Tag Archives: Agents

Replace Govt As Career Agent

Agents for actors, musicians, and artists get 10-20% of their payments in order to advise, promote and negotiate on their behalf. Sports agents get 4-10%, while speaker agents get 20-30%. Headhunters get 18-25% of first year salary. The idea is simple: when someone gets a big fraction of your income, they have an incentive to increase your income. (In addition to reputation and repeat business incentives.)

True, you might not be willing to part with a big fraction of your income just to create such an agent. But it turns out that you already have a career agent who takes 1/4 to 1/3 of your income: your government. But while your government may sometimes pay for guidance counselors and jobs listings, overall they do a terrible job as your career agent. They do far far less than would a private agent paid that big a fraction of your income.

However, it would cost very little to transfer this career agency role from your government to a private actor. All we need is for the government to auction off the right to be paid the amount in taxes that you will pay to the government. The government is no worse off; it could use that auction revenue to pay off its debt, or to buy stock index funds. The auction winner gains strong incentives to increase the taxes you pay, such as by helping you to earn more money. And investors gain a new asset class to diversify over.

Notice that you’d be under no obligation to listen to agent advice, or to accept any of the deals they find for you. And they’d have no powers to enforce or change taxes, or to prevent the government from changing taxes. Though they might report you if they found you cheating on your taxes. This is nothing like tax farming. Seems crazy to me to claim (as many do) that they’d illegally censor you or threaten to break your kneecaps.

Note also that this asset is worth less to someone who can’t get you to listen to or work with them. So the asset will tend to be traded to someone who can get you to listen, if any such person exists. So you’d have a lot of influence over who held the asset. This asset on you could be held by a parent, school, employer, or even by you yourself.

Yes, this agent doesn’t weigh all of your interests the way you do; you’d pick fun over work more often than would they. But such a conflict also exists for all of the other kinds of career agents mentioned above, and for the other agents in your life, such as your lawyer, sport coach, priest, parent, and teacher. They can all help you even though you know to not just believe everything they say. Note also that some of these agents, e.g., parents and teachers, are assigned to you; you don’t get to pick them.

To avoid problems with auction bidders fearing that others know more than they, best to do the auction early, such as at birth, when few know anything. And to tell bidders then some basic stats on the parents. Individual auction prices don’t need to be made public, though seems fair to tell the parents of kid whose rights are sold. (And maybe also to give parents a cut.) There should be a way to contact the asset holder of a person, so one can offer to buy that asset.

You might fear that asset holders would lobby to increase taxes, but they are easily outvoted by ordinary taxpayers. Conversely, you might fear that governments would lower tax rates to please voters while hurting asset holders. But governments would fear cutting revenue in new auctions; governments similarly don’t usually inflate to pay off bonds for fear of raising their cost of new bonds. These tax assets can function as well as does government debt, which is pretty well.

Yes, the risk of unpredictable changes to economic growth and tax rates would impose a risk premium on the cash that auction bidders would pay for these assets. But that’s much less of an issue if the auction itself is denominated in a risky asset, such as a stock index fund, instead of cash..

Yes, people might try to extort asset holders to sell their tax asset to them cheap via threatening to choose a tax-free life. But asset holders would likely call their bluff and just refuse to sell in such circumstances.

Yes, it makes sense to try to start first with small experiments, such as perhaps in a small nation. Maybe also do an experiment where only a random subset get their taxes sold at auction.

Added 8p: To avoid extortion scenarios, it might help to fix the tax system to cut situations where someone gains nearly the same value and consumption, but via very different personal lifetime taxes paid, merely by different formal approaches to what is treated how tax-wise.

Added 2July: 53% of my Twitter followers reject this proposal, including these two variations: let parents veto the auction at birth, and impose a Harberger tax on the assets, to make them more easily transferred.

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