That’s a good point. Then Wei_Dai’s question becomes more important: why don’t we see other coordination mechanisms in this space, besides forcible taxation? And why don’t rich people disproportionately vote in favor of more progressive taxes on themselves?
After all, if all we can learn from this post is that rich people don’t in fact have the posited preference, so this model doesn’t apply, then it’s not very interesting.
Maybe because there is value left on the table? You could apply the same logic to any new idea: “If it was so great, someone would have already thought of it and exploited it, so it clearly can’t be that great.”
Also, I would claim charity tax deduction already is such a coordination mechanism, allowing the rich to engage in philantrophy in ways they believe to be more effective than taxation (e.g. they would like more of their donations going towards foreign aid)
That doesn’t seem to be enough to explain the rich not voting in the past to increase the marginal tax (like a few of them are now calling to do). Many different tax bills have been proposed over history; this doesn’t seem like an idea nobody thought of until now.
It’s likely that the rich (or people in general) don’t trust the government with their money, don’t believe it would be spent nearly as effectively or beneficially as pure redistribution, and may entirely oppose some of the government’s uses of tax money and not want to fund them.
In that case, what we need is a bill that proposes a special tax on the rich whose proceeds go only and directly towards redistribution, or some sort of universal income which not sufficient to live on but also doesn’t count as ‘income’ for ordinary taxation and disqualifications for social services for the poor. And such a thing is plausibly hard to think of, draft, and get enough support behind.
Also, I would claim charity tax deduction already is such a coordination mechanism
It’s not a coordination mechanism; it doesn’t allow people to commit to giving money if and only if everyone else also gives money, as a tax does. Even if giving money was free (untaxed), the OP’s coordination problem would remain.
It’s not a coordination mechanism; it doesn’t allow people to commit to giving money if and only if everyone else also gives money, as a tax does. Even if giving money was free (untaxed), the OP’s coordination problem would remain.
Actually it is, just a bit contrived. The penalty for violating the “commitment” is having to pay extra taxes (lose the tax break). Just a matter of labels.
I don’t understand your point. Paying taxes or not is not related to whether and how much other people also make charitable deductions. Bezos donating less or more doesn’t influence Gates donating less or more. What is the coordination mechanism?
In the first case, to avoid the penalty of being fined, you pay taxes.
In the second case, to avoid the penalty of being taxed, you don’t donate.
If I allow you to donate without being taxed, it doesn’t follow that you will donate. Maybe you don’t want to donate to begin with, or not unless everyone else does as well. That’s the model the OP assumes.
Tax rates on non-donation gifts (= marginal income taxes of the non-rich) are “only” a few tens of percents. For the OP’s model to work, he had to assume a ratio of 1:1,000,000 between the value to a noble of keeping or donating money. That’s as if there was a 99.999,999,9% tax rate on donations! If there was such a tax rate, then making donations tax-free would certainly stimulate a lot of donations. But as it is, under the OP’s general assumptions, tax rates of ~~ 30% should not much matter.
That’s a good point. Then Wei_Dai’s question becomes more important: why don’t we see other coordination mechanisms in this space, besides forcible taxation? And why don’t rich people disproportionately vote in favor of more progressive taxes on themselves?
After all, if all we can learn from this post is that rich people don’t in fact have the posited preference, so this model doesn’t apply, then it’s not very interesting.
Maybe because there is value left on the table? You could apply the same logic to any new idea: “If it was so great, someone would have already thought of it and exploited it, so it clearly can’t be that great.”
Also, I would claim charity tax deduction already is such a coordination mechanism, allowing the rich to engage in philantrophy in ways they believe to be more effective than taxation (e.g. they would like more of their donations going towards foreign aid)
That doesn’t seem to be enough to explain the rich not voting in the past to increase the marginal tax (like a few of them are now calling to do). Many different tax bills have been proposed over history; this doesn’t seem like an idea nobody thought of until now.
It’s likely that the rich (or people in general) don’t trust the government with their money, don’t believe it would be spent nearly as effectively or beneficially as pure redistribution, and may entirely oppose some of the government’s uses of tax money and not want to fund them.
In that case, what we need is a bill that proposes a special tax on the rich whose proceeds go only and directly towards redistribution, or some sort of universal income which not sufficient to live on but also doesn’t count as ‘income’ for ordinary taxation and disqualifications for social services for the poor. And such a thing is plausibly hard to think of, draft, and get enough support behind.
It’s not a coordination mechanism; it doesn’t allow people to commit to giving money if and only if everyone else also gives money, as a tax does. Even if giving money was free (untaxed), the OP’s coordination problem would remain.
Actually it is, just a bit contrived. The penalty for violating the “commitment” is having to pay extra taxes (lose the tax break). Just a matter of labels.
I don’t understand your point. Paying taxes or not is not related to whether and how much other people also make charitable deductions. Bezos donating less or more doesn’t influence Gates donating less or more. What is the coordination mechanism?
The same way taxation is a coordination mechanism.
Taxation = social arrangement
Fines/prison sentence for tax evasion = enforcement mechanism
Charitable donation = social arrangement
Higher taxation = enforcement mechanism
I don’t see how that is applicable.
In the first case, to avoid the penalty of being fined, you pay taxes.
In the second case, to avoid the penalty of being taxed, you don’t donate.
If I allow you to donate without being taxed, it doesn’t follow that you will donate. Maybe you don’t want to donate to begin with, or not unless everyone else does as well. That’s the model the OP assumes.
Tax rates on non-donation gifts (= marginal income taxes of the non-rich) are “only” a few tens of percents. For the OP’s model to work, he had to assume a ratio of 1:1,000,000 between the value to a noble of keeping or donating money. That’s as if there was a 99.999,999,9% tax rate on donations! If there was such a tax rate, then making donations tax-free would certainly stimulate a lot of donations. But as it is, under the OP’s general assumptions, tax rates of ~~ 30% should not much matter.