Network News

X My Profile
View More Activity

A government that works well is a government that taxes easily

Eric Felten makes the conservative case against government efficiency: The easier the government is to use, the less resentful people will be over its costs.

Make it easier and more convenient to collect fines and fees, and soon you'll be collecting more fines and fees. Take Montgomery County, Md. Last month it started a new program that lets motorists pay at parking meters with their cellphones. How easy! How convenient! How civilized! No more digging around the ashtray for dimes and quarters. No more pestering passersby to change a dollar. Of course, when you have to scrounge for coins to feed the meter, you're painfully aware of just how much the parking regime is costing you. Not so with the mobile-phone parking app. According to a demonstration on the Web site of the company powering the service, you just key in how long you'd like to leave your car, and you're on your way. The pesky question of how much you've just paid doesn't come up.

No doubt you can find out later from your online statement, and surely there are some savvy and well-organized folks who do. Yet for most of us the cost fades toward invisibility, and that's when fees go to town. Policymakers have long understood that the less visible — or "salient," to use the economist's term of art — a tax is, the easier it is to raise. Which is why Milton Friedman, looking for ways the federal government could collect more money during World War II, recommended the creation of income tax withholding (an innovation he was not proud of). It's also why "value-added taxes" act like steroids when it comes to bulking up government.

Technologies sold on convenience can prove to be awfully convenient for those setting prices. Consider electronic toll collection systems such as E-ZPass that let drivers blow past highway tollbooths. How wonderful to no longer have to wait in infuriating lines to pay our traffic tribute. And yet, zipping past the toll plaza, how many of us give a thought to how much we were just charged? Could it be that our new electronically induced ignorance gives a green light to those who would super-size the fees? That's the question that MIT economist Amy Finkelstein asked in a recent study of toll-collection nationwide. She found that there was "a strikingly lower awareness of the amount paid in tolls by those who pay electronically," and thus, not surprisingly, that "toll rates increase after the adoption of electronic toll collection," usually by 20% to 40%.

This also underlies the preference some conservatives have for income taxes over consumption taxes. Paying your income tax is a horrible experience that ends with an unexpectedly eye-popping sum. Paying a sales tax or a value-added tax is a mostly automatic process that happens in affordable increments. The income tax is much better for keeping people angry about taxes and mistrustful of the state.

By Ezra Klein  |  February 26, 2010; 11:58 AM ET
 
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: Live chat today
Next: Re: Philosophy and politics

Comments

When citizens decide to empower the federal government to solve their problems, they must trade away some amount of freedom.

Most Americans don't like that deal:

http://politicalticker.blogs.cnn.com/2010/02/26/cnn-poll-majority-says-government-a-threat-to-citizens-rights/?fbid=ceNBoUrKyEK

Posted by: FastEddieO007 | February 26, 2010 12:04 PM | Report abuse

"If people let government decide what foods they eat and what medicines they take, their bodies will soon be in as sorry a state as are the souls of those who live under tyranny."
-Thomas Jefferson

Our founding fathers were truly radicals for designing the FIRST government based around surrendering power to the people, as opposed to consolidating into a central authority.

They were well aware of the efficiency gained by consolidating power BUT determined that the negatives outweighed the positives.

Indeed the most horrible human leaders in history have advocated the merits of consolidating power----Hitler, Stalin, Mao, and so on.


Posted by: FastEddieO007 | February 26, 2010 12:08 PM | Report abuse

~~~~~~~~~
Make it easier and more convenient to collect fines and fees, and soon you'll be collecting more fines and fees.
~~~~~~~~~

A PERFECT EXAMPLE OF THIS is Ezra's own ridiculous posture that the "COST" of lowering taxes made Bush's Tax Cuts on par with Obama & Pelosi's ridiculously expansive federal healthcare reform....


This is outrageous!!! How is the federal government's decision to TAKE LESS MONEY FROM THE CITIZENS equally expansive to a perpetually costly government-run program?

This is the kind of insanity that pervades these kind of blogs!! They will try extrapolate so often that before you know it they are literally arguing red is blue, and yellow is purple.

Posted by: FastEddieO007 | February 26, 2010 12:13 PM | Report abuse

Felter writes: "How civilized! No more digging around the ashtray for dimes and quarters. No more pestering passersby to change a dollar. Of course, when you have to scrounge for coins to feed the meter, you're painfully aware of just how much the parking regime is costing you. Not so with the mobile-phone parking app."

How ridiculous! Doesn't he know that people rationally pursue their self-interest? He sounds like some sort of nanny-state socialist.

Posted by: eelvisberg | February 26, 2010 12:18 PM | Report abuse

Why care about tax rates aside from the pain? Is everything a point of principle these days? They're seriously pro-pain?

Posted by: adamiani | February 26, 2010 12:30 PM | Report abuse

What is the saying? Republicans are the party that says the government doesn't work, then they get ellected and do their best to prove themselves correct.

