Re: Tax Leisure via Time Audits?
On Sat, Apr 27, 2002 at 09:45:12AM -0400, Robin Hanson wrote: > When I'm inferring what it is that people think they want, I don't have to > believe everything they say. I can also look at their actions. I can't > see how anyone has a quadrillion dollar willingness to pay, as no one can > afford to pay that much. You mean you're going to count a suitcase with a million dollars in it as being worth only a thousand dollars to me because I only have a thousand dollars in the bank and am not "willing" to pay more for it? That doesn't seem right. What I meant by a smaller government being worth a quadrillion dollars to someone is that he would choose to have a smaller government if offered the alternative between a quadrillion dollars and a smaller government. Besides, virtually no one pays for government willingly, so how can you tell how much they're willing to pay for government from their actions? The only thing you can say, it seems, is that if someone votes for bigger government, he's probably willing to pay more than $0 for it. That doesn't seem to leave you much to go on. Here's my understanding of why government has gotten bigger as tax efficiency increased. Whoever is in control of a government, whether a dictator or a democratic majority, has an incentive to maximize tax revenue from the rest of the population and then spend the money on themselves. So in a democracy you're always going to have a majority that's in favor of bigger government. That fact tells you nothing about whether bigger government is a net gain for social welfare. And there is nothing you can do to persuade them that they should not want bigger government, because it is in fact in their rational self interest to have bigger government. So the only thing that prevents government from getting bigger is lack of tax efficiency. If you think more slavery is bad for social welfare, you should act to decrease slave productivity, rather than to increase it. Similarly, if you believe that bigger government is bad for social welfare, you should act to decrease tax efficiency, rather than to increase it.
Re: Tax Leisure via Time Audits?
At 04:59 PM 4/26/02 -0700, Wei Dai wrote: >On Fri, Apr 26, 2002 at 05:15:33PM -0400, Robin Hanson wrote: > > I apply the same logic to government. If I believe, as I do, that people > > often overestimate the value they get from government, I should fix that if > > I can by persuasion. > >What if you can't fix it by persuasion and everyone becomes worse off >because of your advice? Or what if you do manage to persuade everyone, and >then they blame you for giving them what they thought they wanted? Ex post, shit happens. :-) >BTW, how do you make interpersonal comparisons of expected (rather than >actual) benefits and costs, when people do not have common priors or the >same capacity for logical reasoning? What if some (crazy) person believes >that having a smaller government is worth a quadrillion dollars? How would >that balance out with the (slightly less crazy) people who believe that a >bigger government is a net benefit? When I'm inferring what it is that people think they want, I don't have to believe everything they say. I can also look at their actions. I can't see how anyone has a quadrillion dollar willingness to pay, as no one can afford to pay that much. Robin Hanson [EMAIL PROTECTED] http://hanson.gmu.edu Asst. Prof. Economics, George Mason University MSN 1D3, Carow Hall, Fairfax VA 22030- 703-993-2326 FAX: 703-993-2323
Re: Tax Leisure via Time Audits?
On Fri, Apr 26, 2002 at 05:15:33PM -0400, Robin Hanson wrote: > I apply the same logic to government. If I believe, as I do, that people > often overestimate the value they get from government, I should fix that if > I can by persuasion. What if you can't fix it by persuasion and everyone becomes worse off because of your advice? Or what if you do manage to persuade everyone, and then they blame you for giving them what they thought they wanted? > Wei asks about the case of advising slave owners about productivity > improvements. So how large are any negative externalities on the slaves > from improving productivity, versus benefits to both owners and slaves? > Without any particular reason to expect them to be enormous, I guess I'd > give the advice. The negative externality is not necessarily all on the current slaves. By increasing the productivity of slaves, you've made it profitable to spend more resources on capturing people into slavery, which obviously has huge negative externalities. BTW, how do you make interpersonal comparisons of expected (rather than actual) benefits and costs, when people do not have common priors or the same capacity for logical reasoning? What if some (crazy) person believes that having a smaller government is worth a quadrillion dollars? How would that balance out with the (slightly less crazy) people who believe that a bigger government is a net benefit?
Re: Tax Leisure via Time Audits?
