Perverting isonomy

...or as I call it, the fallacy of isodomy (in poetic fashion)

Isonomy is a great thing, it says everyone should have the same rights. If everyone has the same rights, and since rights can't infringe on one another then isonomy roughly boils down to natural rights (there are degenerate solutions, for example it's possible to have isonomy where no one has any right at all). Well isonomy is more about law than rights, everyone should face the same rules, but if we apply isonomy to the law making process itself, we land back on our feet with isonomy as equal rights.

One may or may not agree with the possible equivalence between natural right and isonomy... that's not really what I want to discuss. There is a tendency among many people, including libertarian, to justify coercition based on a false view of isonomy.

It generally goes like this. A group of people X is being agressed with the exception of individual x. Isodomy claims that x should be facing the same laws as X and therefore should be agressed. There is a long list of example of the isodomy fallacy :

- Calling for the end of "subsidies" to a given industry / sector, even though these subsidies are really tax-cuts, immigration visas, etc. Only taxation should be opposed. Any "distorsion" created in the market is the fault of the State alone, it is not a legitimate motive to tax a company.

- Saying that "all immigrants should face the same waiting periods" (implying the end of "privileged" immigrants who face shorter waiting period) (Ron Paul)

- Claiming that a flat-tax is a "fair-tax" because everyone faces the same rate.

- Historically, allowing women in a government :o) (ok, extreme case here, but really no one should)

I coined the world isodomy from a parable I once wrote on the subject, explaining how being spared by a rapist was hardly a privilege. It's definitely not subtle but I think it conveys the message pretty well, please spread the word :)

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Targeted tax breaks

Re: "- Calling for the end of "subsidies" to a given industry / sector, even though these subsidies are really tax-cuts, immigration visas, etc. Only taxation should be opposed. Any "distorsion" created in the market is the fault of the State alone, it is not a legitimate motive to tax a company."
Whether or not such targeted tax breaks are subsidies, or the moral equivalent of subsidies, they are a bad idea for purely practical reasons. A tax code with many loopholes and targeted breaks costs more to comply with then a simpler tax code. Also they do distort markets. The distortion may be considered to be the fault of the state alone, but that doesn't make it any less real, or mean that eliminating the loophole, doesn't reduce the distortion. Also the targeted break is a way for governments to influence or even begin to control the decisions of individuals and companies. If you get a tax break for doing what the government wants you to do, effectively you get a tax penalty for not doing what the government wants.

I am not saying they are a

I am not saying they are a good idea, and indeed it is more desirable to have even tax breaks than targetted tax breaks. My point is merely that once a tax break has been granted, it is wrong to oppose it. The distorsion is the fault of the state alone, supressing a tax-break punishes companies that are not responsible for the distorsion.

I still can't agree

 

I don't think its wrong to argue against a targeted tax break, esp. when doing so can enable lower tax rates in general.

If you have a lot of targeted tax breaks then people will be pushed by the state to follow the state's directives in order to get the break. Also people who don't qualify for the break have to pay larger amounts of money to the state then if the breaks didn't exist.

 

If you argue against a tax

If you argue against a tax break, you explicitely argue that someone should be robbed. I fail to see how this isn't wrong (in the fullest meaning of the word). If this was not about money but limbs I'm pretty sure you would have a different stance.

re "robbed"

 

If you want to argue that they should pay no taxes at all, then you should do so directly. I can see, and to an extent support the argument that all taxes are theft or extortion. OTOH no taxes means no government, and as much as I want government to get smaller, I'm not an anarchist. I just don't think anarchy works very well. So you going to have taxes.

Assuming you have taxes "fairness" may be a consideration (esp. a political one, but to an extent it may be more than that). Efficancy is certainly a major issue, as is the level of intrusiveness of a tax.

Highly targeted taxes and tax breaks might not be considered very fair. If you want to dismiss the idea, because you don't care about fairness in this context fine.

Perhaps more importantly they are very inefficent and intrusive.

