What would happen if citizens had direct control over where their tax dollars went? Imagine a system like this: the United States government raises the average person’s tax by 3% (while preserving the current progressive tax rates). This will be a “vote-with-your-wallet” tax, where the citizen can choose where the money should go. For example, he may choose to allocate his tax funds towards the education budget, whereas someone else may choose to put the money towards healthcare instead. Such a system would have the benefit of being at democratic in deciding the nation’s priorities, while bypassing political gridlock. What would be the consequences of this system?
The biggest problem I can see with this is inefficient resource allocation. Others have mentioned ways of giving money to yourself, but we could probably minimize that with conflict-of-interest controls or by scoping budgetary buckets correctly. But there’s no reason, even in principle, to think that the public’s willingness to donate to a government office corresponds usefully to its actual needs.
As a toy example, let’s say the public really likes puppies and decides to put, say, 1% of GDP into puppy shelters and puppy-related veterinary programs. Diminishing returns kick in at 0.1% of GDP; puppies are still being saved, but at that point marginal dollars would be doing more good directed at kitten shelters (which were too busy herding cats to spend time on outreach in the run-up to tax season). The last puppy is saved at 0.5% of GDP, and the remaining 0.5% -- after a modest indirect subsidy to casinos and makers of exotic sports cars—goes into the newly minted Bureau for Puppy Salvation’s public education fund.
Next tax cycle, that investment pays off and puppies get 2% of GDP.
In Italy there’s something similar: you can choose whether 0.8% of your income taxes goes to the government or to an organized religion of your choice (if you don’t choose, it’s shared in proportion to the number of people who choose each church), and 0.5% goes to a non-profit or research organization of your choice.
What would happen if citizens had direct control over where their tax dollars went?
That’s what the free market looks like—and the dollars involved are no longer tax.
I suppose the government could still tax and then ask you if you’d rather use it to buy a flatscreen TV for your living room or else better air conditioning for Army tents in Afghanistan, or they could even restrict options to typical government spending,
Take a look at Hanson’s proposals for allocating government resource with prediction market.
The scenario described is different from a free market in that you still have to pay taxes. You just get more control over how the government can spend your tax-money. You can’t use the money to buy a flatscreen TV, but you can decide if it gets spend on healthcare, military spending, NASA...
or they could even restrict options to typical government spending.
JoshuaFox noted that the government might tack on such restrictions
That said, it’s not so clear where the borders of such restrictions would be. Obviously you could choose to allocate the money to the big budget items, like healthcare or the military. But there are many smaller things that the government also pays for.
For example, the government maintains parks. Under this scheme, could I use my tax money to pay for the improvement of the park next to my house? After all, it’s one of the many things that tax money often works towards. But if you answer affirmatively, then what if I work for some institutute that gets government funding? Could I increase the size of the government grants we get? After all, I always wanted a bigger budget...
Or what if I’m a government employee? Could I give my money to the part of government spending that is assigned as my salary?
I suppose the whole question is one of specificity. Am I allowed to give my money to a specific park, or do I have to give it to parks in general? Can I give it to a specific government employee, or do I have to give it to the salary budget of the department that employs that employee? Or do I have to give it to that department “as is”, with no restrictions on what it is spent on?
The more specitivity you add, the more abusable it is, and the more you take away, the closer it becomes to the current system. In fact, the current system is merely this exact proposal, with the specificity dial turned down to the minimum.
Think about the continuum between what we have now and the free market (where you can control exactly where your money goes), and it becomes fairly clear that the only points which have a good reason to be used are the two extreme ends. If you advocate a point in the middle, you’ll have a hard time justifying the choice of that particular point, as opposed to one further up or down.
Think about the continuum between what we have now and the free market (where you can control exactly where your money goes), and it becomes fairly clear that the only points which have a good reason to be used are the two extreme ends. If you advocate a point in the middle, you’ll have a hard time justifying the choice of that particular point, as opposed to one further up or down.
I don’t follow your argument here. We have some function that maps from “levels of individual control” to happiness outcomes. We want to find the maximum of this function. It might be that the endpoints are the max, or it might be that the max is in the middle.
Yes, it might be that there is no good justification for any particular precise value. But that seems both unsurprising and irrelevant. If you think that our utility function here is smooth, then sufficiently near the max, small changes in the level of social control would result in negligible changes in outcome. Once we’re near enough the maximum, it’s hard to tune precisely. What follows from this?
If you advocate a point in the middle, you’ll have a hard time justifying the choice of that particular point, as opposed to one further up or down.
Trouble with justifying does not necessarily mean that the choice is unjustified.
I like to wash my hands in warm water. I would have a hard time justifying a particular water temperature, as opposed to one slightly colder or slightly warmer. This does not mean that “the only points which have a good reason to be used” are ice-cold water and boiling water.
