Tax That Guy Behind the Tree

Megan McArdle is right (here and here), and Henry Farrell and Mark Kleiman are -- perhaps not exactly wrong, but as far as I can tell, they are either misunderstanding what she says or quibbling on minor points of semantics while apparently believing themselves to have a substantive point. The question is, "Do people want their own taxes raised?" My answer comes more from introspection than from logic or economics. Perhaps Henry Farrell and Mark Kleiman want their taxes raised, but I certainly don't want mine raised. However, I am willing to have my taxes raised in exchange for certain things that I do prefer -- in particular, I'm willing to have my taxes raised in exchange for an increase in everyone else's taxes.

I want to make it quite clear that I will oppose any law that tries to raise my taxes by $300 -- unless that law also contains provisions that I support and that are worth $300 to me. Would a provision requiring my compatriots to kick in a total of $6,000,000,000 to the National Science Foundation be sufficient to gain my support for the package? Hell, yes! I would support the package because the provision that I like (a $6,000,000,000 increase in taxes from everyone else, to finance the NSF) far outweighs the provision that I don't like (a $300 increase in my own taxes). That doesn't mean I like paying $300 more in taxes. When I refuse to make an autonomous contribution to support NSF-like research, I am indeed revealing my preference for not paying more taxes. (And by the way, if someone proposes to exempt, say, people who were, as of February 2008, blogging using a vowelless pseudonym, from a new tax, I will support the amendment, because I really would prefer not to pay more taxes.)

It seems to me that much of the popularity of the anti-tax movement that began with Reagan-Kemp-Roth (or did it begin with Kennedy-Johnson?) was based on an appeal to people's genuine preference for lowering their own taxes, combined with a sort of mental cover-up of the implications of taxing other people. Basically, get people to think about the $300 question and ignore the $6,000,000,000 question. On the pro-tax side, it is precisely the failure to acknowledge that people don't want to pay higher taxes that made it difficult to counter the appeal of the anti-taxers. The pro-taxers insistence on philosophical mumbo-jumbo about collective action and such covered up the fact that they had a very strong common-sense case that they were somehow unwilling to press.

There is a valid concern that revenue doesn't quite rise linearly with tax rates and that high taxes can produce certain economic inefficiencies, but to me the basic math has always looked very good for taxes (in a large country like the US): even if the money is spent very inefficiently and not on my own priorities, $6,000,000,000 is a hell of a lot. The government would really have to make an incredibly huge mess of its spending in order for that not to be worth $300 to a reasonable person. (But again, if you could get it for free, that would be even better.)