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Wednesday, November 19, 2014


What the Government Owes You

Government collects taxes for the purpose of collecting revenue. If you have explored the depths of any media outlet, you will find a plethora of ideas that describe where the tax revenue should go. In all of these ideas, it is believed that the revenue should go towards creating some sort of public good such as healthcare, social welfare, education, public law enforcement, public defense, etc. The purpose behind a public good is to make something accessible to everyone that was once only accessible to those with enough income. Naturally, this rule is not always true since public goods such as social welfare, healthcare, food stamps, etc. are only accessible to those underneath a specified income level.

So, the government collects your revenue and uses it to fund a public good. It would be reasonable to question in this instance what part of the public good you own. Obviously, from a legal standpoint, the government owns the property, but do they owe you anything for it? Because the government is funded by tax revenue, it can be presumed that whatever they produce is proportionally owned by those who funded it. This would mean all public goods produced are proportionally owned by the ones who paid the tax. If a public good is produced using funds from a tax that not everyone pays (income, property, capital gains, etc.) it would not be fair for it to be owned by anyone who did not pay the tax. For instance, a park that was paid for using the income tax revenue from the citizens of a city, would belong to those who paid the tax. Anyone who used the park and its facilities without paying the tax would be a free rider. Furthermore, if you have a proportional ownership of 1%, you can only use 1% of the park before you become a free rider. The latter example is a little bit harder to explain with a public good such as a park because a park is a nonrival good since being in a park does not limit anyone else from being in the same park. A better example would be national healthcare. If you paid for 1% of the healthcare, you are entitled to 1%; anything more would make you a free rider.

Obviously, none of what I stated above is how we actually operate things. A park is free for anyone to use regardless of where they are from and how much towards its creation they contributed. Even if it was distributed accordingly, it would be difficult to own something on such a large, collective scale. Choices for the park would have to be governed by a board and by democratic vote. This would all make the park more like a firm rather than a government public good. Even worse, this would be a firm that few, if anyone, voluntarily wanted to be a part of. Taxes are mandatory, and if the taxes went towards a park, you would have a proportional ownership of a good that you never asked for.

If we are to claim that anything funded by tax revenue is proportionally owned by the ones who paid the tax, we are claiming that the tax is an involuntary investment. Some would call this theft, but I have never seen a thief create something for all of his victims with the money he stole. Furthermore, due to the proportional ownership, the owners in question have a proportional responsibility to the property. In reality, government claims the property is there, so they pay for its upkeep, but they pay for it with tax revenue, so the proportional owners still pay for it. So what does the government owe you? You are owed the proportional amount of whatever good your tax revenue paid for whether it be labor (think politicians, public servants, etc.), healthcare, social welfare, defense, etc. Because ownership allows the ability to exclude, the government homesteads the property; government can still exclude people from a public good thought (example: New York parks ban smokers). This confusion of ownership may result in inefficiency. The government is now like an enormously large corporation. They take investments (tax revenue) and use it to make public goods from all different facets of life. They create transportation, mail service, parks, healthcare, social welfare, public defense, political labor, etc. You may notice that few of these are alike. In the past, we see firms who attempt to diversify to far fail. Instead of failing, these public goods just become inefficient compared to their private good counterparts. Perhaps, we can the conclude that the government should not diversify its creation of public goods.

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