I wrote: >If the reason that government gets bigger as taxes become more efficient >is that most people have a downward-sloping demand for government, and >so "buy" more of it as the price gets lower, then it seems paternalistic >of me to keep the price artificially high, just because my demand is less. >I'd like to have a reputation as a neutral economic advisor, who will >advise people on how to get what they want, even if what they want isn't >what I would prefer them to want. Three people responded. Chris Coyne wrote: >I would argue that you cannot be a neutral economic advisor. As an >economist you are a technician who explains the consequences of various >actions. But you cannot advise the best route to achieve certain ends >without committing yourself to those ends. An economist hired to increase >attendance at sporting events implicity commits himself to the ethical >valuation that increasing attendance is good. It does not relieve the >economist of the responsibility for having made ethical judgements to say >that he has borrowed them from others. Therefore, by increasing >government efficiency you are implicity agreeing to the ends (and likewise >in working to increase sports attendance). Kevin D. Sachs wrote: >Isn't government different from sports (although sports leagues are >cartels, so...)? As governments grow, the "market" for wealth transfers and >hence, rent seeking grow. You can make government internally more >operationally efficient, but if that leads to government growth and >therefore growth in inefficient rent seeking, then allocative efficiency >suffers. As economists, aren't we interested in allocative efficiency >gains? Wei Dai wrote: >Government can get bigger if whoever is in control of the government >forces the rest of the population to pay for it. Even if a majority of >people want bigger government, the losses suffered by the minority can >more than make up for the gains of the majority. ... >Why would you want a reputation for being willing to advise people even >when it's against your self interest, or your analysis of social welfare, >to do so? I mean, I can see why you would want a reputation for always >providing honest advice when you agree to do it, but why would you want to >be known for never turning down a request for advice? >What if a slave owner asked you how to improve the productivity of his >slaves? Would you answer him? As an professional advisor hopeful, I want to pick a simple neutral-but-moral policy about how I give advice and stick to it. I'm not satisfied with just saying things that are true - I also don't want people to fear that I will shut up whenever speaking might hurt some group I favor over others. And the more exceptions and complications my policy has, the harder it is for others to monitor it and check whether I'm following it. So it must be simple. Among the simple neutral-but-moral policies about advice, I've chosen this. On average I think it good and moral to give people more of what they think they want, even when I think they are mistaken about what they want, and even when there are modest, but not enormous, negative externalities from them getting what they want. So even if I believed there were modest negative externalities from smoking, and that people were mistaken in thinking the enjoyment was worth the health risk, I would still give advice about how to lower the cost of cigarettes. Persuasion is the best way to try to overcome their mistakes, and if externalities are modest then the perceived gain to the people who want it should outweigh the harm to others. I apply the same logic to government. If I believe, as I do, that people often overestimate the value they get from government, I should fix that if I can by persuasion. So the issue here comes down to: how large are the net marginal externalities from most people choosing more government when it gets cheaper? The perceived harm within the people who favor more government must be less than the benefit, or they wouldn't favor it. So we're left with estimating how many people don't favor more government, and their perceived harm. And I estimate this group and its harm is too small to tip the balance. Wei asks about the case of advising slave owners about productivity improvements. So how large are any negative externalities on the slaves from improving productivity, versus benefits to both owners and slaves? Without any particular reason to expect them to be enormous, I guess I'd give the advice. Btw, if people could be persuaded, this is the form of government I'd advise them to choose: http://hanson.gmu.edu/futarchy.html Robin Hanson [EMAIL PROTECTED] http://hanson.gmu.edu Asst. Prof. Economics, George Mason University MSN 1D3, Carow Hall, Fairfax VA 22030- 703-993-2326 FAX: 703-993-2323
Re: Tax Leisure via Time Audits?
At 09:12 AM 4/26/2002 -0400, you wrote: But as an economist, I should >try to figure out how to make sports markets more efficient, rather than >trying to sabotage them so more people will do things I prefer. Isn't government different from sports (although sports leagues are cartels, so...)? As governments grow, the "market" for wealth transfers and hence, rent seeking grow. You can make government internally more operationally efficient, but if that leads to government growth and therefore growth in inefficient rent seeking, then allocative efficiency suffers. As economists, aren't we interested in allocative efficiency gains? Kevin D. Sachs, Ph.D. Assistant Professor phone: 513.556.7198 University of Cincinnatifax: 513.556.4891 Department of Accounting/IS email: [EMAIL PROTECTED] 302 Lindner Hall, P.O.Box 210211 Cincinnati, OH 45221-0211
Re: Tax Leisure via Time Audits?
