Tuesday, July 04, 2006

Nappie Time

Here’s another one of those damned moral conundrums that keep coming up when I consider purist libertarianism: tax breaks for parents. The problems from a libertarian perspective are mainly: one, concerns about social engineering; and two, the view that a tax break for one is actually a tax penalty for another. ("If diapers are tax exempt then people who don't buy them have to make up the tax shortfall.")

Meanwhile, here's two usually unrelated facts: the value-added tax on goods in the European Union is 15 percent. Europe has a below-replacement birth rate and is worried about that.

Now here’s a BBC story about how the European Commission is all a-flutter over whether or not it should make baby diapers exempt from the tax.

Whatever decision the European Commission reaches, I bet it won’t be based on libertarian principles. But what would a decision based on libertarian principles be? I don’t know, but I’ll say this: if this is an attempt at the dreaded social engineering it’s a remarkably inept one. Who’s actually going to say “I was planning to remain childless, but now that the cost of diapers has effectively dropped fifteen percent my whole outlook on parenthood has changed?” Nobody.

What would you have the EC do in this case?


Anonymous Warren said...

Your points regarding social engineering and penalization are well taken. Perhaps a more compelling issue, from a libertarian perspective, is the corrupting influence of complicating the tax code. Beyond whether this is a good idea or if it will work as intended, is whether this is the sort of thing the government should be doing in the first place. With each targeted tax break, the notion that this is the proper function of government becomes more entrenched in the American psyche. Taken all together, these concerns illustrate the need to engage in rent seeking and the futility of picking winners and losers.

10:41 PM  
Anonymous Anonymous said...

Depends on whether the diaper tax money is used to support defense or social services.

If it is used to support defense, then the tax should be slashed and they should go to a wealth based tax for that.

On the other hand, if the tax supports social services, then, yeah, tax the consumption, tax the little person right in the pamper because she will be enjoying the positive social environment that social programs bring about every bit as much as a rich person, and even more than a rich person if she ends up using socialized medicine beyond her lifetime tax inputs.

The guiding libertarian principle here is that you should be paying for the set of benefits you enjoy, but not other people's benefits. This plan would substantially accomplish that objective.

5:54 AM  
Anonymous Wild Pegasus said...

The cost of government is not how much it taxes but how much it spends plus how much it costs to comply with it. Ideally, of course, there is no state at all: all services are private and the tax rate is zero. Taxation is theft, plain and simple.

Vis-a-vis the state, the goal for libertarians is to minimise costs. That means not so much tax cuts but spending cuts and reduced compliance costs. A complex tax code, however well-intentioned, imposes compliance costs much greater than a flat tax. Rather than a diaper exception, cut the rate.

- Josh

9:19 AM  
Anonymous Eric the .5b said...

Why would you (of all people) want tax breaks for parents?

5:44 AM  
Blogger Jennifer said...

Because, Eric, SOMEBODY has to keep the human race going. It certainly won't be me. And in today's environment, being responsible for a little person who can't take care of himself and will be a net financial drain for at least 18 years probably deserves a bit of a break.

If this were the old days where everybody was a farmer, and having extra children actually gave you a competitive advantage (more labor, and you can raise most of their food and clothing on the farm), that would be another matter. But in the modern urban world of ours, children are a net financial loss and I don't think the government should exacerbate that by taxing kiddie necessities.

6:45 AM  
Blogger Robert said...

Children nowadays seem to be the means by which idle old people are able to sustain themselves. Consider the arguments we keep hearing about social security; the pundits and talking heads keep bringing up the number of workers relative to the number of retirees. Anti-abortion rights folks likewise bemoan the deaths of millions of potential taxpayers to keep social security solvent.

Thus, can we not look upon children contributing to the health of a nation's economy in the same way we look upon pigs contributing to the health of a nation's citizens? "We want them the breed so the nation can..."

(a)"...eat nutritious pork."
(b)"...keep individual taxes low by having millions more contributors to social security."

Is it because we are reducing children to the level of a commodity that we are made uncomfortable by certain state policies?

7:53 AM  
Blogger Jennifer said...

Another thought occurred to me as I was driving around today--give parents tax breaks for the same reason we give breaks to charitable organizations. It's behavior that helps society, yes, but does NOT generate a profit at all--if anything, you're talking about people operating as a net loss. We don't tax losses, only gains, right?

9:24 AM  
Anonymous pigwiggle said...

“It's behavior that helps society”

Not always. If the point was to really benefit society then you shouldn’t have a problem with giving tax incentives to folks who are going to have the children that will likely benefit society, no? Like the fit and intelligent. People generally make children who are very much like themselves. So, tax (or not not tax) childbearing morons and congenital cripples.

Or shorter; the breeders always talk of their children as the next generation’s doctors and nursing home attendants, not as the kid who is going to get drunk and run over your dog.

11:54 AM  
Blogger Deep Thought said...

What does "tax shortfall" mean, to a libertarian?

Second, it can be seen as a justified investment in the future - any encouragement that leads to more future taxpayers is a long-term growth strategy, right?

And not all taxes are theft; ask a fireman.

4:49 AM  
Anonymous Wild Pegasus said...

And not all taxes are theft; ask a fireman.

Why? Do they get special philosophical training?

7:51 AM  

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