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Phil's Rambling Rants
September 15th, 2005
08:48 pm

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Ideas: Appropriate use of taxation

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From:bedlamhouse
Date:September 16th, 2005 12:19 pm (UTC)
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Leaving aside the very controversial question of whether taxes are meant to be a way to raise money for the functioning of the government or are a way to implement social policy ...

A) The problem is that item 1 (use taxes to enforce social behaviors) and item 2 (keep taxes simple) are mutually exclusive. For every additional behavior tax that cannot be assigned directly (i.e. not direct sales taxes on things you don't want people to buy) there will be further complications as someone has to figure out whether individuals need to pay the tax or not.

B) Government becomes dependent on socially-imposed taxes for activities unrelated to the activity being taxed. For instance, the money raised by tobacco taxes should have been sufficient to cover the cost of healthcare and anti-smoking campaigns, but that money has been lumped into general revenues for so long that the government has both become dependent on it and also tried to raise the money to cover the costs through litigation. On the one hand, unwillingness to allow the revenue stream from bad-behavior-tax X to be reduced leads to conflicts of interest about the behavior. On the other hand, government does not do well at using income from specific sources to fund costs rising from said source (see the various airline taxes for airport maintenance ...)

To the extent that taxation is used to modify behavior, it should be revenue-neutral to the cost of mitigating such behavior and applied only to said mitigation. This would be better described as "fees" rather than "taxes", and has been rejected out of hand by many who feel it is "paying for permission to do <whatever>" as opposed to "raising the price of <whatever> to its real costs".
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From:tigertoy
Date:September 16th, 2005 08:53 pm (UTC)
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Leaving aside the very controversial question of whether taxes are meant to be a way to raise money for the functioning of the government or are a way to implement social policy ...

But in my meanderings about the perfect world I want to live in, I get to decide (or at least comment on) what taxes are meant for, and my whole point is that they should be used with directed intent for both purposes, because even if the intent is to serve one purpose and ignore the other, the other will still be affected.

The problem is that item 1 (use taxes to enforce social behaviors) and item 2 (keep taxes simple) are mutually exclusive.

Which is why I explicitly included "(but not too simple)".

For every additional behavior tax that cannot be assigned directly ... there will be further complications as someone has to figure out whether individuals need to pay the tax or not.

If there isn't something that a tax can be assigned directly to, taxation probably isn't the answer. I'm arguing that taxation is the first approach that should be considered, not the only approach. If the complications are such that figuring out who owes how much tax and the logistics of actually making the payment are more of a burden than paying the tax in the first place, it's a bad tax.

Government becomes dependent on socially-imposed taxes for activities unrelated to the activity being taxed.

This is a danger. Government has a responsibility to continually evaluate its tax policies and make sure that they are actually still doing what they were meant to do, and to change them when they're not even if it is inconvenient at budget time. But I think it's actually more of a problem if a specific tax on a behavior that some people want to eliminate is directed to a specific program that other people support than if it's just general revenue.

To the extent that taxation is used to modify behavior...

All taxation modifies behavior. I think it is better to tax with intent, and to review the effects to see if they match the intent, than to pretend that taxes don't modify behavior.
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