Saturday, December 04, 2010

How to level the playing field

In a conversation on reddit today, I read a comment that I think most of the people in the US and the "western world" would agree with.
Part of the point of taxation is to keep the playing field level.
That idea is a deadly mix of popular and completely and totally wrong. :)

The only legitimate purpose of taxation is to raise funds for the goods and services the state purchases.

That raises a very obvious question:
How do you level the playing field without using the tax code?
That is a really good question.

It also raises a few other questions, only one of which I'm going to address:
  • Is it the state's job to level the playing field?
  • Just how level should the playing field be? What level of wealth disparity will the state allow.
I'm going to assume, for the sake of discussion, that the answer to the first question is "Yes." Likewise, let's assume that some metric for permitted wealth disparity exists. It doesn't really matter what this number is when we look at the question of "How to level the playing field?"

How to level the playing field?

Quite simply, some wealth needs to be taken from each person that is "too wealthy" (probably in proportion to how "too wealthy" they happen to be) and given to each person that is "too poor" (also probably in proportion to how "too poor" they are). If we do this, then the playing field will be, by definition, made level to within our permitted wealth disparity.

(Please note: I am ignoring a number of other dimensions of "too wealthy" and "too poor", things like genetic predisposition to diseases, good looks, height, pre-existing medical conditions, etc. can all constitute some notion of "wealth" that a one person can have "too much" of relative to others' "too little"; for the sake of argument, I'm suggesting that these dimensions can be distilled down into some dollar figure, which doesn't seem totally unreasonable - and those that can't be distilled can't be "leveled" so they can't really be addressed anyway).

The first thing to recognize is that this is not a function of the government needing funds. The government isn't going to buy something from each of the people deemed "too poor." They're not vendors to the state, and therefore it is dishonest to acquire the funds given to the "too poor" via taxes (taxes being how the government raises funds to pay for the products and services it purchases).

Here is an honest way to achieve a leveling of the playing field. My emphasis is on the method being an honest reflection of the intent instead of intentionally obfuscatory so as to hide either the intent or the method from the ordinary citizen.
  • Each year, the net worth of each person in the US will be calculated on a mark-to-market basis.
  • Software will assign each "too wealthy" person a number of "too poor" persons that they are to transfer funds to and the amount of each transfer.
  • The state will insure that each transfer payment is received by each "too poor" person within the appointed time, say 1 month after the annual audit.
  • Any "too wealthy" person who does not transfer funds within the time allotted, will be have the amount of their proscribed transfers taken by the state and transferred to the proscribed "too poor" party(ies). In addition, a fine of 3x the amount untransferred will be levied against said "too wealthy" person, one-third of which will go to the "too poor" party(ies) that were denied their transfer, and the remaining two-thirds will be used to offset the administrative costs of this transfer system.
That achieves the goal of leveling the playing field, and it does so honestly.

It is honest about the intent: that some people are "too wealthy" while others are "too poor."
It is honest about the means: the "too wealthy" person is deriving precisely zero direct benefit from the transfer of their funds, and the "too poor" person has done precisely zero to deserve the receipt of said funds.

I believe that such a system would face monumental opposition, even though it is a fundamentally honest way to tackle the problem of "an unlevel playing field," and some of the strongest opposition would come from many of those who would directly benefit. And the opposition would make a very, very valid point:
such a system is clearly and obviously unfair.
I think that it is only through indirection and obfuscation that a system designed to take from those who have "too much" in order to give to those who have "too little" can garner sufficient public support to remain the law in a democracy.

The end result is a system that inefficiently does that which the public would be unwilling for the state to do if it was done in a clear and honest manner. That sounds like the worst of both worlds to me.

1 comment:

C3 said...

Like being "pro choice" the debate over redistribution of wealth has to be re branded or obscured to be palatable to anyone but the most ideological. If you want to do something most would object to, renaming it is a great option. Congress does this all the time with the names of various bills. As usual, you are going back to principal. Something most liberals will not let you do because they can't craft an effective argument on principal. Take heart though, with 20% of the population of the US identifying as liberals and 40% as conservative we have some hope.