Tax Choice?

While I do believe there’s a necessity for some form of social safety net, I’d still say I have libertarian leanings. Unfortunately, I don’t think the radical tax reform proposed by many libertarians is the way to go. Rapid change of any kind usually results in either backfire or ineffectiveness. I guess you could call me “conservative” when it comes to major structural changes.

I think most people, regardless of political affiliation, realize that taxes have an element of force to them. I think nearly everyone tries to pay as little tax as possible. Why are people so reluctant to pay something that (ideally) benefits society so greatly? I’d say it’s primarily a lack of salience. Corruption, inefficiency, and all the other ailments of bureaucracy are obvious factors; but I think most of all, people fail to see how their taxes translate into goods and services.

The idea of “tax choice” has been around for a long time, but I’m not sure there’s been much allusion to it in libertarian movements. I think some formulation of a tax choice system could work to make taxes more salient as well as more transparent. My suggestion would be to group taxes into categories, much like the categories you see on this pie chart (scroll down). For each category, allow taxpayers the ability to reallocate say 5% of the amount they pay in that category to a different category if they so desire.

One concern with this is that the government will change the base funding for categories that receive less, effectively mitigating any change. Fortunately, people can attempt to elect officials who won’t undo their reallocations. The funding of large organizations will actually depend directly on peoples’ decisions, meaning they’ll have incentive to be more transparent with taxpayers. Recipients of government funding would have incentive to prove their value to taxpayers as well as elected officials. It might even make it harder for elected officials to rescind policy proposed in their platforms, since tax allocation could (partially) roadblock them. I’m not suggesting this as some kind of alternative to voting, but it instead has the potential to synergize with voting to allow taxpayers a little more say in where their money goes.

If it wasn’t obvious, I’m very much in the brainstorming phase for this method of “reform”. I’ll likely have to come back to the subject. As always, I would love to hear criticism, especially if it’s harsh.

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