What does generality imply for taxation and thereby tax incentives?

En gammal uppsats jag hittade på datorn. Mycket spännande faktiskt. Handlar om Macroekonomi och skatter.

Generality is the idea that political action should not (positively or negatively) discriminate against any person or group of persons. A tax incentive is an aspect of the tax code designed to encourage a particular economic activity.

The case for adopting a constitutional generality principle can be grounded in economic and political efficiency. The citizens of a polity who do not broadly support democratic or egalitarian norms may nonetheless have a constitutional interest in the generality principle because it tends to increase the efficiency of democratic decision-making and the policies adopted. Application of the generality principle to the production, distribution, and financing of government services reduces the range of distributional conflict that occurs and thereby increases political efficiency in several ways. 

Buchanan and Congleton suggest that movement toward generality in taxation will be more “efficient” than alternative tax-share schemes in a political regime (majoritarian democracy), even if attainment of some ideal remains far from reach. The reason why generality in taxation is efficient is that the very structure through which decisions are made prevents any attainment of the type of tax-share discrimination that might be defined to be optimal in the stylized model that is altogether divorced from politics.

A tax structure is inefficient to the extent that it reduces economic value below that which might be potentially achievable within given resource and technology constraints and within the particular political-legal order that exists. In this setting, a tax structure characterized by generality in the treatment of persons or other objects of imposition will involve a lower wastage of economic value than alternative structures.

Buchanan and Congleton also discuss that the fiscal operation of majoritarian democracy almost surely will produce lower rates of growth in the economy than under the condition when a constitutional requirement for generality in taxation.

They point of four reasons to inefficiency with absence of generality:

1.     The incentives provided for wasteful rent seeking.

2.     The related costs of administration, both for government and taxpayers.

3.     The additional excess burdens involved when discrimination is introduced.

4.     And on the budget itself.

 I believe that generality in taxation is good (efficient), referring to the “golden rule”, that generality is morally intuitive. Economists often talks about dead weight loss and say that violations of generality make us poorer (when government discriminates, people change their behavior and these changes in behavior are costly because they tend to discourage mutually-beneficial exchange). Violations of generality also create rent seeking and violate economic freedom.


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