Corpania Ideas

CAVEAT! I'm an amateur philosopher and idea-generator. I am NOT an investment professional. Don't take any of my advice before consulting with an attorney and also a duly licensed authority on finance. Seriously, this my personal blog of random ideas only for entertainment purposes. Don't be an idiot.

Tuesday, March 29, 2011

Analogy on Taxes vs. Services: "Renting a Vacation Home with Friends"

Analogy on Taxes vs. Services: "Renting a Vacation Home with Friends"

Hypothetical:

You and your friends are just a couple of years out of college and you all want to get together to rent a vacation home for a week. How much should each of you pay?

Well you can't really answer that without more information.

How big/expensive will the house be?
What amenities?
What activities will you do?
These are your costs and they are determined (or should be determined) by how much you can all afford to pay.

Will you each pay the same amount?
Will the person in the master bedroom pay the same amount as the two people sharing the laundry room floor?
Will the person who cooks all the meals pay the same as someone who does no chores?
If one person pays more will he not have to do any chores?
What if most people among the group of friends make $30k per year but one person's dad is super-rich and really doesn't want to stay in a crappy shack in a dangerous neighborhood so he's begrudgingly willing to pay the difference for a much nicer/safer place?

If everyone votes and the majority wants to buy PPV fights on cable is it fair to make the person who voted against it pay if he doesn't watch it? What if that guy begrudgingly watches it after it's ordered?

If everyone agrees to split the purchase of a $200 security system but then the guy ordering the security system ends up paying $1000 for a much bigger system --- who should pay and how much?

What if the majority votes to buy an emergency first aid kit and only one person gets hurt and needs the kit? Should the person against buying the emergency first aid kit not have to pay if he didn't get hurt? What if he did get hurt, should he pay then?

What if the majority votes against buying the first aid kit and then someone gets hurt? Instead of being OK had the kit been there, the victim now incurs massive medical costs because of the ad-hoc "MacGyver"-first aid and resulting infection. Should the victim be able to shift some of those costs to the rest of the group? What if the victim wanted to buy the first aid kit in the first place? What if the majority wanted the first aid kit but the guy tasked with purchasing it decides he doesn't want to spend the money?

That entire hypothetical and all its questions are highly analogous to the social contract of democratic government in America.

MY CONCLUSION: We all figure out the minimum services we want government to provide and then also the maxim number of services. That creates the range of potential budgets. Then we create a taxation system that can sustainably fund those budgets along that spectrum. The voters then elect representatives to place the country somewhere on that spectrum.

SIDE NOTE: There should be no preset arbitrary number for tax rates (e.g. why is 51% inherently bad especially when historically the rates in the US have been as high as 91%?).

Tax rates & government services should always be factored on a cost-benefit basis.

As a progressive liberal, whatever government services I think are absolutely necessary should nevertheless be cut down if our national security is entirely threatened and thus resources needed to be shifted to defense.

Conversely, for you conservative libertarians, whatever you've predetermined to be the absolute maximum for tax rates should reasonably be increased by 1% if the benefit would be practical utopia (no crime, no poverty etc.).

The question on taxes vs. services should always be: is what we're getting on the whole worth what we're paying?

BTW - Check out philosopher John Rawls "A Theory of Justice":
 http://en.wikipedia.org/wiki/A_Theory_of_Justice  
...and especially Rawls' concept of "the veil of ignorance":
 http://en.wikipedia.org/wiki/Veil_of_ignorance_%28philosophy%29

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