Saturday, August 20, 2011

On collective-action:

This week Warren Buffett said that he thought taxes should be raised on wealthy people like him. In response, may on Fox News have derided that stance and asked why Buffett doesn't write a check for "his" amount and be done with it.

Mark Kleiman wrote an excellent post on this issue. Here it is reproduced in its entirety:
Why I want to pay higher taxes

by Mark Kleiman

Megan McArdle is extremely smart, but this post is hilariously wrong, both logically and empirically.

Megan claims, if I understand her correctly, that no one wants his or her own taxes raised, only taxes on others, because if you really wanted more money spend on something you’d just make a contribution. She acknowledges the collective-action argument, but somehow seems to think that since the amount of tax paid is a continuous, real-valued variable rather than a binary variable that problem somehow goes away. But it doesn’t.

Take me, for an example. I’d like to see the National Science Foundation budget double, from the current $6 billion to $12 billion. (In the long run, I’d go much higher.) And I’d prefer to pay for that increase entirely out of increased income taxation on people making more than twice the median family income, a group into which I fall. I don’t have the figures handy, but my share of that additional taxation might come to something like $300 per year. ($6B is about $60 per household, but if the increase were financed entirely by taxing high-income households then each high-income household would have to pay considerably more than $60.)

So, says Megan, why don’t I just write a check for $300 to some outfit that finances the same sort of research the NSF does? (There’s no mechanism that would allow me to make a contribution directly to the NSF, as opposed to the General Fund.)

But that question answers itself: it’s easily worth $300 to me to increase spending on basic science by $6 billion, but it isn’t worth $300 to me to increase spending on basic science by $300. So I’m willing to vote for the tax but not to make the contribution.

Collective action problem. End of story.


There's never a shortage of people who think they know best how to spend other people's money.

By Anonymous Anonymous, at 8/23/2011 5:06 AM  

"Megan McArdle is extremely smart"


By Anonymous Anonymous, at 8/23/2011 8:42 AM  

Post a Comment