This simple bill would add a line near the bottom of Page 2 of all Form 1040 tax returns, allowing any taxpayer to voluntarily and very easily pay more tax than the law requires. What a great idea, huh? - John Campbell, The Liberal TaxUnfortunately, not enough other congresspeople agreed that Campbell's idea was that great. But I certainly did...so I sent him an e-mail about another great idea...The Taxpayer is King.
Off the top of your head...do you know if it's even possible to make donations to specific federal agencies? I sure didn't. After a bit of searching I found this article by Brian Palmer...Uncle Sam Wants You ... or at Least Your Spare Change. It turns out that it is possible...at least for some agencies...
Department of Treasury
Department of Health & Human Services
National Cancer Institute
National Institute of Health
National Institute of Mental Health
National Institute of Environmental Sciences
Department of the Interior
National Park Service
Department of Agriculture
The United States National Arboretum
Department of Defense
National Science Foundation
National Endowment For the Arts
What if you want to donate to the EPA or USAID? I'm not so sure. This 1963 document is the most official and comprehensive source that I could find on the topic. Who knows if any of those laws have changed since then. But why would any government agency be prohibited from accepting donations? Because...they already have more than enough money? From my perspective, every government organization should facilitate donations. Maybe they shouldn't go as far as unleashing hordes of bike riding, suit wearing and door knocking minions...but it should be really easy to find the "Donate" button on their website.
For some reason relatively little has been written on the topic of donating to the government. Here's what I managed to find...
- Small Gifts Sent to Ease U.S. Debt - Sewell Chan
- Donating this year? Uncle Sam needs your help - Jeanne Sahadi
- Want Higher Taxes? Pay Them Yourself. - Matt Zwolinski
- Why Are Donations to Government So Small? - Bryan Caplan
- Should Warren Buffett Voluntarily Pay More in Taxes? - Will Wilkinson
- Why Millionaires Who Want Higher Taxes Don't Just Donate Money To The Government - Arthur Delaney
[Update: Jan 2015 found some more...]
- Voluntary taxes - Rebecca Tuhus-Dubrow
- The President’s Taxes - Steve Landsburg
- Voluntary Taxes - Karl Smith
- Should redistributionists feel compelled to give more of their own money away? - Tyler Cowen
- So why don't you just pay extra taxes? Hm?
- A Voluntary Buffett Rule - M. Todd Henderson
[Update: Aug 2015 found...]
- Let’s celebrate the people who pay the highest taxes by naming post offices and schools after them - Luke O'Neil
[Update: Sept 2015 found...]
- Voluntary Taxes and the Relevant Margin - Arnold Kling
We've been e-mailing back and forth intermittently since then and I've managed to get a somewhat better handle on his solution to the problems of government. What really helped me better understand his model was a paper he recently wrote. But before I share the link with you...let me make sure that the title of his paper doesn't jump you to the wrong conclusion.
With Razo's model...taxation would still be compulsory...but perhaps not indefinitely so. The more donations the government receives...the less taxes people will be required to pay. In other words, more voluntary contributions means less coerced contributions.
If you have strong feelings one way or another about compulsory taxation...I really think it will be worth it if you try and keep an open mind.
Here's his paper... Voluntary Taxation and the Future of Democracy.
Let's get some semantics out of the way. Razo calls his model "Voluntary Taxation". This label is... misleading. I fear, as you might have noticed, that both liberals and anarcho-capitalists will jump to the wrong conclusion right off the bat. Maybe they will incorrectly assume that Razo has been sponsored by the Tea Party. But that's really not the case. In theory, Razo's model should be equally desirable to both sides of the debate. So I've taken the liberty of calling his model of government "razotarianism". With this label it will be highly unlikely for anybody to be immediately and incorrectly biased for or against his model. Plus, right now there isn't a single search result for the word "razotarianism". This means that it meets the google alert standard. You don't have to worry about being swamped by irrelevant results should you sign up to receive an e-mail from google whenever there's a new search result for "razotarianism".
Before we dive in, let me confess that I'm really not going to be able to do razotarianism justice. Heck, I can't even do pragmatarianism justice. But I'd be doing Razo's model even less justice if I didn't at least try to give it the recognition that it certainly deserves.
Are you wondering why in the world more people would voluntarily donate more money to the government? The answer is...incentives! In a razotarian system, people would be incentivized to contribute more than they were required to do so. What's the incentive? Votes. Anybody who paid more than their fair share to the government would receive more votes. If you're concerned that this would give too much influence to the wealthy...then let me put your concerns to rest by clarifying that the weight of your contribution would depend on your total wealth. So if both you and Bill Gates donated 1% of your wealth to the government...then even though his contribution was absolutely larger...you'd still receive the same amount of votes because his contribution was relatively the same size.
How powerful is this incentive? Let's try and visualize the possibilities with this illustration...
"A" represents the current system with the current incentive. The amount of donations that the government receives is a green drop in a red ocean. It's vanishingly small. If we switched over to a razotarian system...would people be sufficiently incentivized to voluntarily shoulder half of the tax burden..."B"? Do you think it's possible that people would be so incentivized that they would be willing to voluntarily shoulder the entire tax burden..."C"?
