Diet Pork

by Robin Hanson

The following post and replies appeared on the (public) Alternative Institutions mailing list in January 1994.
From: (Robin Hanson)
Date: Fri, 14 Jan 94 15:20:54 PST
Subject: Let Federal Taxes Vary by Congressional District

[Here is an example of a reasonable altinst post. It is on a political
subject, but does not engage political debate.]

Anton Sherwood's proposal for balancing the budget seems worth a
closer look.  But I'd like to describe a simpler way to deal with the
same problem.

[First I described the problem to solve.  Once a post declares the
problem it wants to solve, it is out of bounds to reply that this is a
dumb problem to solve.]

Congressfolk seeking re-election seek, among other things, concrete
benefits they can bring to their district, which they can claim clear
credit for.  Thus they focus on getting dams, grants, etc. directed to
their district, and seek tarriffs or subsidies for industries
especially concentrated in their district.  

They tend to give only lip-service for issues, like say health-care
reform, which might benefit everyone in the nation, and which lots of
congressfolk would be involved in developing -- the benefits and the
credit to be claimed are both diffuse and unconcentrated.  And when
credit is diffuse, each contributor has incentives to slack off and
let the others do all the work.

So a standard argument why congress overspends, or spends more than it
gets, is that each congress-person seeks concentrated benefits that
cost taxes, while the general tax rate is a diffuse benefit.  It's
hard to win re-election by claiming to have lowered taxes for all
Americans, with the help of several hundred other congress-folks.

[Here I have given a short analysis of the problem to be solved, just
to lead into and motivate the solution.  But the solution is the main

So my simple proposal is to allow federal tax rates to vary by
congressional district.  Given this, taxes would suddenly become a
concentrated benefit.  Incumbents could brag about how much lower
taxes were in their district, and challengers could complain how high
they were.  Incumbents would have clear incentives to trade votes to
get taxes lowered in their district, and the credit would be clear -
who else would want to push for lower taxes in that district?

[Here I have proposed one institutional solution to the problem.  Just
one main solution per post, not a laundry list of possible solution
directions folks might consider.  Further posts with the same subject
line should respond to this proposal.  Other proposals to solve this
or other problems should use other subject lines.] 

Robin Hanson
818-683-9153  2433 Oswego St., Pasadena, CA  91107   FAX: 818-405-9841
818-395-4093  Div. Hum. & Soc. Sci. 228-77 Caltech, Pasadena, CA 91125

Date: Sat, 15 Jan 94 12:17:01 EST
Subject: re: Let Federal Taxes Vary...

While I generally applaud the idea of providing an incentive for 
politicians to reduce government, I feel this proposal would encourage
them to reduce federal revenue below the point where it could perform 
the functions for which it is suited, i.e. national defense, 
infrastructure, etc. While the current system lets them ignore the cost
of the programs, I think the proposed system would allow them to horde 
their money within their state without regard to the things the country 
as a whole needs.

Bob Fite, Houston, TX

From: (T. David Burns)
Date: Sat, 15 Jan 1994 22:58:27 -0500
Subject: Re: Let Federal Taxes Vary by Congressional District

robin wrote:
>my simple proposal is to allow federal tax rates to vary by
>congressional district.  Given this, taxes would suddenly become a
>concentrated benefit.

How Wicksellian! Unfortunately, debt and money creation are still diffuse.
If you could also vary the amount of debt by district that would go a step
closer. We would need to limit constitutionally the fedgovt's ability to
issue debt, allowing the various districts to decide whether to pay taxes
with cash or by borrowing. Would that put a 'better' limit on how much
could be borrowed, since each district's credit rating is different from
the feds'?

How shall we plug the money loophole?

Bob Fite wrote:
>I think the proposed system would allow them to horde
>their money within their state without regard to the things the country
>as a whole needs.

I don't see anything in Robin's proposal that would allow hording.
Allocation would remain as it is. But this points to a cute economist-type
question which amounts to something very similar: what if some districts
simply pay no taxes?

Dave              (T. David Burns)
Date: Mon, 17 Jan 94 02:30:55 EST
Subject: Re: Let Federal Taxes Vary by Congressional District

While the idea of letting taxes vary by district is provocative, maybe the
more interesting extension is to tie the tax rate to the amount of federal
benefits directly received by each district.
Thus, districts that receive a lot of pork would be charged with paying for
it as well, relatively speaking. That might reduce, even discourage the
normal and politically understandable drive to bring more goodies to the home
Date: Tue, 18 Jan 1994 11:33:14 -0500 (EST)
Subject: Let Federal Taxes Vary by Congressional District

The function of taxation is different in different people's minds.
Let me give some possible purposes of taxation:
- Get as much money as possible for the government (optimal solution 
here is a straight payroll tax on labor, such as Medicare tax is now
(Social Security only on first $60,000 of income), and no other taxes
- Collect sufficient amount with as little interference in social
affairs as possible (optimal solution again as above).
- Equalize incomes with no regard for social and economic effects 
of the tax strategy (I do not know of any research into this area,
but I think that communism is the optimal solution here)
- Balance equalizing incomes with not killing the economy too
quickly (this seems to be the current U.S. approach, an impossible
dream, in my opinion).
Robin's idea is interesting, but the point I am trying to make is
that one's purpose needs to be specified. Why should taxes vary by
district? What do we want to achieve this way?
In relation to this I would like to bring to yall's attention two
important points
- The tax which maximizes after tax income to labor is the straight
payroll tax on labor only (no tax on capital or businesses, any such
taxes cost labor its income, dearly I should say)
- If marginal combined income tax rate exceeds 50%, it is far more
profitable to hide the last dollar of income than to make an extra 
buck. Add Social Security/medicare, federal, state and local 
marginal rates and ... weep?