In a comment to the earlier post on freedom from taxes, Ben Bateman made a good point:

The real problem this state compact is addressing is neither a spending problem nor a revenue problem. It's a tax administration problem.

It's tempting to think of tax law in political terms; I did it, too, until my first tax class in law school. But my tax prof patiently explained that tax law says very little about how much tax is collected overall. It is instead concerned with who pays how much. A bad tax system warps taxpayer behavior, and makes the economy less efficient overall.

The sales tax situation is a great example: In-state vendors are required to collect sales tax, while out-of-state vendors are not. Technically, the purchaser is required to pay a tax on out-of-state purchases equal to what he would have paid in local sales tax. But that tax is impossible to collect as a practical matter.

This differential treatment pushes people to prefer out-of-state purchases over in-state purchases to some extent, solely because of the tax system. That's inefficient in many cases. Many types of products can be sold more efficiently through brick-and-mortar stores, but the tax system pushes people away from those and towards less efficient purchases by mail. That tax-based distortion generates pure economic waste.

Very true. The best way to pay less taxes is to lower the tax rate, not to have all sorts of special cases that end up distorting the market. However, seeing as how it's rather difficult to elect politicians that will actually cut taxes, I'll take what I can get.

As for the rest of Ben's comment, I disagree.

It's usually a mistake to think about tax law in ideological terms. As my tax prof liked to say: "We've got to pay the Marines." We're going to give the government some amount of our money. The total amount that the government takes is a political question. But once politics has set that amount, the next question is not political: How much should you pay? How much should I pay? And how much should the guy down the street pay? Or, more globally: How do we determine who pays how much?

The question of who pays what seems entirely political to me. Should everyone pay the same amount? The same percentage? Percentage of income, spending, wealth, or what? Those are all political questions.



Email blogmasterofnoneATgmailDOTcom for text link and key word rates.

Site Info