Tag Archives: Proposals

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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Sell Tax Rights To Make Agents

Assume the federal government is owed X% of a certain person’s future wages w(t). Or some fixed function F(w(t)). You might not think the government entitled to such income taxes, but you gotta admit the odds of changing this situation anytime soon look slim.

I propose that the government auction off this right to collect these income taxes. Ideally at birth, if not sooner. Government could use the auction revenue to pay off part of its government debt, and thus in effect convert one kind of debt into another. So the government’s expected tax revenue need not suffer.

This selling-tax-rights action would create a job agent out of the auction winner. Someone with an incentive to try to help and promote this taxpayer, to get them to earn more money, and thus to pay more taxes to their agent. The auction would find the person or organization who thinks they can do this job best, and if they actually succeed then they would benefit. And if this system works on average then the government also gains in expectation at auction time.

This system would probably also benefit the taxpayer themselves, as we aren’t giving the agent any powers but persuasion. The agent can suggest options and strategies to the taxpayer, and can recommend the taxpayer to others. But the taxpayer and others can ignore any of this advice, and can refuse to divulge any info to this agent.

The agent could at any time sell their agency role to anyone else who thought they could do a better job. This might be to the parents or schools of children. For adults, it might be to an employer. Or adults might buy the rights to become their own agent, maybe taking out loans to pay for that. As long as these various agents do a better job advising and promoting the taxpayer than would the government, this system becomes a net win for all parties, at least in expectation.

You might worry that an agent would threaten their taxpayer, saying that unless the taxpayer does certain unpleasant things the agent will refuse to advise or promote them, and thus somehow trash their career. This seems an unlikely problem to me, but if this issue becomes a dealbreaker, I know how to use conditional speculative markets to solve it, at the cost of a bit more mechanism complexity.

You might worry that an agent would be mistaken about their ability to help, and thus harm their taxpayer in the process of hurting themselves. Thinking you were protecting both parties, you might regulate who is allowed to become an agent, and what agents are allowed to do. I don’t recommend this path, but I admit that only severe regulation might kill off most benefits of this system.

If the taxpayer dies, then of course their agent stops getting paid. So agents will want to advise on health, in addition to careers. And on anything that promotes health. For example, if getting happily married helps careers, the agent will want to advise on that. If a taxpayer emigrates, their target nation might not accept this taxation transfer system, in which case the agent would also lose. But this is a standard reason nations have given for not allowing citizens to emigrate; as the world hasn’t accepted that argument for nations, I don’t see why they’d accept it for agents.

Once the rights to tax revenue is sold to agents, governments would lose a direct incentive to provide services to citizens in order to increase citizen income. But governments would retain the incentive to create the appearance of high future income, to induce higher auction prices. And modern governments mainly choose service levels to citizens based on the threats and actions of voters, not based on government calculations on tax revenue.

What about non-federal governments? Well they could just collect their taxes as usual. Or their taxes could also be auctioned off at birth, and then the federal government could over time reimburse the jurisdiction where the taxpayer resides for their lost taxes. This second approach seems preferable, as it creates stronger agent incentives.

And that’s my proposal. Looks like a clear win-win for everyone. What don’t you like?

Added 10p: Please note that I did not propose to give agents control over how taxes are collected. This is not about “tax-farming.” No need or reason to change the tax collection process for this system. The IRS collects taxes because it is assigned to do so, not because the rest of the government gets to spend the money right then. I collects taxes nearly the same no matter who gets the tax revenue or when.

Yes, agents would want to lobby for higher taxes, while taxpayers want to lobby for lower taxes. Taxpayers have more votes, however, to influence policy, and their long term incentives are for good tax levels. Note that a similar problem is that governments can print money to avoid having to pay their debts, yet this only rarely actually happens. Just as governments are afraid to scare bondholders, since that raises the interest rates they pay, governments should be afraid to scare tax auction bidders, as that would lower their auction revenue.

There is a reasonable concern that taxpayers might try to commit to trash their lives, or to emigrate, until they are sold their agent rights. Or until a secret ally can buy their rights. As with insurance fraud, it probably works sufficiently well to call this behavior fraud, criminalize it with large penalties, and offer rewards to those who report violations. And we don’t have to let emigrants who stop paying taxes ever return.

Many offer the generic works-against-anything argument “We can’t allow a conflict of interest to exist between two groups, as the bad side might lobby harder”. Here the groups are agents and taxpayers re tax levels.

If there any doubts re if individual taxpayers would benefit, let’s only auction the rights for a random half (or tenth) of the population. That would also reduce problems with changing enforcement and revenue patterns. And maybe also only for newborns whose parents approve.

Added 20Mar: Another solution to the fiscal discipline problem is to put the auction revenue into a separate trust fund like we do with social security payments. Also, see my next post for a poll on this topic.

Added 21Mar: Here is a related proposal. Also, maybe once a year the government can include info on how to contact your agent in the mail they send you about your taxes. See more comments on the idea here.

Added 22Mar: Most who dislike seem mainly offended by their not being able to pick their agent. But if the relation is much more productive in that case, then target-picked agents should be able to win auctions, and get other agents to sell the role to them.

Added 24Mar: We should also note that this would allow ordinary people to invest more easily in, and diversify more over, a whole new class of assets. That should be worth something in terms of reducing risk for any given average return.

Added 30Jun2021: I tried to write a easier clearer presentation of the idea.

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