Economics Dictionary of ArgumentsHome
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| Taxation: Taxation is the process by which governments collect money from individuals and businesses to fund public expenditures and services. Levied based on income, profits, property, or goods and services, taxes serve as a primary revenue source for governments, enabling the provision of infrastructure, healthcare, education, defense, and other public services. See also Government budget._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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James M. Buchanan on Taxation - Dictionary of Arguments
Boudreaux I 24 Taxation/Wicksell/Buchanan/Boudreaux/Holcombe: Two features of Wicksell’s approach to public finance are especially relevant to Buchanan’s work. 1) The first is Wicksell’s insistence that, at least in democratic societies, government budgeting should be analyzed as what Buchanan called “fiscal exchange.” Government spends money to produce various goods and services for citizens, and it obtains this money, mostly through taxation, from citizens. Therefore, whether the government’s whole budget or any of its individual components are worthwhile depends upon citizens getting their money’s worth. It follows that public-finance theorists should assess the merits of budgetary outcomes and budgetary proposals from the perspective of the citizens who are taxed to pay for government expenditures and who then receive government-supplied goods and services in exchange. 2) Wicksell’s second foundational contribution to Buchanan’s thought is his rejection of the benevolent-despot model of government. If the government’s budget appropriately emerges from fiscal exchange, budgets are not imposed on the populace. They are agreed to through a collective decision-making process that begins with the citizens who are to live under those budgets. Government has no interest of its own; it is merely an organizational tool that citizens use to achieve their collective goals >State/Buchanan. Boudreaux/Holcombe: In our democratic age this conception of government perhaps sounds obvious. But from it follows the conclusion that the state is not an agency existing independently of citizens. The state has no greater knowledge than is possessed by its citizens. Boudreaux I 25 Taxation/Buchanan/Boudreaux/Holcombe: (…) for taxes to be generally agreed to in an informed way, citizens must know beforehand how those tax revenues will be spent. Buchanan emphasized that the desirability of taxes cannot be evaluated independently of how that tax revenue is to be spent. The common sense behind this insight is that if individuals are asked if they want to pay a particular tax, they usually say no, because a tax imposes a cost on them. On the other hand, if they are asked whether they favour paying a tax on gasoline to finance road construction, they are more likely to agree to it, weighing the costs to them of the proposed tax against the benefits that they anticipate the road would provide. The merits of any particular tax cannot be evaluated independently of how the tax revenues will be spent. This seemingly straightforward insight is rarely recognized by public-finance economists even in the twenty-first century. >Decision-making process/Buchanan. Boudreaux I 26 Buchanan’s approach views taxes as the price people pay for government-supplied goods and services. Boudreaux I 92 Taxation/Buchanan/Boudreaux/Holcombe: Institutions must be designed with the understanding that unfit people - people mad for power, people concerned more with being popular than with doing what’s right, even people who are malevolent - will sometimes gain political office. It is prudent and wise to constrain all government officials to prevent the harm that would otherwise be unleashed by the worst government officials. Taxation: One application of this idea is found in his 1980 book, The Power to Tax: Analytical Foundations of a Fiscal Constitution(1), co-authored with Geoffrey Brennan. Conventional public-finance theory suggests that tax bases, that is, what is taxed, should be broad so that any given amount of revenue can be raised with tax rates that are as low as possible. This recommendation would be valid if those who in the real world design the tax system truly wish to further the public interest. But what if those in power want to maximize the revenue collected by government? In this case, broad tax bases allow revenue maximizers to collect tax revenues well in excess of what is in the public interest. Thus, constitutional rules that limit the size of tax bases can be welfare-enhancing. 1. Geoffrey Brennan and James M. Buchanan. (1980). The Power to Tax: Analytical Foundations of a Fiscal Constitution. Econlib Books 2018._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
EconBuchan I James M. Buchanan Politics as Public Choice Carmel, IN 2000 Boudreaux I Donald J. Boudreaux Randall G. Holcombe The Essential James Buchanan Vancouver: The Fraser Institute 2021 Boudreaux II Donald J. Boudreaux The Essential Hayek Vancouver: Fraser Institute 2014 |
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