Ideal city: taxation: time is money
[This is the second entry in the ideal cities series. As I said in the first post, entries vary greatly in length. This is a long one.]
How should my city tax its citizens? There’s something intuitively appealing about the idea of a flat tax, a tax that treats everyone the same. Everyone pays the same amount. Everyone pays $A.
Except when we talk about a tax system that treats everyone the same we (almost) never mean that. We mean taking an equal portion from everyone. Everyone pays $(B*X), where X is their income and B is some multiplier (normally 0.00<B<1.00).
But hell, if either of those counts as treating people the same, why not $(B*X+A), i.e. everyone pays a fixed portion of their income plus (or minus) some fixed amount? Or why not $(C*X^2)? (In which case you better not make more than 1/C, otherwise you lose money?) If all we need is a formula…
Well, no, we want more than that. We need to be able to say what this same thing is what we’re making people give us. It’s easy to say “a certain amount of money” or “a certain portion of their income,” but what is it we’re doing when we take from people an amount proportional to the square of their income?
I don’t think this is the biggest problem people have with progressive taxes, but it is one common objection. Why should rich people pay a larger percentage than poor people? They already pay a larger amount! We need to treat people the same!
My ideal solution, which I do not pretend is politically feasible, or even necessarily desirable: fine, let’s treat them the same. Everyone contributes N hours a week of their time.
In a way, this would be like a true flat tax: everyone gives the same thing. In a way, it would be like a flat percentage tax, since if you make more money your time is worth more to you. But in a way it would be progressive. Here’s how. If you’re poor, your free time is less valuable to you. Say you make $10/hour. If you could give up an hour of your free time to make $8, would you? Maybe. Say you make $100/hour. If you could give up an hour to make $120, would you? Maybe not. (This is the whole idea behind overtime pay.) Of course maybe you would, and there could be a million different reasons for that, but in general, I suspect, and perhaps even by definition, the rich value their free time more than the poor. (In other words, being rich maybe has more to do with the valence of the derivative of hourly wages than with the size of the wages themselves.)
The tax system ends up being, in a way, rather simple. If you have an excess of time and a dearth of money (i.e. you’re willing to work), you pay your taxes with your time. The city does pay you for your time, though not that well; the exact amount, called “taxpayer wage,” would be analogous to though not exactly a minimum wage. The paying of taxpayer wages could also end up being this society’s main form of welfare, as well as the main way it accomplishes tasks like mail delivery and mindless bureaucratic work. If you have a dearth of time and an excess of money (i.e. you’re willing to pay for more free time), then you pay your taxes with what your time is worth to you. This is how the city makes the money to pay all its employees, including those on taxpayer wage (all of them?). The city can change the time requirement to raise and lower taxes, and can change the taxpayer wage to address problems in the ratio of labor force to cash flow.
But wait. How do we determine what your time is worth to you?
Well, we might as well let the market decide right? I’m thinking auctions. Citizens are grouped by hourly wage (estimated in the case of those who receive salaries–that, or those who get salaries aren’t allowed to pay their way out), and they bid for the right not to pay their time. Bidding probably starts at the amount of the hourly wage minus taxpayer wage, since the bidding will always reach it anyway. After all, if you have to work for taxpayer wage, you might as well do the job you enjoy rather than the one assigned you by the state. Of course if there’s bidding, that means some people don’t get to pay money even if they want to–which I guess means there’s a third variable here, the ratio of people allowed to pay money not time.
I don’t know that the auction system would work that well in practice, but this city is, after all, ideal. I’m going to stipulate that it works as intended, that we really can determine what people’s time is worth to them. If we could, this tax system would be simultaneously regressive (everyone pays the same amount (of time)!), flat (everyone pays the same percentage (of their time)!), and progressive (everyone pays according to how much they can afford to pay (to avoid giving time)!)
The main advantage to such a system, though, is a change in mindset. First, in how we think of taxes. Income taxes are like Leviathan taking something away from you just because you earned it. A time tax would be a requirement to be a good citizen, to participate in the city’s maintenance. It’s as if the default way to pay your taxes were jury duty. Second, in how we think of time. In a way the system encourages us to commodify time, to distance ourselves from what is most ours (there’s no way to make my time not mine, however I spend it), but then, shouldn’t we value our time? People always say income taxes discourage people from producing, and analogously, I suspect, a time tax would discourage people from working, but I see that as a good thing. It’s a tax system that encourages leisure.