Catallaxy Files

It is time for the Government to consider a voluntary tax bill.

How many times have you observed a prominent person bemoaning ‘the fact’ that Australians don’t pay enough tax?

Usually it is an ideological pretext to increase the amount of income redistributed.

What about those that accused the previous government of profligate spending because of tax cuts. Well yes, the previous government did have some silly and expensive programs. But a tax cut is not spending. It is a tax cut! A cut to revenue not an increase in expenditure.

What we need is a voluntary tax bill.

Those piously calling for increased taxes can then lead by example. Put their money to a good cause – taxation.

I propose that tax deductible contributions to the Australian Tax Office be permitted and indeed encouraged.  And just like donations to say Opera Australia, the donor’s name should appear on the ATO’s website and in its annual report. We could even give donors different titles: a platinum donor for those paying voluntary tax above say $20,000. A gold donor for those paying between $15,000 and $20,000 and so forth.

Then when we hear another claim that taxes should be increased, we just need to check the ATO’s website to see how much voluntary tax the proponent donated in the past year.

The ATO: a worth deductible gift recipient.

The principal argument for the economic stimulus was to help prevent a recession in Australia.

We have canvassed previously the efficacy of the stimulus program, which I maintain would have been better delivered through tax cuts.

One of the key arguments in favour of “go early, go hard go household” was because of a perceived need to support an economy with spare capacity. After all, that is the reason proponents think that Keynesianism works – where there is spare capacity in the economy Government activity can support the economy without crowding out the private sector.

This was also a reason behind the Australian Business Investment Partnership (Ruddbank) which was a topic in an early post that I put up that has been lost. In that, the Government claimed that the property sector (commercial in particular) needed the support of Ruddbank and naturally the Property Council and other such lobby groups were strongly in support of ABIP.

And one would also think that Government would benefit from bulk buying discounts.

So it is interesting to see the cost overruns in the stimulus programs in the areas of solar, insulation and schools in particular.

For we see now that the grateful taxpayer has been shelling out huge amounts of money on schools and getting little in return. In effect the taxpayer is paying three times the going rate.

In today’s Sun Herald, for example, it states that quantity surveyors saythat a quality one or two-level commercial building costs around $2100 per square metre yet a 25 square metre canteen at Orange Grove Public School cost $22,000 per square metre.

Examples like this can be found everywhere that Government intervenes – throwing huge amounts of money at relatively few suppliers and hence bidding up costs, crowding out private sector activity.

The same thing may be observed in Australia’s foreign aid program where the beneficiaries are some Australian experts enjoying substantial tax free salaries while the standards of living in our neighbouring countries continue to decline. As Helen Hughes has often observed, economic growth is inversely proportional to aid receipts.

But this crowding out and bidding up the costs of construction is another piece of evidence against the efficacy of the stimulus program. We didn’t need Ruddbank and we didn’t need the stimulus program. Tax cuts would have been considerably superior as a form of stimulus – taxpayers have proven much more adept at spending their own money than the government has spending taxpayers’ money.

Surely in the middle of a financial crisis when there was supposedly a lot of surplus labour, the government could have negotiated better prices? Clearly not.

The shameful profligacy of the Government has been manifest in an extraordinary number of ineffectual programs and a burden on the taxpayer that could have been avoided.

And let’s not forget the marginal excess burden of taxation – another reason to be cautious in spending taxpayers’ resources.

Governments are elected to wisely manage the resources of the Commonwealth – this Government, so far, has failed in its stewardship of the national treasury. It has thrown money around without proper analysis. Perhaps worse, the implementation and management of the programs has been abysmal.

I’ll leave the final quote to Milton Friedman, in his 2004 interview on Fox:

There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I’m not so careful about the content of the present, but I’m very careful about the cost. Then, I can spend somebody else’s money on myself. And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch! Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government. And that’s close to 40% of our national income.

The ACT Greens – fortunately with their power base confined to a relatively small part of Australia – want Canberra’s newest town to have a seven star rating with 30 km/h speed limits, bicycle “highways” and only one car parking space per household. Clearly the Greens want to rob us of cars.

Now it is all very well to have an energy efficient house if it is cost effective. But to impose dramatically increased costs on home building which swamp any energy savings is silly. And hits at the very people the Greens claim to represent: those that are less well off and want “affordable housing” whatever that means.

Imagine hosting a party in one of these utopian homes in Canberra – sorry you have to come by bicycle or public transport. And as everyone knows, the longest distance between any two points is an ACTION bus route.

The Rudd government are threatening to take Japan to court. Again.

“If we don’t get that as a diplomatic agreement, let me tell you, we’ll be going to the International Court of Justice,” Mr Rudd said.

“Secondly, if we don’t reach a landing point with the Japanese diplomatically, that action will occur well before the commencement of the next whaling season, which is this November, OK?”

I think he means November 2010 – after the next federal election. Maybe he’s meant November 2010 all along.

Labor leader Kevin Rudd believes the Government has taken no real action over 11 years to oppose whaling.

