would wind up with a large underclass of people whose choice between "basic" and "premium" states would not be free in any meaningful sense, simply because they couldn't afford to move.
This means that another thing to do, if you wanted people to be free to choose their tax burden, would be to make it easier for poor families to relocate. I'm not sure how you'd do that, especially without the ability to throw money at the problem in the form of "Federal Relocation Grants" or whatever, but maybe you'll think of a clever solution. (Back when the frontier was still open, what made it possible for the poor to relocate was cheap land, though that's not an option now — the government doesn't have much arable land left to give out — and in any case, it only worked if you were moving east-to-west. But one way to look at it is, what's the modern equivalent of cheap land?)
posted by nebulawindphone at 12:52 PM on August 19, 2010
"What logistical hurdles exist for implementing a differential taxation system where the level of government services you receive is determined by the taxation rate you choose to pay?"
The biggest hurdle is human stuuuuuuuuuuuuuuuuuupidity and greed. Nearly everyone thinks they deserve more but few want to pay more.
Most people would, if given the chance, choose to tax themselves less and use less services. But those are the same people who would cry boo-hoo if those services didn't exist when they needed them. And why wouldn't those services exist? ...because people had elected not to be taxed to pay for them.
posted by 2oh1 at 9:20 PM on August 19, 2010
The biggest hurdle is human stuuuuuuuuuuuuuuuuuupidity and greed. Nearly everyone thinks they deserve more but few want to pay more.
Most people would, if given the chance, choose to tax themselves less and use less services. But those are the same people who would cry boo-hoo if those services didn't exist when they needed them. And why wouldn't those services exist? ...because people had elected not to be taxed to pay for them.
posted by 2oh1 at 9:20 PM on August 19, 2010
This thread is closed to new comments.
posted by leotrotsky at 10:04 AM on August 19, 2010