The inefficancy means they will do more damage to the economy (which means real reduction in wealth for real people, not just some abstract GDP figure). The intrusiveness means they are a form of government control.

Getting rid of government control and reducing the harm caused by government policies, strikes me as more beneficial then harmful, and even more good than wrong.

 

Tax breaks are good

If you have a lot of targeted tax breaks then people will be pushed by
the state to follow the state's directives in order to get the break.

Here's an analogy.

You and everybody else are on a small island surrounded by a moat of lava, and you would like nothing more than to get to the mainland, but you're prevented by the lava. The lava moat is taxes.

The island and moat were built and you and your fellows were trapped on the island by the entity known as Leviathan. Leviathan is the state.

One day, an agent of Leviathan appears at the edge of the moat and announces that he will build a bunch of bridges across the moat at specific locations around the moat. The bridges are targeted tax breaks.

Somebody on the island objects as follows: "If you build a lot of bridges around the moat, then people in their desire to leave the island will be pushed to cross the moat where the bridges are located instead of at other places around the moat. This is geometrically unaesthetic. Without the bridges, people will have no particular incentive to go to any particular spot on the edge of the island, but with the bridges in place people will have an artificial incentive to go to the spots around the island where there are bridges. This is bad because it's not perfectly symmetrical, and everyone knows that symmetry equals freedom."

The other people on the island grab the lunatic and throw him into the lava and tell the agent of Leviathan, "never mind him, please, proceed."

Also people who don't qualify for the break have to pay larger amounts of money to the state then if the breaks didn't exist.

That is an assumption, and not necessarily correct. These are two separate acts: creating a tax break and raising taxes generally are two separate acts and either one can be done without the other.

A tax break is a lowering of a particular tax. If you assume that lowering one tax will necessarily raise other taxes (and if you consider this reason enough to oppose), then logically you must oppose all lowering of taxes that are not absolutely symmetrical across the board. Therefore, if the government imposes a tariff that restricts foreign trade, at that point in time (once it has been established), you must oppose the elimination of that tariff on the assumption that its elimination would raise taxes elsewhere.

Maybe you would like to argue that a tariff is itself a targeted tax which targets foreign trade, and that targeted taxes are just as bad as targeted tax breaks because they push people to follow the state's directives (in this case, to buy local). Okay, but this does not address your assumption that the reduction of one tax would necessarily result in other taxes being raised. As long as you assume this (and as long as you consider this to be reason enough to oppose), then you must oppose the elimination or reduction of any tax at all short of a blanket reduction. You must oppose the elimination or reduction even of targeted taxes, on the argument that the reduction of the particular tax would raise taxes elsewhere.

Not a very good analogy

 

The bridges presumably do no harm. Distortions caused by a complex tax code do harm, in terms of complience costs, perverse incentives, and increased government control.

Also people who don't qualify for the break have to pay larger amounts of money to the state then if the breaks didn't exist.

That is an assumption, and not necessarily correct. These are two separate acts: creating a tax break and raising taxes generally are two separate acts and either one can be done without the other.

They are two seperate acts, but assuming an unchanged level of spending (and neither of these acts directly impacts spending) then the spending will have to be paid for. You can borrow the money but that just means you pay for it later. A government can print money but that just causes inflation and pays for the spending by robbing all holders of the currency.

Also beyond the direct cost of the tax, complex tax codes impose a dead weight cost in terms of complience costs, and increased government control.

A tax break is a lowering of a particular tax. If you assume that lowering one tax will necessarily raise other taxes (and if you consider this reason enough to oppose), then logically you must oppose all lowering of taxes that are not absolutely symmetrical across the board.

Even if you assume its a total 100% automatic connection (and I wouldn't go quite that far, in theory its possible that "starve the beast" tactics, could lower spending), there is no necessity to oppose all tax breaks that are not symmetrical across the board. Reducing targeted taxes would reduce complience costs and government impact on decision making, and so would be even better than an absolutely symmetrical tax cut.