On Fri, Apr 26, 2002 at 09:12:53AM -0400, Robin Hanson wrote: > If the reason that government gets bigger as taxes become more efficient > is that most people have a downward-sloping demand for government, and > so "buy" more of it as the price gets lower, then it seems paternalistic > of me to keep the price artificially high, just because my demand is less. Government can get bigger if whoever is in control of the government forces the rest of the population to pay for it. Even if a majority of people want bigger government, the losses suffered by the minority can more than make up for the gains of the majority. > I'd like to have a reputation as a neutral economic advisor, who will > advise people on how to get what they want, even if what they want isn't > what I would prefer them to want. Why would you want a reputation for being willing to advise people even when it's against your self interest, or your analysis of social welfare, to do so? I mean, I can see why you would want a reputation for always providing honest advice when you agree to do it, but why would you want to be known for never turning down a request for advice? What if a slave owner asked you how to improve the productivity of his slaves? Would you answer him? > >Also, labor supply curves tend to bend backwards at high incomes, so > >perhaps we should subsidize instead of tax the non-work time of > >high-income people? > > I don't follow this argument. It was more of a question than an argument, but I figured out that the answer is no.
Re: Tax Leisure via Time Audits?
Professor Hanson- I would argue that you cannot be a neutral economic advisor. As an economist you are a technician who explains the consequences of various actions. But you cannot advise the best route to achieve certain ends without committing yourself to those ends. An economist hired to increase attendance at sporting events implicity commits himself to the ethical valuation that increasing attendance is good. It does not relieve the economist of the responsibility for having made ethical judgements to say that he has borrowed them from others. Therefore, by increasing government efficiency you are implicity agreeing to the ends (and likewise in working to increase sports attendance). Chris Coyne Graduate Student, George Mason University Dept. of Economics >From: Robin Hanson <[EMAIL PROTECTED]> >Reply-To: [EMAIL PROTECTED] >To: [EMAIL PROTECTED] >Subject: Re: Tax Leisure via Time Audits? >Date: Fri, 26 Apr 2002 09:12:53 -0400 > >At 03:00 PM 4/25/02 -0700, Wei Dai wrote: >> > ... Today it seems that we can cheaply monitor >> > the act of paying wages, and so income taxes are feasible, and >> > government is larger. >> >>Robin, why are you proposing to increase tax efficiency, knowing >>that it's going to lead to larger government? > >If the reason that government gets bigger as taxes become more >efficient >is that most people have a downward-sloping demand for government, >and >so "buy" more of it as the price gets lower, then it seems >paternalistic >of me to keep the price artificially high, just because my demand is >less. >I'd like to have a reputation as a neutral economic advisor, who >will >advise people on how to get what they want, even if what they want >isn't >what I would prefer them to want. For example, I don't care much >for >sports, and would rather that people attended more to things that I >like, which would lower the price for me. But as an economist, I >should >try to figure out how to make sports markets more efficient, rather >than >trying to sabotage them so more people will do things I prefer. > >>Also, labor supply curves tend to bend backwards at high incomes, >>so >>perhaps we should subsidize instead of tax the non-work time of >>high-income people? > >I don't follow this argument. > >Robin Hanson [EMAIL PROTECTED] http://hanson.gmu.edu >Asst. Prof. Economics, George Mason University >MSN 1D3, Carow Hall, Fairfax VA 22030- >703-993-2326 FAX: 703-993-2323 Get your FREE download of MSN Explorer at http://explorer.msn.com.
Re: Tax Leisure via Time Audits?
