Wednesday, November 10, 2010

Uninformed Taxpayers

One criticism of pragmatarianism that crops up fairly frequently is that "other" people would make uninformed allocation decisions with their taxes.  To address this criticism we can compare three different groups...the general public, taxpayers and congress.  

Taxpayers are better educated than the general public.  In fact, the more educated somebody is the more money they earn and the more money they earn the more taxes they have to pay.  Here's a diagram from the Bureau of Labor Statistics that illustrates the strong correlation between education and income...


To give you an idea of how much taxes the general public would have to work with...the bottom 40% of the US population owns less than 1% of the wealth.  

Would taxpayers make more informed allocation decisions than congress?  In a pragmatarian system every taxpayer would ask themselves that question.  If they answered "no" then they would give all or some of their taxes to congress.  If they answered "yes" then they would allocate their taxes themselves.

Of course, the tax allocation decisions of congress are also a public good.  The total quantity of revenue congress received would reflect how much taxpayers valued that public good.

It's important to note that just because somebody is educated doesn't necessarily mean that they are informed.  It just means that they have reasonable critical thinking skills.  Lobbyists currently provide congress with information in order to help make them make informed decisions.  In a pragmatarian system lobbyists would also be motivated to share that information with taxpayers.

Congress as a group can only process a certain amount of information.  Allowing taxpayers to decide how their taxes are allocated would expand the quantity of information that factors into how taxes are allocated.  It would also more accurately reflect the values of taxpayers.  

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