How much are people willing to pay for more say? Beats me...but I'd certainly love to find out. I really appreciate the idea of incentivizing people to pay more than their fair share of taxes.
Bryan Caplan touched on this...
I do wonder, though: Could the U.S. government attract a lot more donations with better marketing? What if the President spent less time raising money for his campaign and more time raising money for the Treasury? What if Congress publicly acknowledge the ten biggest donors in an annual ceremony? I can easily believe that donations to the U.S. government would rise a hundred-fold. But even then, Uncle Sam's share of national charity would be a mere .1%. - Bryan Caplan, Why Are Donations to Government So Small?In my blog entry...Civic Crowdfunding - Encouraging Participation...I linked to these two posts by Miles Kimball...
In my entry I also argued that civic crowdfunding websites shouldn't just list the donors and the size of their donations...they should also include a link of the donor's choosing. No reason that this couldn't work for making donations to government organizations. If I make a donation to the EPA...and I opt for my donation to be made public...then my row on the EPA's "Thank you!!!" page would display three things...my name, my donation amount and a link to my blog. The more I donated...the higher the link to my blog would be on their "Thank you!!!" page...and the more traffic my blog would receive. Like any good trade...it would be mutually beneficial.
That's just one of many different possible ways that people could be incentivized to donate to government organizations (GOs). It's hard for me to imagine why, as taxpayers, we wouldn't we want GOs to enthusiastically explore additional sources of revenue.
So how do we get from here to there? Let's break the big challenge down into three smaller challenges...
- Awareness - people have to know that it's possible to donate to GOs
- Facilitate - people have to be able to easily find the donate button
- Incentive - people have to be rewarded for donating to GOs
Challenge #1 - Awareness
If every GO website has a noticeable donate button (challenge #2) then anybody who visits a government website will realize that it is possible to donate to GOs. Plus, there should be an up-to-date list of GOs that you can donate to. If you take a look at this donation page on the the USA.gov website...you'll see that their list of GOs that you can donate to is far shorter than my list. That's easy enough to remedy.
Ideally, the USA.gov website should link people to the complete list maintained on the Government Accountability Office (GAO) website. It's right up the GAO's alley given that their responsibility is to make the government more "efficient, effective, ethical, equitable and responsive". Clearly the GAO is dropping the ball if they allow GOs to turn their noses up at additional sources of revenue.
Challenge #2 - Facilitate
This should be the easiest challenge. Thousands of non-profit organizations make it ridiculously easy for people to donate to their organizations. If a GO can't accomplish this simple task...then they really shouldn't be spending anybody's tax dollars.
Challenge #3 - Incentive
This would seem to be the biggest challenge. What perks/rewards/benefits can people receive for donating to GOs? I already mentioned more traffic for your website. What about a T-shirt? Would you shell out $35 for a T-shirt? It would say something like, "I donated to the EPA...because the environment's worth it!" It's for a good cause...right? Would you shell out $250 for a limited edition silver coin featuring Dendrophylax lindenii? Would you shell out $10,000 for additional votes?
If you did spend $10,000 for additional votes...are you being more altruistic than somebody who donated $10,000 to the government for nothing but the warm glow of doing so? This question is important because, I believe that the logical basis of razotarianism is the idea that, in the political realm, selfless people should have far more influence than selfish people. Razo's model intends to effectively filter out the greedy bastards from politics. Except, I'm not too sure if anybody who needs to be bribed with votes in order to donate to the government is necessarily that selfless.
Before we dig deeper into the rationale...let's try and figure out how Razo believes that this filter process would work...
Based on the rate of return on capital, wealthy individuals will have to decide whether they want to retain their capital or increase their political power. They can’t have both because the model mathematically excludes the possibility of increasing wealth and also increasing political power. If the rate of return on capital is 10%, for example, and an individual’s voluntary tax contribution is 20%, it will not take long for that person to lose his or her wealth. It’s also important to understand the competitive nature of the model. At the upper extreme, people will inevitably compete at annual (wealth and income) tax rates of nearly 100%. One does not have to be a financial expert to understand that 100% tax on wealth and income will necessarily drive economically ambitious people (of all social classes) away from politics and into business, where they belong. Again, one of the most important strengths of the voluntary tax model is its unprecedented ability to remove self-interest from the top tier of politics.Does this make sense? The more money you donate to the government...the less money you'll have to invest in profitable ventures. So do you want more votes...or more money? Because you can't have both.
Here's another passage...
It is worth clarifying that the voluntary tax principle does not condemn self-interest. It simply excludes it from politics. This ability to divorce business and self-interest from politics is precisely where the power of the voluntary tax model is found.And another...
In his zeal for the common good, our imaginary taxpayer has voluntarily given away 100% of his wealth and his entire life’s work and has opted for a life of productive simplicity.And another...
The segment of the population with the most political power would be comprised of the individuals who have demonstrated the least amount of self-interest.This strikes me as fundamentally wrong. Perhaps the best way to show the wrongness is to whip out Elizabeth Warren...
