Wednesday, May 6, 2015

Tax Choice Tax Rate

Reply to thread: Tax Choice - Pragmatarianism - Calling Xerographica


helmuth_hubener, your "final word" is missing one very important word... "congress". This thread, on the other hand, has (prior to this post) 19 instances of the word "congress". How do you explain this disparity?

In case I wasn't very clear the first gazillion times that I've explained this...

  1. Tax choice is where people can choose which government organizations (GOs) they give their taxes to
  2. Congress is in charge of determining the tax rate
  3. Congress is a government organization (GO)
  4. Therefore, in a tax choice system, taxpayers will be able to choose how much of their hard earned tax dollars they give to congress.

You (the taxpayer): Ah man, these public options really suck! I'm the complete opposite of a kid in a candy store!! I'm a depressed taxpayer in a public market!!! I'm a despondent adult in a crap store!!!!!!
Congress: Will you give us more of your hard-earned tax dollars if we raise or lower the tax rate?
You: Lower!!!!!!! For sure! Drop the tax rate to 1% and I'll give you all of my tax dollars!
Congress: How many other people are in the same boat as you?
You: To be completely honest... I really don't know. If I'm the only person in this boat, and you lower the tax rate to 1%, then more people will boycott you and your revenue will plummet.
Congress: We really don't want our revenue to plummet, we want our revenue to skyrocket!
You: Then decrease the tax rate marginally. If your revenue increases then you'll know that you're going in the right direction. Keep marginally, and gradually, decreasing the tax rate until your revenue starts to decrease.
Congress: That sounds like a really good plan!
You: I know! I'm a genius!

If taxpayers largely perceive a relative scarcity (shortage) of public goods... then they will perceive the necessity of a higher tax rate. So congress would increase its revenue by increasing the tax rate. If, on the other hand, taxpayers largely perceive a surplus of public goods... then they will perceive the necessity of a lower tax rate. So congress would increase its revenue by decreasing the tax rate.

In this video, the kid doesn't give his money to the pastry vendor. Why didn't he? Because evidently the kid perceived that there were more valuable things to spend his money on. From his unique perspective, with his unique set of preferences, in his unique situation/circumstances/environment...

relative scarcity of other goods (X) > relative scarcity of pastries (Y)

X > Y

If taxpayers, in a pragmatarian system, perceive that the...

relative scarcity of private goods (X) > relative scarcity of public goods (Y)

X > Y

... then they'll allocate their hard-earned tax dollars accordingly. They'll give more tax dollars to congress if, and only if, congress lowers the tax rate.

This is how and why markets work. Consumers use their cash to guide producers in the most valuable directions. Consumers are the compass. Right now this compass is not in the public sector...

The management of a socialist community would be in a position like that of a ship captain who had to cross the ocean with the stars shrouded by a fog and without the aid of a compass or other equipment of nautical orientation. - Ludwig von Mises, Omnipotent Government
The only alternative to a market price is a controlled or fixed price which always transmits misleading information about relative scarcity. Inappropriate behavior results from a controlled price because false information has been transmitted by an artificial, non-market price. - Mark J. Perry, Why Socialism Failed

You might be right that pragmatarianism is a crappy idea. But your critique to end all critiques doesn't even address the mindnumbingly simple process that will determine the tax rate in a pragmatarian system.

Speaking of bad ideas... here's the worst idea ever.

Personally, I think that consumers will be more honest in the public sector. More honesty means a more accurate compass. And a more accurate compass means more value will be created in the public sector. When the public sector creates more and more value... the tax rate will increase accordingly. Until we end up at a 100% tax rate.

Is my prediction wrong? I wouldn't be surprised! So please come up with a better prediction. Predict, using the stupid simple process that I outlined in this post, what the tax rate will end up being. Will it go up? If so, how high and why? Will it go down? If so, how low and why?

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