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2.6.05

Relational Models For Taxation

I apologize if you're not too interested in the relational models theory, but having just finished Fiske's book, it's on my mind.

One shortcoming of the relational models theory, as well as Cultural Theory, is that in focusing on the conflicts between models/worldviews, they don't offer much help in deciphering sub-model/worldview conflict. So Douglas and Wildavsky dwell on the contrast between the egalitarian Amish and the hierarchical Hutterities, but they don't have much to say on the differences between the Amish and the equally egalitarian Old Order Mennonites, or between the hierarchies of the EPA and the DoD. Fiske does go on at length about the importance of specifying the parameters for implementing a model, but he doesn't offer a theory about how particular parameters are chosen and what happens when people disagree about them.

I think taxation provides a nice example of the importance of parameters. In the modern US, the debate over taxes is, for all its acrimony, largely limited to Market Pricing visions of taxation. Certainly all four models offer a view of taxation. Communal Sharing would lead to a voluntary contribution system. Under the Articles of Confederation, we found that the Communal Sharing ethos isn't strong enough in modern states to support this type of system. Authority Ranking suggests a feudal or imperial tribute system, which has been out of favor for centuries. Equality Matching would undergird a system in which each person is charged the same dollar amount. We do see this system at work in many places today -- for example, toll roads and vehicle registration fees, which cost the same amount for the pauper and the billionaire. But outside of New Hampshire, few governments get a major portion of their revenue from this type of head tax.

One of the big arguments in modern tax policy is between two versions of Market Pricing. (It may seem odd to describe taxation as "Market Pricing," but the Market Pricing model is a broad concept covering any system based on equity, proportionality, and ratios.) Both flat-taxers and progressive-taxers agree that taxes should be proportional to wealth, but they disagree as to how to measure that wealth. To flat taxers, taxation should be proportional to dollar value. Everyone should pay the same number of cents per dollar to the government. This philosophy underlies both a flat income tax and a sales tax. Progressive taxers believe that taxation should be proportional to utility, that is, the amount of happiness that wealth brings. As the early utilitarians noted, there is a general trend of diminishing marginal utility with increases in wealth -- each additional dollar is worth less. Thus a properly equitable system would charge rich people a higher number of cents per dollar. While this philosophy is best associated with a progressive income tax, it is also crudely approximated by some sales taxes that exempt necessities like food and clothes (which make up a larger proportion of the poor's budgets) from taxation and which add a luxury tax to items that rich people buy more of. The key point here is that both progressive taxers and flat taxers believe that their system is properly proportional, the commonsense application of the Market Pricing idea -- and thus the other system is inequitable and thus a backhanded form of Authority Ranking.

Likewise, our most salient tax question -- what the rate of taxation will be within a given structure -- is also a question of parameter specification. Here, I think the taxation parameter is subordinated as a means to supporting a choice of models elsewhere in society. Libertarians thus support low taxes because they're instrumental toward maintaining a wider Market Pricing system running on neoclassical economic parameters. Small government conservatives also support low taxes, but they do so because they favor Communal Sharing at the local community level. Liberals likewise want to support Communal Sharing, but because they specify the parameters of the community as being the whole nation, they are led to favor a high tax rate.

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