There is nobody in this country who got rich on his own. Nobody. You built a factory out there—good for you! But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that maurauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.If Warren is correct that the successful operation of business depends on government...then wouldn't it be a huge disaster to try and divorce business from politics?
In this sense...razotarianism and pragmatarianism are polar opposites. As a pragmatarian I want the rich guy, who I dollar voted for, to have far more political influence than Warren, who I didn't even ballot vote for. As a razotarian, Razo wants the rich guy to have far less political influence than Warren.
So who's right? Razo or myself?
Let's consider the simple act of buying an apple pie. Buying an apple pie means dollar voting for whoever produced that pie. Let's say his name is Bob. In order to produce the pie and earn our money...Bob had to dollar vote for whoever produced the apples that he put into the pie. Bob, who really wants our money, has a strong incentive to purchase the optimal quantity and type of apples. If he purchases the wrong quantity or type of apples... then he will lose dollar votes. And given that Bob is self-interested...he really doesn't want to maximize loss, he wants to maximize gain. So he diligently does his homework, and we benefit.
But are apples the only input in apple pies? No, there are numerous other inputs...which can be divided into two types...private and public. Private inputs, such as apples, are private because they are supplied by the private sector. Public inputs, such as roads, are public because they are supplied by the government.
Apples and roads both go into our apple pies. Of course roads don't literally go into our apple pies. It would really suck to find chunks of asphalt in an apple pie. But the apple pies that we buy depend on roads just as much as they depend on apples. Apple pies can't go from Bob's bakery to your home without them. This is why I want Bob to be free to shop for himself in the public sector. Nobody has more incentive or knowledge than he does to dollar vote for the optimal balance of apple pie inputs. If he needs more apples...then that's what he'll spend his private dollars on. If he needs better roads...then that's what he'll spend his public dollars on. If Bob misallocates either his private dollars or his public dollars, then consumers would shift their dollar votes to producers who haven't misallocated their money.
Razo wants to diminish Bob's influence in the public sector. Why? Because Bob is self-interested. I want to increase Bob's influence in the public sector. Why? Because Bob is self-interested.
Let me clarify, I don't want to arbitrarily increase Bob's influence in the public sector. I merely want his influence to accurately reflect the will of all the people who have dollar voted for him. Because right now it really doesn't. Bob's influence has been limited as the result of primitive traditions and bad economics. These shackles have to be removed. The fact of the matter is...the more people Bob serves...the more influence he should have. Nonsensically limiting his influence in either sector fundamentally subverts the will of the people that Bob has effectively served. Prohibiting Bob from shopping in the public sector doesn't help consumers...it hurts them. It's as counterproductive as literally shooting Bob, their good and faithful servant, in the foot.
Are you convinced that I'm right? If not, then read this passage by Adam Smith...
When high roads, bridges, canals, &c. are in this manner made and supported by the commerce which is carried on by means of them, they can be made only where that commerce requires them, and consequently where it is proper to make them. Their expences too, their grandeur and magnificence, must be suited to what that commerce can afford to pay. They must be made consequently as it is proper to make them. A magnificent high road cannot be made through a desert country where there is little or no commerce, or merely because it happens to lead to the country villa of the intendant of the province, or to that of some great lord to whom the intendant finds it convenient to make his court. A great bridge cannot be thrown over a river at a place where nobody passes, or merely to embellish the view from the windows of a neighbouring palace: things which sometimes happen in countries where works of this kind are carried on by any other revenue than that which they themselves are capable of affording. - Adam Smith , Wealth of NationsIf commerce, in our case Bob, isn't free to dollar vote for the optimal allocation of roads, bridges and canals... then how could these public inputs possibly be constructed where they create the most value for consumers? Does it really serve the common good if the government builds billions of bridges to nowhere?
Here's another wonderful passage by Adam Smith...
It does not seem necessary that the expence of those public works should be defrayed from that public revenue, as it is commonly called, of which the collection and application are in most countries assigned to the executive power. The greater part of such public works may easily be so managed as to afford a particular revenue sufficient for defraying their own expence, without bringing any burden upon the general revenue of the society. - Adam Smith, Wealth of NationsThis argument is perfectly relevant as to whether or not government organizations should have donate buttons on their websites. Facilitating donations is the bare minimum that government organizations can do to help minimize their "burden upon the general revenue of society".
What about razotarianism? How much would it help decrease society's compulsory tax burden? I don't know. But it's a really good question. It's kinda hard to imagine truly selfless donors really shouldering very much of the total tax burden. Just how much money do truly selfless people have? If they earned a lot of money...then perhaps they weren't so selfless. And if they have to be bribed with votes in order to donate a lot of money to the government...then perhaps their Scrooge like transformation didn't really occur.
From my perspective...the compulsory tax burden would be far more likely to significantly decrease if votes weren't sold on a proportional basis. Plus, arbitrarily limiting Bob's influence in the public sector substantially subverts the will of the people. So I still prefer pragmatarianism...but razotarianism is definitely on to something with the idea of incentivizing donations to the government. Hopefully many more people will discuss the merits of this approach. Especially John Holbo.