Do This, Don't Do That: Tyrannical Taxation
Via Julian Sanchez, I see that my favorite economists these days ("the good guys") continue to push back against my most unfavorite economists ("the bad guys"). By way of analogy, the bad guys think of taxes as the iron fist tucked inside the velvet glove of behavioral optimization, with the hand of government simply nudging the public toward efficiency. The good guys realize that nudging leads to shoving. In the form of tax policy, I'd argue, nudging itself is an illegitimate use of government power, and the good guys help us understand why. Tyranny is a blunt-instrument word that I use advisedly, but I'm not sure any other term accurately characterizes the illegitimacy afoot when citizens are taxed not to raise revenue but to pressure them to behave in a way they wouldn't otherwise. Or, as the good guys put it:
Do Loewenstein and Ubel [the bad guys] conclude that consumers are rationally choosing greater girth in the face of lower prices (and, I might add, superior healthcare), and therefore recommend leaving them alone? Let’s see:
To combat the epidemic effectively, then, we need to change the relative price of healthful and unhealthful food — for example, we need to stop subsidizing corn, thereby raising the price of high fructose corn syrup used in sodas, and we also need to consider taxes on unhealthful foods.
In other words, Loewenstein and Ubel remain convinced that consumers are making poor choices that require government correction. If nudges don’t work, then shoves may be warranted.
[...] The pattern repeats through the rest of the op-ed. If gallons-per-mile laws don’t induce people to choose different vehicles, then we need higher gas taxes. If telling people how much electricity their neighbors use doesn’t cause them to turn out the lights, then we need a carbon tax. [...] The behavioral goals of policy are taken as given; only the means get scrutiny.
In our first paper on paternalist slopes, Mario Rizzo and I warned about precisely this kind of process. When a policy is enacted to achieve a specific goal and then fails to achieve it, further policies are justified on grounds of achieving the goal that “we” have already agreed upon. In Loewenstein and Ubel’s op-ed, I believe our prediction is vindicated.
Now, we're all familiar with the way the left favors expert decisionmaking these days. Much of the conversation on the reasonable right centers around the problem of a government where policy goals are set by unaccountable regulators and administrators. Those who harp on taxation as tyranny are often written off as absolutists or crackpots. But it's not taxation as such that's tyrannical, of course; it's the abuse of the tax power. Taxation is the means to a particular end -- revenue-raising. When our political arguments degenerate into fights over who gets to manipulate public behavior by taking control of the tax power, we're riding the slippery paternalist slope to tyranny.
We shouldn't halt corn syrup subsidies because doing so contributes to the same effect as that of raising taxes on unhealthy syrup-laden foods. We should halt them because corn syrup shouldn't be subsidized by tax revenues. Likewise, we shouldn't tax unhealthy foods to nudge -- or shove -- people toward healthier options: not so much because we have a sacred right to binge on Twinkies but because that's not what taxation is for. The current ObamaCare debacle reveals that those who think good government is government that plans and manages public behavior return time and again to taxes as the instrument of control and enforcement. It's not just the goal that's illegitimate. It's the means. And since lots of Americans really do want more public services, folks on the right should consider shifting their criticism away from the goal and toward the means its advocates so often rely on.
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Jul '10
Re: Do This, Don't Do That: Tyrannical Taxation
If there is one simple principle that I would like to see enforced as the gold standad in conservative political/economic doctrine, it is that the purpose of taxes is to raise revenue for the legitimate activities of government. That's it. Nothing else. It's not about "incenting"people to do this or that. Or punishing enemies, or rewarding favored constituencies. Tax Policy is about figuring out how to most efficiently raise required revenue while doing the least possible collateral damage to the economy and society at large.
Start from that premise, and it's really not a difficult exercise. Start form the "bad guys" perspective, and you soon end up with a gordian knot of conflicting and often counterproductive policies. There is no surer way of guaranteeing unintended consequences.
May '10
Re: Do This, Don't Do That: Tyrannical Taxation
This pervasive nudging and directing is exactly the sort of tyranny that Tocqueville warned against oh so long ago: "The will of man is not shattered, but softened, bent, and guided; men are seldom forced by it to act, but they are constantly restrained from acting. Such a power does not destroy, but it prevents existence; it does not tyrannize, but it compresses, enervates, extinguishes, and stupifies a people, till each nation is reduced to nothing better than a flock of timid and industrious animals, of which gov't is the shepperd."
And, as Tocqueville warns, we submit due to the consolation and comfort that we have freely chosen submission: "They devise a sole, tutelary and all-powerful form of gov't, but elected by the people...this gives them a respite: they console themselves for being in tutelage by the reflection that they have chosen their own guardians."
How depressing.