KSS eKourier July 2022

NEV’S NOTES

NEV'S NOTES

Neville Kennard (1937 - 2012) Founder of Kennards Self Storage, enjoyed and was very passionate about expressing his ideas. These little gems have been appreciated by many in KSS. We will continue to publish his ideas that we have in stock. Enjoy!

THE TRAGEDY OF THE TAX POOL COMMONS

The Tragedy of the Commons” is an expression well-known in economic circles. It was expressed first in 1968 by Hardin in Science Magazine referring to land that is not “owned” but is able to be used by many. The “commons” can apply to land, to waterways (polluting and overuse), oceans (fishing), air (pollution). Can it also apply to the “Tax Pool”, that pool of funds collected from the taxpayers and available for distribution to those with a claim to some of it.

There is no limit to those who would make claims on a bit of this Tax Pool Commons. There are politicians who seek to get (re)elected by dispensing favours and privileges. There are policy-making bureaucrats who seek to expand their power and influence by “programs”. There are industry groups, trade unions, special-interest groups who seek some benefit by getting “grants” and handouts, or who promise electoral support if they get a benefit. Imagine if a corporation were to have some of its capital “un-owned” — if some of its assets or funds, or shares were a “commons” available for anyone or any group to claim and use. Imagine the change in attitude to this “commons” part of the company’s assets in a time-preference sense. Where a company invests for years ahead, for decades often, decisions for use of company assets are made with a long horizon, a long-term time-prefer- ence. Compare this with governmental use of funds. Government departments have a short-term time-preference — use it this year or it will not be there (in our budget) next year. Saving and economising is not in the mind-set of a government department. And Parlia- ments have an electoral-cycle mind-set — spend it soon so we get elected next time. Or save it on this program and then we can spend it on that one with a better vote-catch. No-one owns the un-owned pool of taxes. It is there for the taking by government departments and by governments. There is little incentive to

privatise this obscurely-owned pot of funds?

use it carefully, to save it for tomorrow, to reduce the size and growth of it. In fact the incentive for the would-be users of the Tax Pool Commons to expand and enlarge the pool, to increase and expand the tax-take so there is more to take out. Many (but not all) of the Tax Pool Consumers are not Net Tax Contributors, but are Net Tax Consumers, so there is little incentive for them to reduce taxes or make the pool smaller. There is ever-increased blurring of the line between Tax Consumers and Tax Producers. The government ensures that more Tax Producers are also to some extent Tax Consumers. And even for the Tax Pool Consumers who are in the private sector and who are Net Tax Producers, if they can get access to the Tax Pool they are benefitting at a cost of the Tax Rate — say 30 cents in the dollar. So if an Industry Group can gain for its members some bit of the Tax Pool they will gain a 70% advantage. In the case of land, it is not hard to lease or sell the land so it is in private hands and no longer a “commons”. Waterways too can be privatised, or partially privatised or users can be charged fees. With oceans and fishing, this Commons is typically addressed to some extent with licensing where possible. Usage rights licenses are dispensed to limit over-use. Further partial privatisations will no doubt occur in the future in regard to “International Waters”. What to do about Privatising a Commons?

Governments are very adept at obscuring any sense of ownership of this Tax Pool Commons. Taxes are diverse and complex and many. Many are small individually. The more central- ised the government and the Tax Pool, and the more diverse and wide-spread the Taxes and the Tax Producers the less any sense of ownership. The answer is really very easy — reduce the size of it. The funds in the Tax Pool Commons are really owned by the Tax-Payers; so the less the Tax Payers pay the more “private” are the funds that are kept out of the Pool. Funds kept out of the Tax Pool Commons get invested, saved, spent and are no longer available for politi- cians, bureaucrats, special-interest groups to seek to access. This reduction of the Tax Pool Commons can go on indefinitely until the Pool shrinks and shrinks. Isn’t this what Karl Marx called “the withering away of the state”? Except that it is happening under capitalism and not under communism. So as with the privatising of other Commons, the Tax Pool Commons gets privatised by non-payment, non-contribution, by legalised reduction to the inflow into the pool. Thus the capital and savings of individuals and companies expands, investment improves, spending on consumer goods increases, and the Tragedy of the Commons gets progressively eliminated.

July 29th, 2010

But the Tax Pool Commons? How to

22 Kennards Kourier July 2022