Since 2005, Mr Rudd and Labor frontbencher Anthony Albanese have been pressing the Government to get the International Court of Justice to intervene.

The Parliament will soon consider a private members bill on gay marriage.

Both Labor and the Coalition are opposed to changing the marriage act to allow for same-sex marriages.
…
“I’m calling on Tony Abbott and Kevin Rudd to allow their members to speak freely on the issue and to have a conscience vote. It’s important that our parliamentarians represent the wills and needs and desires of their communities and on this issue more than ever.”

My good friend Tim Wilson has done a lot of thinking in this area, even beating up Penny Wong on national television, and his idea of competitive marriage contracts should be seriously considered.

Put simply, marriage is a contract. The problem is the existing contract is a civil and religious institution in one. Everyone’s contract is the same, but some religious civil celebrants require extra obligations in return for overseeing entry into the contract.

But in arguing for same-sex marriage most gay activists don’t appreciate the significance of marriage to religions. In response, many religious conservatives have bunkered down for the fight. They shouldn’t. The solution is to establish alternative options such as Abbott’s covenant marriage.

Doing so will stop religions having their marriage contracts secularised and government mandating its extension to same-sex couples.

The government can allow multiple marriage contracts. Registering a contract would require meeting minimum standards set by government, and religious bodies could set additional requirements for a marriage to conform to their faith.

[vimeo]http://vimeo.com/8234595[/vimeo]

Jason and I had an exchange in the last open forum over the individual who flew a plane into an IRS office killing himself and an IRS employee.

Sinclair

This guy attacked the IRS. Waging war against the government over tax is the foundation activity of the US republic.

Jason

And tax is a necessary evil. No taxes, no civilisation, no military or cops or other things that everyone but nutty anarchists think should be provided by government.

Innocent people died in this act of domestic terrorism. You’re not seriously suggesting his actions are any less worthy of condemnation than that of the other nuts.

Sinclair

No I’m not suggesting that the deaths of innocent people is ever acceptable. I am suggesting that the US government is in an interesting place when it’s own tax collecting agency is targeted given the US government itself is a consequence the largest tax revolt in history.

Jason

nothing particularly interesting about it. The US isn’t an anarchy. whatever revolt it had in the past it still has to collect taxes

I actually agree with what Jason says, but I also think there is a more interesting story here. I’m going to start off by quoting that great libertarian document, the US Declaration on Independence.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.

This raises an interesting problem. You don’t have to be an anarchist to recognise that situations can and do arise where violence is an appropriate solution to some problems. Violence is also an extremely expensive solution; investment in violence is also extremely risky. This is true at both the macro and the micro levels.

Economists and political scientist often think in terms of ‘voice’ and ‘exit’; violence can be a form of voice. Democratic societies create more scope for voice. Successful societies would create incentives for mutually beneficial trade and disince tives for violence. In those societies we might expect political elites to be more responsive to non-violent protest than in non-democratic societies. This point may well be somewhat trivial. Maximising the scope for voice to resolve differences is almost the definition of democracy. What of exit?

Many societies have less reliance on exit. For example, aggrieved citizens may freely emigrate but not secede. Few political entities recognise the right to secede. The Australian constitution has that right for Western Australia but not the other states. Contrary to popular libertarian opinion US states have no right to secede either. Whether they should have that right is another question. One of the problems with running that argument is that the types of people who have wanted to secede have undesireable traits. As Samuel Johnson asked

How is it that we hear the loudest yelps for liberty among the drivers of negroes?

Good question.

From a Public Choice perspective we might believe that there is an undersupply of protest and rebellion against government. The personal cost of waging war against the State is borne almost entirely by the individual, while the benefits (assuming there are any) is spread out over the community. This type of argument assumes that rebellion leads to better government – but that assumption is very strong. Taking the argument at face value, political violence is undersupplied by the market (so to speak) and this then is a negative externality. Consistent with this view governments’ do subsidise political violence. Not at home, of course, but abroad. This just becomes a process of picking winners and often ends in tears. I think there can be little doubt that the US oversubsidised the Afghan rebels in the 1980s. That episode simply reinforces the libertarian prespective of not getting involved in other peoples civil wars.

So this has been a somewhat rambling post, but I think there is a discussion to be had about the limits of legitimate protest and political violence. I know Skepticlawyer ponders these issues from time to time and she might have a jurisprudential take on this. I haven’t read it yet, but Douglass North, John Wallis and Barry Weingast have a book that looks like it might touch on these issues.

All societies must deal with the possibility of violence, and they do so in different ways. This book integrates the problem of violence into a larger social science and historical framework, showing how economic and political behavior are closely linked. Most societies, which we call natural states, limit violence by political manipulation of the economy to create privileged interests. These privileges limit the use of violence by powerful individuals, but doing so hinders both economic and political development. In contrast, modern societies create open access to economic and political organizations, fostering political and economic competition. The book provides a framework for understanding the two types of social orders, why open access societies are both politically and economically more developed, and how some 25 countries have made the transition between the two types.