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Comment by londons_explore | Hacker News Reader

Conventional wisdom is that if one can fund the IRS with one extra dollar, and they use that dollar to collect two dollars more taxes (from evaders), than that was a good way to spend taxpayers money.

Many economists don't agree though. If you care about economic success of the country, the goal isn't 'collect as many taxes as possible'. The goal is to make the citizens wealthier in real terms.

Effort your citizens put into tax collection is 'dead weight', and doesn't contribute to exports etc. However, effort your citizens put into trade that (for various reasons) ends up under-taxed, usually does add to the economic wellbeing of citizens.

Therefore, it's only necessary to collect mostly-correct taxes from most citizens, if doing so let's you redirect labour from tax collection into other work.

Is it unfair? Yes. But it's still good economic policy.

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> If you care about economic success of the country, the goal isn't 'collect as many taxes as possible'. The goal is to make the citizens wealthier in real terms.

But the goal of taxation isn't to maximize the country's economic success or overall wealth.

It's to fund necessary government services (schools, courts, police, military, etc.) and to redistribute wealth (Social Security, Medicare, Medicaid, etc.).

We only want to maximize national wealth after we've funded government services fully and redistributed wealth (and sufficiently protect the environment, protect workers, etc.).

So if funding the IRS gets you back more money, that's always good, because it's by definition going to the things that we have democratically decided are a higher priority than maximizing national wealth. And if we democratically decide that we're spending too much on services or redistributing too much, then we cut those intentionally -- not "accidentally" by underfunding the IRS.

Even if under-collecting taxes is good economic policy by the extremely narrow measure of GDP, it's terrible national policy. It's like saying that accidentally redirecting an extra $500 per person to the military is good military policy. I mean, sure it might be. But that doesn't mean it's good national policy.

>We only want to maximize national wealth after we've funded government services fully and redistributed wealth

There's a chicken or the egg issue here. If your country isn't rich enough to fund government services such as education, transport and healthcare you need some economic development first.

Except we are vastly more wealthy than needed to provide these services. Wealth inequality is so laughably bad that a tax on just a handful of mega rich billionaires could cover the cost of many important social services.

Are you sure? Have you ever tried to balance the federal budget?

> If you care about economic success of the country, the goal isn't 'collect as many taxes as possible'. The goal is to make the citizens wealthier in real terms.

Just like how "collect as many taxes as possible" isn't actually a good goal, just "make the citizens wealthier" isn't actually a good goal either because it says nothing about the distribution of that wealth.

If we enacted a law that made 99.9% of all citizens absolutely destitute to the point where they must eat rotten food found in the trash to survive, but this law also multiplied the wealth of Bezos and Elon a millionfold, then that would successfully "make the citizens wealthier" in sum.

Taxes are used to run society, from it's roads, fire department, education, social services, and much more. A lot of people are pushing to cut down on those things, to decrease the bounty that society offers regular people who partake, because "we just can't afford it." and the reason we can't afford it is because there is an overly focus on "make the citizens wealthier" even at the cost of most citizens.

> Taxes are used to run society, from it's roads, fire department, education, social services, and much more

The "much more" is much, much, much more than anyone thinks. The federal budget is tremendous. People cannot conceive of trillions, yet the federal government alone spent over six of it a year, three years in a row.

Virtually nobody has a problem with tax funds being used to build roads and bridges, fire departments, and whatnot. It's everything else that's contentious. Public schools are visibly wasteful, with the number of students and teachers overall remaining largely constant, but the number of administrators having increased many-fold in the past decades; at this point it's a jobs scheme for adults, not an education scheme for children. Nonprofits received hundreds of millions of taxpayer dollars to support illegal immigration. Et cetera.

So many things in the federal budget appeal to a fringe minority of advocates, yet the money hose continues to flow. This is not the way that a federal government with clearly delineated limits should work. Something is wrong.

> It's everything else that's contentious.

In part, because of comments using wording like "hundreds of millions of taxpayer dollars" as if it were huge, when it describes a pretty miniscule part of the 6,000,000 millions in the budget. (It also misses those same immigrants paying billions in sales and other taxes here, including quite a bit of Medicare/Social Security funding they'll never get back.)

As a result, Americans have a massively skewed idea of where it all goes; they think NASA gets 6.4% of the budget when it gets 0.5%, for example. https://www.businessinsider.com/nasa-budget-estimates-opinio...

Defense, healthcare, and social security make up the vast majority of Federal expenses. Education is, comparatively, a pittance; nonprofits serving immigrants don't even show up on the chart as a full pixel.

https://commons.wikimedia.org/wiki/File:2023_US_Federal_Mand...

https://commons.wikimedia.org/wiki/File:2023_US_Federal_Disc...

Most public education funding at the K-12 level is from state and local taxes.

Yeah, to be more specific:

> The federal government provides 10.5% of funding for public K-12 education.

https://educationdata.org/public-education-spending-statisti...

