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Bill Harrison

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How can we re-frame tax policy to make people happier about paying taxes and/or spending pro-socially?

We already require people to pay taxes, both for their own good and for the good of society as a whole. Michael Norton's talk, everyday experience, and our tribal evolutionary history suggest that pro-social spending makes us happier. Yet, many people hate paying taxes, possibly (as per Rory Sutherland's talk) because of the way tax policy is perceived or structured, or because they hate the lack of control as to where their money goes.

If you think social policies should be structured in such a way as to give the greatest happiness to the greatest number of people, then is there a way to structure tax policy in such a way to make people happier about paying taxes and/or spending pro-socially?

For example, maybe allowing (or requiring) people to pay some percentage of their taxes (beyond what they pay to the general fund) on some pre-approved set of necessary social programs, but allowing people to choose which ones, could be a policy that would promote pro-social behavior, and thereby produce happier and tighter-knit communities, nations, etc.

Such a policy would, in fact, be less restrictive than either taxation or education, both of which we already require. We don't allow selfish behavior (not paying taxes, remaining ignorant) in either of those cases, because we understand that pro-social laws and policies are necessary for society to function at all.

Policies like this are particularly necessary right now in the US, for example, where the country is extremely divided politically. This could also get the Mitt Romneys of the world to gain an appreciation of the interdependence that allows them to become and remain wealthy.

So, given that pro-social spending makes people happy (a la Michael Norton's talk) and given that re-framing where money goes can make people happier about paying money (as per Rory Sutherland's talk), how would you structure taxes so that people would be happier about paying them?

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    Apr 26 2012: Bill, It's in the nature of bureaucracies to proliferate, whether within a single department or by creation of new departments.

    The difference between tax and pro-social spending is quite simple - the former is enforced, the latter is voluntary. the various experiments quoted lack one critical control. In the experimental situation, the giving of money to spend on others is a novelty. As such that money is treated differently from money flowing through a run of the mill bureaucratic process.

    There are examples of philanthropy being tied in to the tax system, and they do result in some increased gain for charities. That has a lot to do with the fact that people giving to a charity of their choice would rather see money go to the charity than to the taxman.
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      Apr 26 2012: Not only is pro-social spending voluntary, but you get to choose where it goes, and people express gratitude, and you get to directly see the results of what you paid for, etc.

      But I don't see why 10% of your "taxes", for example, couldn't be pro-social/discretionary instead of it going into the general coffer to pay for things you disagree with. We obviously need taxes. But here's another option/category of payment - you're required to pay it, but you choose where it goes. And that might make people a little bit happier.

      I've argued in the past that money is more like a vote than voting is, because it is a direct claim check on the allocation of social resources. If Warren Buffett wants thousands of people to paint his portrait every day, he can do that, because he has lots of "claim checks" on society's capital, which includes its human capital. The point being that if we value people being equal under the law, then we can maybe give people a little bit more control over where social resources are allocated, without letting people just keep it all for themselves. And maybe that would make people happier with their governments and the societies they live in.
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        Apr 26 2012: The problem with routing those funds through a bureaucracy is that the state would increase taxation by 10%, skim off the cost of administering it, then return the money to people in the vague hope that people would do with it what the state wants them to do. As processes go, that's hugely inefficient, even in the realms of social engineering.
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          Apr 26 2012: But what I'm saying is that tax funds are already routed through an already existing bureaucracy via tax withholding, and (at least in the US) we already get back money through tax refunds/returns. This wouldn't even have to be a tax increase necessarily - you could be an anti-government, anti-tax person and still favor this policy, because you're getting the same amount of money back or more, (at the least restrictive end of the spectrum) along with a note saying, for example, that it would be really cool if you spent 5% of your money pro-socially, that might make you a little happier.

          Half the point of the program would be for the benefit of the giver, not the receiver, so I fail to see how that would be inefficient, given that there are a huge number of pro-social causes that need money and which people could choose to give to.

          I get that you really dislike bureaucracy, but there are so many ways that this could be implemented with very few changes to how things already are. It seems like your objections can be easily met if you toggle any number of variables, but I reject the "no, it wouldn't work and it would be inefficient because bureaucracy/government are inefficient" argument. If you dislike government to the extent that you don't want it to work, then you can design it in such a way that it doesn't - which is why modern Republicans should never be put in positions of government.

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