At 03:00 PM 4/25/02 -0700, Wei Dai wrote: > > ... Today it seems that we can cheaply monitor > > the act of paying wages, and so income taxes are feasible, and > > government is larger. > >Robin, why are you proposing to increase tax efficiency, knowing >that it's going to lead to larger government? If the reason that government gets bigger as taxes become more efficient is that most people have a downward-sloping demand for government, and so "buy" more of it as the price gets lower, then it seems paternalistic of me to keep the price artificially high, just because my demand is less. I'd like to have a reputation as a neutral economic advisor, who will advise people on how to get what they want, even if what they want isn't what I would prefer them to want. For example, I don't care much for sports, and would rather that people attended more to things that I like, which would lower the price for me. But as an economist, I should try to figure out how to make sports markets more efficient, rather than trying to sabotage them so more people will do things I prefer. >Also, labor supply curves tend to bend backwards at high incomes, so >perhaps we should subsidize instead of tax the non-work time of >high-income people? I don't follow this argument. Robin Hanson [EMAIL PROTECTED] http://hanson.gmu.edu Asst. Prof. Economics, George Mason University MSN 1D3, Carow Hall, Fairfax VA 22030- 703-993-2326 FAX: 703-993-2323
Re: Tax Leisure via Time Audits?
On Thu, Apr 25, 2002 at 11:36:31AM -0400, Robin Hanson wrote: > Once upon a time income taxes were difficult to collect, because > income was hard to cheaply monitor. So governments used less > efficient taxes, and arguably this was a reason the size of > government was lower. Today it seems that we can cheaply monitor > the act of paying wages, and so income taxes are feasible, and > government is larger. Robin, why are you proposing to increase tax efficiency, knowing that it's going to lead to larger government? Also, labor supply curves tend to bend backwards at high incomes, so perhaps we should subsidize instead of tax the non-work time of high-income people?
Re: Tax Leisure via Time Audits?
Why would you want to tax leisure? Wouldn't this promote less intense (i.e. more leisurely) and thus, less productive work? Gustavo - Original Message - From: "Robin Hanson" <[EMAIL PROTECTED]> To: <[EMAIL PROTECTED]> Sent: Thursday, April 25, 2002 11:36 AM Subject: Tax Leisure via Time Audits? > Once upon a time income taxes were difficult to collect, because > income was hard to cheaply monitor. So governments used less > efficient taxes, and arguably this was a reason the size of > government was lower. Today it seems that we can cheaply monitor > the act of paying wages, and so income taxes are feasible, and > government is larger. > > Income taxes are inefficient, however, because people respond by > substituting leisure and home production for wages. But this > inefficiency need only apply if we assume that we cannot cheaply > monitor time spent working for wages. And as the technology of > surveillance improves, it should get easier to monitor this. > > Perhaps in the future, the government will randomly check on each > person ten times a year, and see if they are working for wages > at that moment. Taxes would then depend the fraction of times > that, when checked over the last few years, they were found to be > working for wages. Of course to implement this each person will > need a cell phone, beeper, or some way to be contacted at random > times when they are working for wages. But since most people will > have such things for other reasons, the presumption will be that > the exceptions are doing it to avoid taxes, and so failure to > contact will be coded as not working for wages. > > Anyone ever estimated the size of the deadweight loss from the > income tax distortion? > > > > > Robin Hanson [EMAIL PROTECTED] http://hanson.gmu.edu > Asst. Prof. Economics, George Mason University > MSN 1D3, Carow Hall, Fairfax VA 22030- > 703-993-2326 FAX: 703-993-2323
Re: Tax Leisure via Time Audits?
At 11:33 AM 4/25/02 -0700, john hull wrote: >Instead of surveillance schemes that sound a bit >Big-Brotheresque, no offense, why not just take the >forms already extant and merely switch hours worked >for income earned? We know how to audit returns to check on the income earned. The question is how to audit time spent. We need enough data so that audits are feasible. >Question: Would such a program necessarily imply flat >taxation, instead of progressive, since income will >not be reported but hours will? Tax as a function of hours need not be flat. Robin Hanson [EMAIL PROTECTED] http://hanson.gmu.edu Asst. Prof. Economics, George Mason University MSN 1D3, Carow Hall, Fairfax VA 22030- 703-993-2326 FAX: 703-993-2323
Re: Tax Leisure via Time Audits?
Fred Foldvary wrote: >Real-estate taxes were not that difficult to collect, and rather efficient. I won't argue that here, as it isn't central to this discussion. > > And as the technology of > > surveillance improves, it should get easier to monitor this. > >The technology would need to keep ahead of tax-evading encrypted texts. To evade taxes, you need to appear to be working when time audited, but actually be in leisure or home production. How do encrypted texts help with this? > > Perhaps in the future, the government will randomly check on each > > person ten times a year, and see if they are working for wages > > at that moment. > >And if you are working at home? They will need a video camera. It is up to you to convince them you were working, otherwise they'll assuming you weren't. It would then be in your interest to install that video camera, if that is what it takes to convince them. Robin Hanson [EMAIL PROTECTED] http://hanson.gmu.edu Asst. Prof. Economics, George Mason University MSN 1D3, Carow Hall, Fairfax VA 22030- 703-993-2326 FAX: 703-993-2323
Re: Tax Leisure via Time Audits?
