Government 1B: Lesson 45
The “benefit principle” has been used to justify progressive income taxation. What is the benefit principle? Are there any problems with it?
The benefit principle attempts to create taxation similar to market pricing, where individuals should be taxed in accordance with the benefits they receive from the government. While sounding nice at first, there are a few problems that soon dismantle this taxation principle.
The first problem I see is the comparison to the free market. On the market, all people pay one uniform price for a good or service no matter the subjective value individuals place on it. The more eager person does not pay a higher price, and the expert does not pay more than the novice. The benefit principle claims that individuals benefit in proportion to their income or increased proportion to their income. But, do the rich reap a proportionally greater benefit from the government than the poor? They do not unless the government is responsible for their riches.
The rich do not benefit from welfare or redistributive expenditures, because those are always aimed at taking from the rich and giving to the poor. Maybe the rich benefit more from police protection? No. The rich can pay to live in safe neighbourhoods and for their own protection, i.e. security cameras, security systems, or top-of-the-line door locks. The rich benefit the least from police protection. The poor and vulnerable are most eager for protection, but, in contrast to the benefit principle, they would not pay more on the market.
To pay according to the benefit principle would mean bureaucrats would have to pay all their salaries back to the government since their job is entirely provided by the government. Those receiving a subsidy would have to pay the same amount back. There is clearly no benefit to this principle.
What is the Washington Monument Syndrome?
The Washington Monument Syndrome is one of many manipulation games the government plays on an unsuspecting public, where bureaucrats facing pressure to cut their budgets choose to cancel the most visible public service to create the most public outrage. This tactic started in 1969, when the director of the National Park Service, George Hartzog, decided to close two of the most popular national park attractions, the Washington Monument and Grand Canyon National Park when Congress denied the budget he had requested. Instead of cutting smaller or unnecessary expenses, Hartzog drew more public attention by closing down services that directly affected the public. It was never financially necessary to do so, but the immediate inconvenience it created sparked public outrage over the budget cuts, and Congress then restored the full funding.
Since then, all government bureaucracies have picked up this tactic and have used it to manipulate taxpayers who refuse to pay higher taxes until they beg to pay more taxes in exchange for eliminated public services. Police, firefighters, teachers, garbage collection, and road maintenance service cuts are all examples of the Washington Monument Syndrome. And it always works.
What is the primary problem facing a policymaker who is trying to design a program to benefit people in unfortunate circumstances?
The goal of every program designed to help the poor, addicted, or those in unfortunate circumstances, is to have those individuals no longer in need of such programs and able to take care of themselves. However, history has shown that those on welfare are likely never to get off it. In the book, Losing Ground: American Social Policy, Charles Murray tries to explain why ”the number of people living in poverty stopped declining just as the public assistance program budgets and the rate of increase in those budgets were highest.” Murray comes to the conclusion that it is impossible to devise a social transfer program that would not cause net harm.
Why would an individual try to make more money to get off of welfare, when he can live relatively comfortably on it? The problem every policy maker will face is finding the right amount of money to give to people that need it, but not too much money to encourage them to stay or others to join.
One of the largest problems in today’s economy is the unwillingness of people to work, and it is because most of them are on welfare. The government has made the monthly check so great, that it is more profitable for an individual to sit at home on the couch than go out and get a minimum-wage job. Fewer people are getting off of government help programs, more and more people are joining, and our economy is steadily getting worse.
What have been some of the outcomes, intended or unintended, of anti-poverty programs?
The overall outcome of anti-poverty programs is the destruction of ‘work ethic’ in the population. Children brought up on welfare will also have everlasting negative effects.
- reduced IQ by up to 20%
- Impaired ability to learn in young men
- 3x behavioural and emotional problems
- 2x criminal activity
The argument brought up in favour of anti-poverty programs is that private charity is inadequate. But one simply has to look that the paper money trail bureaucrats leave behind, to see that it would take a fraction of the government welfare budget for private charities to collect and help the poor.
- ⅔ of the government welfare budget is eaten up by bureaucracy.
- According to James Payne, burdens and costs associated with levying and collecting taxes equal 65 cents with every $1 collected.
Thus, the total cost of government delivery of $1 to the poor equals $5. Bureaucracy becomes self-perpetuating, and government calls for more and more taxation.
Conclusion
It is a vicious cycle that the government continues to drag the public through, and the unfortunate people who become addicted to welfare will never have the motivation to get out of it. Bureaucracies that are called to cut their bloated budgets will pull a Washington Monument manoeuvre and the public will demand to throw more tax dollars at an inefficient government program that puts more dollars into the politicians’ pockets than the poor. Round and round we will go until the system utterly collapses and the people will have to pull themselves out of one of the worst depressions history has ever seen.
louisa neudorf 