WhyNot?

Ownership of money?

Category: Taxes
Responses: 6 (1 in support, 0 neutral, 5 in opposition)
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To what degree do you own the money you make? Could there be a way to measure what percentage of a business's income is dependent on other businesses, on government services, on the work of others (especially in investments), etc? Might we rethink the ownership of money such that taxes are viewed as the government keeping its fair share, instead of you forking over your own hard-earned money to the government? Who else besides government might have a share in your earnings? These questions call to mind incorporations and shareholders but I think I'm suggesting a fundamentally different angle. Barry Commoner once said (back in the 70s?) that our concept of the ownership of money was comparable socially to the views on ownership of slaves in the early 1800s, and would soon be open to change and perhaps even a movement, much the way abolition changed slavery...

esp, Jun 03 2004

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I sympathize with your sentiment here, however there are a few things you should consider. First there is a notion in economics called "surplus" or "rent". This concept does not refer to something leftover or what you pay to live in an apartment. Economic surplus is the net value generated by any economic activity or exchange. Consider the simple exchange involved in hiring somebody to mow your lawn. The agreed upon price must be more than MINIMUM the laborer is WILLING TO ACCEPT (WTA) and less than MAXIMUM the lawn-owner is WILLING TO PAY (WTP). The difference WTP-WTA is the economic surplus. The agreed price determines how the surplus is divided between the laborer and the lawn-owner. Suppose for example the laborer would have accepted a price as low as $3 and the lawn owner would have paid as much as $20 and the agreed upon price was $4. Is this fair? $1 of the $17 surplus went to the laborer, $16 went to the lawn-owner. To put it in your terms, should the lawn-owner really retain ownership over the $16 he might have paid? Converesly, consider the situation if the price turned out to be $19. You might ask who really generated the surplus? None of the $17 surplus would have existed had it not been for the laborer. On the other hand, none of it would have existed if had not been for the lawn-owner. They BOTH generated 100% of the surplus! Hence this line of reasoning is not helpful. Now consider the production of a service in a competitive market. Most production involves labor of many kinds as well as capital. For example flying business travelers from NY to San Fransisco. Forget about the travelers themselves. How do you decide who gets what share of the revenue? The pilots? Without them the flight could not happen. The flight mechanics? Without them the flight could not happen. The flight attendants? The air-traffic controllers? The runway construction crews? Who should own the surplus? Most economists have settled on: "Let the market decide".

That said, there are many functions markets do not serve very well. These are public goods - goods and services for which it is difficult to enforce exclusivity rights and which are relatively easy to share among many people. Moreover the provision of the public goods is a great boon to private production (e.g. roads, water service, security, etc). So how do we decide what portion of the economic surplus generated by such production rightfully belongs to the government which provided the public infrastructure on which it depends? By the very nature of public goods, it is impossible (or at least very costly) for the provider to negotiate a price. So yes, it is absolutely true that some portion of the economic surplus generated in the private sector is owed back to the public sector which made it possible. But exactly how much is owed and by whom is and will forever be a question. In fact, it is the fundamental question behind all of public finance. If you come up with a perfect answer to this question, you would surely be the most famous economist of our times.

Now there is one over-riding principle which in general I would advocate toward changing the current system of public finance: User Fees. And i user this word in the broadest possible sense. That is to say taxes should be charged to economic activity which directly uses or degrades a public goods. (Don't worry about the downstream - the indirect use by the people who use as inputs the goods which used the public good. Market prices will adjust to account for that) . Again it is impossible to make a system of user fees perfect. But often times it can get pretty close. For example, gasoline taxes to fund highways is not pefect since gasoline consumption does not precisely measure how much one uses and degrades public highways, but it is a pretty good measure of it. For the most part, governments are very good at imposing fees on services where it is easy to administrate and where the expense for the public good is "out of pocket" from the point of view of the government treasury. I personally would like to see more user fees applied to services whose expenses are incurred not by the treasury directly. For example, clean air is a public good whose provision does not show up directly on any ledger in the treasure department. (Though efforts to protect it do.) We need to get serious about taxing activities which degrade public resources such as this. Gasoline is taxed for the implicit use of highways. We should be taxing it for its use of the air as well. We should be taxing all carbon emissions for their contribution to the greenhouse effect. We should be taxing cars for noise and congestion. That's just to name a few. If we got serious about taxing externalities, we could lower other taxes -- taxes which are truly burdensome (i.e. payroll and income taxes).

ajguse, Jun 07 2004

Read Thomas Paine's "Common Sense"

"Society in every state is a blessing, but government even in its best state is but a necessary evil"

The surplus is produced by society (and we couldn't live without it at our current population densities). The government is not society and has no claim on this surplus.

You may also be interested in some economic theory describing the proper functioning of a free market and how the societal surplus gets distributed among the people.

http://mutualist.org

dumllama, Jun 25 2005

There is somehow here implied that government is not a necessary component of social life and that the sooner it would be eliminated the better society would become. This is equivalent to saying that the sooner management could be eliminated from business, the better business would become. Bad management and bad government can, of course, be a plague. But a society well governed prospers. Obviously that is not easy to do and those elements of society closer to the levers of power naturally influence government in their favor and this is, in general, to the detriment of the whole.Although the market frequently adjusts inequities it is frequently driven by short sighted greed and ignorance of consequences and, as is obvious to anyone aware of the miseries of people with little or no income, can easily become a monstrous element of society.

sand, Feb 22 2006