Democratizing Taxes

There’s an old proverb:

Nothing in this world is certain except for death and taxes, but scientists are still trying to prevent death.

Government and taxes

Governments are a way for people to provide certain basic needs at scale. Most commonly, the services best provided by the government are those of natural monopoly: control over natural resources, electricity and water supply, roads and railroads, safety (police and army), health and education. Things that have economy of scale, where competition is ill advised, and privatization will not benefit the people.

Let’s analyze the army, as an example: the army provides security. It prevents threats to the people of this country by the people of other countries. Let’s say, for the sake of example, that the army is privatized. My neighbors pay for protection and I don’t. Can the army protect their country without protecting mine? No. Therefore, I’m incentivized not to pay, not to conscript. I leach on others. Governments are built to prevent such behavior, and it is done by taxes.

A tax is a way of collecting money from the people, for the benefit of the people through these

natural monopolies. And in order to make things easier, all tax money is pooled into one big pool, and then spread back to the different services. Through the centuries of slow information and transaction flow, this provided a certain fairness. Collecting taxes was complicated, spreading the money was complicated. Asking people what they want was complicated – even in relatively modern democracies.

Over the years, technology and changes in moral stands may change what is considered as public service and what is considered for private service, as the example of the privatized firefighters becoming popular again in the US – they will save your life, but will only save your property if you pay extra. However, the amount of control you had about how your tax money was spend was extremely limited.

Charity and taxes

There seems to be a charity boom over the past few years. I think there are two reasons for this:

  1. Increase in available income: there has been a tremendous improvement in the average quality of life over the past hundred years. Over the last decade, a lot of technologies have reached a level of maturity that we get so much bang for the buck, that there are we have spare bucks in the bank. Computers are dirt cheap, cars are smaller and cheaper, overall health is better, etc. This leaves more income for charity – because giving makes us feel good about ourselves.
  2. Internet makes charity direct: take Kiva, for example. Kiva provides you with an interface to control exactly what happens with every dollar you donate. You know who gets it, and what they plan to do with it. This is not an organization governed by a group of old people in suits. This is you helping one other person.

I think that for these two reasons, we will see more and more charity in the coming years.

There are claims that charity is the sign of bad policy. That is, if governments did a better job, we wouldn’t need charity. I think it’s the other way around. Governments were the only way we could manage the basic services in the old days. There just wasn’t any other way. Taxes are built to fit the old days.

Charity is people voting with their money on what services are important and what aren’t. What they believe should be the basic rights of every human being and what isn’t. I believe that we will see more charity-like models enter governments over the next fifty years, as democracy becomes more direct and more open than ever before.

Charitable Taxation

Don’t get me wrong – I think taxes are extremely important. It is crucial that we force everyone to partake in the payment for the public services we consume. What I suggest is a concept of Charitable Taxation, under which you will get a choice of spending some of your income tax directly to charity or government service of your choice. For example, I think most of my income tax should go to health and education services. Other may think the police is more important.

Services that are underfunded will have to change. They will be forced to become private – as it seems that nobody feels they are necessary as government services. Others will bloom, as the people feel they are more important. And what services are provided by the governme

nt will be in constant change, always adapting to the time.

There is a lot of details that need to be brushed out, obviously. I’m not completely certain that this mechanism is, in fact, stable. However, I think that we are best provided when we are more involved in how our governments act. After all, they are the government of the people, by the people and for the people.

  • Amir

    Interesting idea !