Howdy, Instead of surveillance schemes that sound a bit Big-Brotheresque, no offense, why not just take the forms already extant and merely switch hours worked for income earned? Question: Would such a program necessarily imply flat taxation, instead of progressive, since income will not be reported but hours will? -jsh __ Do You Yahoo!? Yahoo! Games - play chess, backgammon, pool and more http://games.yahoo.com/
Re: Tax Leisure via Time Audits?
Martin Feldstein has recently done work on the distortions created by the income tax that take into account broader notions of labor supply behavior, such as shifting taxable income into untaxed fringe benefits or better working conditions. The cite is Feldstein, Martin. "Tax Avoidance and the Deadweight Loss of the Income Tax," in Review of Economics and Statistics, November 1999, 81(4): pp 674-680. Also NBER Working Paper No. 5055. for a nice introduction see his May 1996 AER Richard Ely lecture on social security privatization or the introduction (it's basicallly the same paper) to his volume on Privatizing Social Security. Alex -- Dr. Alexander Tabarrok Vice President and Director of Research The Independent Institute 100 Swan Way Oakland, CA, 94621-1428 Tel. 510-632-1366, FAX: 510-568-6040 Email: [EMAIL PROTECTED]
Re: Tax Leisure via Time Audits?
--- Robin Hanson <[EMAIL PROTECTED]> wrote: > Once upon a time income taxes were difficult to collect, because > income was hard to cheaply monitor. So governments used less > efficient taxes, Not necessarily. Real-estate taxes were not that difficult to collect, and rather efficient. Land has hitorically been used as a tax base. > Income taxes are inefficient, however, because people respond by > substituting leisure and home production for wages. Income taxes are also inefficient because they are complex, requiring tax lawyers and accountants, and million of hours of "home production" keeping records and filling out forms. > But this > inefficiency need only apply if we assume that we cannot cheaply > monitor time spent working for wages. What about taxes on profits? That will always be complex because of the question of what is a deductible expense. > And as the technology of > surveillance improves, it should get easier to monitor this. The technology would need to keep ahead of tax-evading encrypted texts. > Perhaps in the future, the government will randomly check on each > person ten times a year, and see if they are working for wages > at that moment. And if you are working at home? They will need a video camera. > Anyone ever estimated the size of the deadweight loss from the > income tax distortion? The book The Losses of Nations, estimates the US loss conservatively at over $1 trillion per year from all taxes. Fred Foldvary = [EMAIL PROTECTED] __ Do You Yahoo!? Yahoo! Games - play chess, backgammon, pool and more http://games.yahoo.com/
Tax Leisure via Time Audits?
Once upon a time income taxes were difficult to collect, because income was hard to cheaply monitor. So governments used less efficient taxes, and arguably this was a reason the size of government was lower. Today it seems that we can cheaply monitor the act of paying wages, and so income taxes are feasible, and government is larger. Income taxes are inefficient, however, because people respond by substituting leisure and home production for wages. But this inefficiency need only apply if we assume that we cannot cheaply monitor time spent working for wages. And as the technology of surveillance improves, it should get easier to monitor this. Perhaps in the future, the government will randomly check on each person ten times a year, and see if they are working for wages at that moment. Taxes would then depend the fraction of times that, when checked over the last few years, they were found to be working for wages. Of course to implement this each person will need a cell phone, beeper, or some way to be contacted at random times when they are working for wages. But since most people will have such things for other reasons, the presumption will be that the exceptions are doing it to avoid taxes, and so failure to contact will be coded as not working for wages. Anyone ever estimated the size of the deadweight loss from the income tax distortion? Robin Hanson [EMAIL PROTECTED] http://hanson.gmu.edu Asst. Prof. Economics, George Mason University MSN 1D3, Carow Hall, Fairfax VA 22030- 703-993-2326 FAX: 703-993-2323