The interesting thing about this line of thought by Mr. Felton is that it relies on the idea that the American people are just too stupid to realize that they are going to have to pay for their parking space when they charge in on their phone. While there is some truth to the (other) old saying that, "Nobody ever went broke underestimating the intelligence of the American public," I think Mr. Felton is off base on this one.

I could use the same arguement to outlaw credit cards. Should we do away with credit cards?

Is this just more of the anti-science nonsense conservatives like to spout? Or is this more a function of conservatives resistance to change?

Posted by: nisleib | February 26, 2010 12:32 PM | Report abuse

If you want to starve the government of revenue, then Felten makes a good case. But conveniences like EZ-Pass make my *life* more efficient, and I think that's something I am willing to pay for in the form of using those services more, rather than seeking out inefficient ways of trying to bypass them.

Fast Eddie and Felten take the maxim "In a dictatorship, the people fear the government; in a democracy, the government fears the people," and decide that we would be best off if our form of government resembled a dictatorship, because they want a fearful, resentful populace, and they want to do that by creating a government that doesn't work and is hostile to the people. And they're willing to be up front about the fact that this is their goal!

Posted by: constans | February 26, 2010 12:35 PM | Report abuse

John Kenneth Galbraith, I believe in the re-issue of "The Affluent Society", advocated that Democrats should repeal or reduce the income tax and implement a VAT or something similar. His reasons were that a) taxes on consumption are generally to be preferred over taxes on savings, b) it’s a Nixon in China thing and only the Democrats can do it, and most importantly c) removing the resentment against the real or perceived evils of progressive taxation would significantly reduce donations to Republicans. He’s right. This should be a high priority on Obama’s agenda.

I’d like to see this include a tax on financial transactions, small, but a tax. Maybe a quarter percent, maybe less. On a mortgage, or a student loan, or on a loan to buy a new machine tool, it would be negligible, but it would slow down computer trading and still raise a lot of money.

Galbraith also said his biggest mistake in the original book was underestimating how self righteous affluent people would become. I’m all for hidden taxes. If we can’t shame the affluent into doing their civic duty, con them into it. (FYI, I enjoy an upper decile income.)

Posted by: gVOR08 | February 26, 2010 12:38 PM | Report abuse

Do you belong to a gym that has a monthly charge? Do you calculate the cost per visit? Do you estimate the cost per netflix movie? Your cost per game that you watch on ESPN? Your cost per text message?

The government is way behind private industry on making payment easy. Parking meters are the best example. People don't mind paying a couple of bucks to park on the street. They HATE having to find a store to buy something they don't want in order to get some quarters.

So any technology that gets rid of this problem is a brilliant solution for the driver and for the government. There's nothing sinister or evil about it.

Posted by: Bloix | February 26, 2010 12:41 PM | Report abuse

*John Kenneth Galbraith, I believe in the re-issue of "The Affluent Society", advocated that Democrats should repeal or reduce the income tax and implement a VAT or something similar.*

Americans put a big premium on their ability to buy significant consumer items cheaply. You don't really get much of an idea of the differences in salaries and incomes taxes (or benefits) between the U.S.A. and Europe, but you *can* very easily see the difference in cost of consumer goods between the U.S.A. and Europe, driven in part by Europe's VATs.

Tell me that my $300 suit is going to cost $400 or that my $1500 laptop is going to cost $2000, I might start to complain in a way that I probably won't about small changes to the marginal income tax rate. I may be wrong, though. Maybe the very rich will get excited about the opportunity to have more take-home pay even if it means their new car costs an extra $10,000 on top of what they would have otherwise paid.

Posted by: constans | February 26, 2010 12:45 PM | Report abuse

*****Paying a sales tax or a value-added tax is a mostly automatic process that happens in affordable increments.*****

Roger that.

I happen to be self-employed, and although philosophically as a liberal I support a robustly-funded, activist government, I must admit that writing a fat check four times a year to the IRS is painful.

I've often fantasized about an opt-in VAT for people like me: the government, perhaps in conjunction with my bank, would allow me to sign up for a voluntarily consumption tax plan. Basically, every time I make a purchase using my debit card, I would automatically be "taxed" on that purchase, and the funds withdrawn from my account and sent to Uncle Sam. I know rationally by rights I should prefer to keep my cash as long as possible, but again, writing large checks several times a year is stressful and scary.

Posted by: Jasper999 | February 26, 2010 12:45 PM | Report abuse

And PS - a parking charge is not a "fine" or a "tax." When you park on the street, you are storing your property on government-owned land. The government is charging you rent - usually at a rate MUCH lower than the market will bear (compare street parking costs to private garage costs.)

Why people think that the government has an obligation to set aside acres of space for people to leave their stuff on for free is beyond me.

Posted by: Bloix | February 26, 2010 12:45 PM | Report abuse

"When citizens decide to empower the federal government to solve their problems, they must trade away some amount of freedom.

Most Americans don't like that deal"

Funny how this argument arises when social programs are floated, but when security issues are at stake, it's hard to measure how fast people are to trade away their freedoms and rights, just for the illusion of security (read: PATRIOT act, free speech zones, and torture).