You can’t justify a point, but you could justify a range by speficfying temperatures where it becomes uncomforable. Actually, specifying a range is just specifying the give point with less resolution.
What would happen if citizens had direct control over where their tax dollars went? Imagine a system like this: the United States government raises the average person’s tax by 3% (while preserving the current progressive tax rates). This will be a “vote-with-your-wallet” tax, where the citizen can choose where the money should go. For example, he may choose to allocate his tax funds towards the education budget, whereas someone else may choose to put the money towards healthcare instead. Such a system would have the benefit of being at democratic in deciding the nation’s priorities, while bypassing political gridlock. What would be the consequences of this system?
The biggest problem I can see with this is inefficient resource allocation. Others have mentioned ways of giving money to yourself, but we could probably minimize that with conflict-of-interest controls or by scoping budgetary buckets correctly. But there’s no reason, even in principle, to think that the public’s willingness to donate to a government office corresponds usefully to its actual needs.
As a toy example, let’s say the public really likes puppies and decides to put, say, 1% of GDP into puppy shelters and puppy-related veterinary programs. Diminishing returns kick in at 0.1% of GDP; puppies are still being saved, but at that point marginal dollars would be doing more good directed at kitten shelters (which were too busy herding cats to spend time on outreach in the run-up to tax season). The last puppy is saved at 0.5% of GDP, and the remaining 0.5% -- after a modest indirect subsidy to casinos and makers of exotic sports cars—goes into the newly minted Bureau for Puppy Salvation’s public education fund.
Next tax cycle, that investment pays off and puppies get 2% of GDP.
There would be a lot of advertising.
I think it would be a plus. Americans would be forced to actually consider which issues are important to them.
In Italy there’s something similar: you can choose whether 0.8% of your income taxes goes to the government or to an organized religion of your choice (if you don’t choose, it’s shared in proportion to the number of people who choose each church), and 0.5% goes to a non-profit or research organization of your choice.
That’s what the free market looks like—and the dollars involved are no longer tax.
I suppose the government could still tax and then ask you if you’d rather use it to buy a flatscreen TV for your living room or else better air conditioning for Army tents in Afghanistan, or they could even restrict options to typical government spending,
Take a look at Hanson’s proposals for allocating government resource with prediction market.
The scenario described is different from a free market in that you still have to pay taxes. You just get more control over how the government can spend your tax-money. You can’t use the money to buy a flatscreen TV, but you can decide if it gets spend on healthcare, military spending, NASA...
JoshuaFox noted that the government might tack on such restrictions
That said, it’s not so clear where the borders of such restrictions would be. Obviously you could choose to allocate the money to the big budget items, like healthcare or the military. But there are many smaller things that the government also pays for.
For example, the government maintains parks. Under this scheme, could I use my tax money to pay for the improvement of the park next to my house? After all, it’s one of the many things that tax money often works towards. But if you answer affirmatively, then what if I work for some institutute that gets government funding? Could I increase the size of the government grants we get? After all, I always wanted a bigger budget...
Or what if I’m a government employee? Could I give my money to the part of government spending that is assigned as my salary?
I suppose the whole question is one of specificity. Am I allowed to give my money to a specific park, or do I have to give it to parks in general? Can I give it to a specific government employee, or do I have to give it to the salary budget of the department that employs that employee? Or do I have to give it to that department “as is”, with no restrictions on what it is spent on?
The more specitivity you add, the more abusable it is, and the more you take away, the closer it becomes to the current system. In fact, the current system is merely this exact proposal, with the specificity dial turned down to the minimum.
Think about the continuum between what we have now and the free market (where you can control exactly where your money goes), and it becomes fairly clear that the only points which have a good reason to be used are the two extreme ends. If you advocate a point in the middle, you’ll have a hard time justifying the choice of that particular point, as opposed to one further up or down.
I don’t follow your argument here. We have some function that maps from “levels of individual control” to happiness outcomes. We want to find the maximum of this function. It might be that the endpoints are the max, or it might be that the max is in the middle.
Yes, it might be that there is no good justification for any particular precise value. But that seems both unsurprising and irrelevant. If you think that our utility function here is smooth, then sufficiently near the max, small changes in the level of social control would result in negligible changes in outcome. Once we’re near enough the maximum, it’s hard to tune precisely. What follows from this?
Hmm. To me it seemed intuitively clear that the function would be monotonic.
In retrospect, this monotonicity assumption may have been unjustified. I’ll have to think more about what sort of curve this function follows.
Trouble with justifying does not necessarily mean that the choice is unjustified.
I like to wash my hands in warm water. I would have a hard time justifying a particular water temperature, as opposed to one slightly colder or slightly warmer. This does not mean that “the only points which have a good reason to be used” are ice-cold water and boiling water.
You can’t justify a point, but you could justify a range by speficfying temperatures where it becomes uncomforable. Actually, specifying a range is just specifying the give point with less resolution.