Saturday, October 17, 2009

People Need To Have Skin In The Game

The folks at Sadly, No! say:

Leaving aside the (obvious) fact that having 47 percent of households owe no federal income tax isn’t in and of itself a reason for those who do (pay said tax) to get angry (damn poor people and their no paying federal income tax)
True enough; that fact shouldn't make people angry. But it is legitimate cause for concern.

One reason is that an individual who pays no federal income tax has little vested interest in the economic efficiency of the federal government1. When this number exceeds 50% is becomes difficult to hold government responsible for expenditures via the ballot box. In a situation where people are not just relived of the burden of taxes, but actually receive income from the federal government in the form of transfers, there's an incentive to support policies which may fiscally imprudent in the long run. The worse case scenario, not that we've come near that in the United States, is that the federal government can buy support for its policies in such a fashion. You can see this to some degree in Latin America; for example, Hugo Chavez's political fortunes have tended to track the price of oil. When the money is rolling in he can buy support through redistribution, but when the price falls he's SOL.

Additionally, the fact that a significant fraction of citizens of the United States pay no federal taxes serves to undermine the civic republicanism which has typically been one of the high points of America's social structure. Citizenship is a two-way street; in the absence of compulsory service2 citizens typically discharge their obligations to the state through taxes. If someone pays no taxes and provides no service, what are they doing to uphold their end of the social compact?

1 And no, "economic efficiency" isn't code for "small government". Governments, be they "big" or "small", can be cost-effective or spendthrift. There's an argument to be made that its easier to run a smaller institution efficiently, but that's a separate topic for another day.
2 Not that I'm endorsing that particular idea.


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