Posted by: kryptik1 | February 26, 2010 12:50 PM | Report abuse

*So any technology that gets rid of this problem is a brilliant solution for the driver and for the government. There's nothing sinister or evil about it.*

If your sales pitch to voters is that government is an evil, broken entity that needs to be restrained or destroyed, then efficient technological solutions that make public transactions easier and makes delivery of services more satisfying kind of works against you.

You do see a difference in the Republican message across the country. It is Republicans like Weld, Cellucci, and Romney in Massachusetts who implemented a lot of the efficient-government conveniences like storefront DMVs in malls because the more liberal voting base wanted better public services and the Republicans bet that their prospects for changing those desires of the public by making government more painful to deal with were low. In other parts of the country, ineffective delivery of government services and collection of fees and taxes might be seen as "part of life."

Posted by: constans | February 26, 2010 12:56 PM | Report abuse

Most conservatives aren't against a consumption tax. They are against current VAT proposals because they would be IN ADDITION to income taxes, and somewhat hidden, in the way you discuss.

Posted by: WEW72 | February 26, 2010 12:56 PM | Report abuse

Certain breeds of conservatives believe that public roads should be done away with and converted to privately-run toll roads -- or at least that new capacity should be built this way. Would they design these privately-run toll roads to require collection of a dime every mile instead of easy electronic toll passes as a way to remind users about its cost?

Posted by: meander510 | February 26, 2010 1:00 PM | Report abuse

As someone who is sometimes sympathetic to conservative arguments, this one is terrible. Having a difficult-to-collect tax isn't going to change a whole lot other than making peoples' lives more difficult. Liberal Democrats aren't going to say 'you know, I believe in social justice and single payer health care and public pensions, but screw it, the difficulty in paying the tax is too much - Palin/Pawlenty '12!' In any case, most of the middle class and the poor have an easy time calculating their taxes and receive a refund (which is often treated as a windfall, not the return of a 0% loan to the government), and for the wealthy, tax calculation is largely outsourced to accountants. A complicated income tax is guaranteed employment for accountants (and a way to dole out political favors), not a hedge against large government.

For what it's worth, I hear that in Sweden you can pay taxes by text (haven't verified this though). That would be *awesome*. Also, I'd like to note that Sweden had a huge government prior to tax by text message.

Posted by: justin84 | February 26, 2010 1:36 PM | Report abuse

There is plenty of research showing that people spend more (i.e., assess cost and value differently) when it's easier -- for instance, people who use credit cards for everything, even if they pay in full and never carry a balance, tend to spend more than those who pay cash because they don't focus as much on the cost. (Michelle Singletary cites this a lot. And as one of those credit card users, I believe it's true.)

What I find striking is that economic conservatives would buy into this psychology-based view, which directly refutes the pure-rational-economic-actor fiction that has long been their gospel.

Posted by: Janine1 | February 26, 2010 2:17 PM | Report abuse

I hate people who think they know what's best for my money. Sure I'll chip a great deal in for the common good, for society, for the common welfare. But it seems like the demand for more never stops. Could we ever set an absolute limit on it? Could we ever say that the government will not take more than 25 or 50% of what you earn for your family? Fewer than 50% of us even are net payers of income taxes at this time.

Posted by: staticvars | February 26, 2010 3:29 PM | Report abuse

@FastEddieO007

Thomas Jefferson never wrote that. He wrote something similar in Notes on the State of Virginia, but it had to do with freedom of religion, not tyranny.

"Was the government to prescribe to us our medicine and diet, our bodies would be in such keeping as our souls are now."

Posted by: elidan | February 26, 2010 8:09 PM | Report abuse

Total incredible irony that he chose parking fees, which are a user fee not a revenue-generating tax.

As Bioix wrote above, the meters in MoCo are often below market-rate! I parked in Bethesda just yesterday and noticed the pay by cell, but had coins handy. It was $1 per hour in an area crowded with restaurants, shopping, movie theatre, offices, etc.

Posted by: jeffro20 | February 27, 2010 8:39 AM | Report abuse

"And PS - a parking charge is not a "fine" or a "tax." When you park on the street, you are storing your property on government-owned land. The government is charging you rent - usually at a rate MUCH lower than the market will bear (compare street parking costs to private garage costs.)

Why people think that the government has an obligation to set aside acres of space for people to leave their stuff on for free is beyond me."

Mindless comments like this only confirm how far the spirit of independence and intelligence of the average citizen has fallen. The Government does not own anything. Public property is, guess what, public property maintained with tax payer dollars.

Posted by: davidring | February 27, 2010 9:20 PM | Report abuse

Parking meter fees are not meant to generate revenue. I'm sure they barley cover the salary of guy/woman or rolls the change cart around emptying them ;) Another reason it will take forever and a day to upgrade that system. The fees are there so that you don't park all day and more people can share the spot.

Anyone who thinks any DMV is efficient has never been to one.

--David

Posted by: davidring | February 27, 2010 9:28 PM | Report abuse

The comments to this entry are closed.

 
 
RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company