Tax Reform: Immediate Feedback

[gustavolacerda]

Do people behave more responsibly when they feel the consequences of their actions immediately?

Matt McIntosh proposes a tax system based on this idea
Here’s a tax reform proposal to try on for size: start with a graduated income tax (or consumption tax with negative income taxes a la Arnold Kling, either works) without any special loopholes,

Comments

[smandal]

How about voting for national office on your federal tax return? Just replace those campaign donation bubbles with actual ballot markings.

[easwaran]

You'd have to make the indexing factor right to push the incentives so that it leads to "precisely" the amount of spending the public wants, rather than much less or much more. Ideally, it would be such that the tax income always exactly covers the amount spent, or something like that.

Though of course, there's something to be said for delaying some of the pain - in certain circumstances (ie, Katrina), it makes sense to make a huge spending at one point, and there's no need to pay for it immediately.

[gustavolacerda]

I agree.

In any long-term government project, decisions have to be made in advance: so this could mean committing the whole country to higher taxes for a long time... numbing them to the money loss, which opens the door for more government projects... unless of course, the people are eager to have their tax rolled back. But I think that most people like to keep things the way they are: don't rock the boat!

Marginal Tax Rates

[r6]

What’s wrong with discontinuous marginal tax rates?

Re: Marginal Tax Rates

[gustavolacerda]

Let me turn this around: what's right about dscontinuous marginal tax rates? Assuming that the cost of calculations is negligible, can you imagine any system where discontinuous marginal tax rates are the best we can do?

Re: Marginal Tax Rates

[r6]

I was going to say that discontinuous marginal tax rates are easy to compute. In particular they are easy to integrate; yielding piecewise linear functions.