You need to ask yourself how the tax evader uses their $2, and how the government uses their $1. And you need to ask yourself about the perceived rule of law, and how many more tax evaders you would create by letting it be known that it is easy to get away with tax evasion. And you need to ask yourself if you want tax evaders to have a leg up on investments compared to full-tax-payers.

Very easy to draw extremely wrong conclusions from this line of thought without factoring in the long-term cost of declining trust in the rule of law.

Only if you're under the false premise of the people serving the government rather than the government serves the people.

I have no idea what connection you’re drawing there.

What is the confusion? You're the one bringing up "rule of law" as if I live to be the government's personal slave along with millions of others.

The confusion is that that doesn’t follow, at all.

[edit] it occurs to me that this is a term of art you may be unfamiliar with, so reading it in an unusual sense:

https://en.m.wikipedia.org/wiki/Rule_of_law

Basically, it’s a super-important thing to have if you want to live in a “developed” country that doesn’t have all kinds of very-bad problems, and isn’t some proxy for level-of-authoritarianism, which is how it seems you’ve read it. It’s about actual and perceived equal treatment under and efficacy of the law, not how much law (if you will) you have. A minarchist libertarian state would sensibly seek to have high rule-of-law, for instance.

I'm not confused at all about the concept. Your stance is incomplete. "Rule of law" does not stand alone either, you've also mixed in a few concepts that frankly do not apply, but we'll ignore that for now.

"Rule of law" requires government (and it's officers) be above all, both in practice and in theory. Just on the basis of who can violate rights, perceived or otherwise, and who in turn pays for the consequences, it fails in the test of "equality". And in reality, it's enshrined in multiple jurisdictions varying levels of immunity.

Even if you think tax money, once assessed and collected, belongs to the government.

Ah—you know the sense in which it was intended but, unusually (I intend this descriptively, not pejoratively), reject its definition as self-contradictory. That, I was not expecting.

I don’t think we’re gonna bridge that gap productively in a comment section. Have a nice weekend (sincerely).

That's not what the phrase "Rule of law" means.

No matter what society you live in, you will have to obey rules. There has never been a society where this is not the case, and there never will be one.

You can call that slavery if you want.

You have to breath in mere seconds after you breath out, this action must continue until your bodily functions completely fail or otherwise.

> Effort your citizens put into tax collection is 'dead weight', and doesn't contribute to exports etc.

Hot take: a lot of tax revenue does contribute to exports etc. The government is spending a lot of money re-digging that shipping channel in Baltimore after the bridge collapsed. Just one recent example, but pretty much every bridge and port and road in the world has a lot to do with taxes.

The government is also spending lots of money on social programs people like too much for even the Republicans to try to repeal, yet the government is not taxing enough to cover them. Letting rules slide for certain people means more debt for everyone else, and is what a lot of economists would call "arbitrary redistribution", which is bad.

I was referring to the effort of collecting taxes themselves - ie. The salaries of all the IRS workers who have to chase everyone up.

One good way of measuring economic success is by ignoring the income and wealth of the top 10%. The exact percentage is not important. What matters is the idea that the success of the well-off only benefits the society to the extent it improves the lives of ordinary people.

Many government activities make sense from that perspective. By redistributing money from the top 10% to the bottom 90%, they increase the economic success of the country, though possibly at the expense of economic output.

And fairness is also important, because societies are built on trust. When people don't trust government institutions and each other, everything starts falling apart.

it is not good policy to reward people who break the law to the detriment of people who abide by the law. if tax fraud occurred less, it would give us latitude to lower taxes which would give the broad based economic improvement you are discussing.

The problem with the conventional wisdom is taxes don't fund government services. Fairness is a real asset. Deciding how to weight fairness as an asset against computers and food is political.

I think you are only looking at a point in time and not considering the impact of incentives over time.

It's good economic policy based on what? Did you run a counterfactual already? Comparing the US to other countries is meaningless, it's not the same set of init conditions and variables.

Do you realize that those taxes go to fund public services and help people stay afloat, which I don't need a study to show you, creates far more customers for all these tax evaders in the first place? Go back 50 years to see what this country used to be and how much shit it got done and compare it to today. There are measures of productivity engineered in math, and then there is common sense: majority of existing infrastructure was built decades ago and now it costs billions in overrun projects to build a single station in NYC.

The current system works just fine in terms of punishingly taxing everyone on this website and the poor, that's why it feels like I'm contributing half of my salary to the federal government. What it doesn't do is take its share from extremely wealthy, who in turn DO NOT SERVE the economy because they're effectively stateless agents, who can put their money into Seychelles or whatever. Nobody would bat an eye if those billionaires would contribute the billions to the economy. Instead you get people crying about how "the government is inefficient, it gets nothing done, I'd rather the titan spend it as they see fit." But if this ship called United States floods they will be the first to abandon it, just like a famous critter.

I'm sorry but posts like this are the exact definition of bootlicking.

I would like to see the citations on this asinine idea.

Nobody needs a first principles argument to justify greed and tax evasion. It just feels right.

Economics is not divorced from ethics. Fairness matters. If people think the system is rigged they won't participate, or they will try to find their own way to exploit the system.

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