In terms of practical effect a 30% tax rate with a 10 percentage point break for jumping through some government imposed hoops, is that same as a 20% tax rate with a 10% penalty for not jumping through those hoops. What I want to do is remove the penalty.

Hmm the blockquote tab doesn't seem to work...

 

 

Re: analogy

The bridges presumably do no harm. Distortions caused by a complex tax code do harm, in terms of complience costs, perverse incentives, and increased government control.

The bridges do exactly the same kind of harm in exactly the same way. Compliance cost: people must move (incurring moving costs) to where the bridges are in order to take advantage of them (compare: people must act in a certain way (incurring some costs) in order to take advantage of the tax breaks). Perverse incentives: same thing. People will react to the presence of the bridges by changing their behavior, possibly in unintended ways. Increased government control: by deciding where to put the bridges, Leviathan determines where people will gather on the island (compare: by deciding what to give a tax break, the government determines what people will do).

They are two seperate acts, but assuming an unchanged level of spending (and neither of these acts directly impacts spending) then the spending will have to be paid for.

I already addressed this point. I presented the argument that tax levels are not determined by spending, but by what the taxpayer will bear.

I may have erred in calling my argument an "analogy". An "analogy" is often rather loose, but this is tight. It is nothing more than an illustration of an abstract point. When Leviathan traps people on the island, that is a harm. When the state taxes people, that is a harm. They are both harms - they are both wrongs. Since what is wrong with taxation is that it is a harm, a wrong, then what is wrong with taxation is the same thing as what is wrong with trapping people on an island. They have the same problem: they are wrongs.

And a tax break is a selective alleviation of the harm. Similarly, building bridges from the island to the mainland is a selective alleviation of the harm. Both are selective alleviations of a harm. And your complaints about tax breaks all derive from the fact that tax breaks are selective alleviations of harm. I will list three points you raised and explain how they arise from the selectivity of harm relief:

  1. Compliance costs. These exist because the selectivity of the alleviation causes people to move towards those areas where the harm has been alleviated. Compliance costs are the costs incurred by people in their effort to move towards those areas where harm has been alleviated. Had the harm not been alleviated selectively, then they would not have moved towards those areas and so would not have incurred compliance costs.
  2. Perverse incentives. It is the selectivity of the alleviation that motivates people to modify their behavior in possibly perverse ways.
  3. Increased governmental control. It is by selecting where to alleviate the harm that the government motivates people to do what it wants.

These problems that you bring up all arise because the harm is selectively alleviated. But that is precisely what happens when bridges are built from the island to the mainland. The island is not reconnected to the mainland as a whole, but rather bridges in particular areas are built. This is selective alleviation. So the "analogy" displays exactly the phenomena which you are complaining about.

The "analogy" reveals the emptiness of the complaints about tax breaks by instantiating the same supposed bad thing - namely, selective alleviation of harm - but doing so in a context which has not yet been thoroughly confused by rhetoric. It's virgin territory, so it's a bit easier to see clearly.

Re: bridges the same as tax law

 

The bridges do exactly the same kind of harm in exactly the same way. Compliance cost: people must move (incurring moving costs) to where the bridges are in order to take advantage of them (compare: people must act in a certain way (incurring some costs) in order to take advantage of the tax breaks). Perverse incentives: same thing. People will react to the presence of the bridges by changing their behavior, possibly in unintended ways. Increased government control: by deciding where to put the bridges, Leviathan determines where people will gather on the island (compare: by deciding what to give a tax break, the government determines what people will do).

The bridges are almost pure benefit. The complience cost to use a bridge is minimal. If you want to make it similar to taxes you could start by requireing tons of paperwork and documentation (with the posibility of severe penalties if you get it wrong) in order to use the bridge. But even that change won't be enough.

You will generally use the bridge if it takes you to where you want to go. Sure the addition of infrastructure will change people's decisions. You might find go to an otherwise slightly less ideal place because its easier to get to on the network of bridges. Also other people might build things you would want to go to at places convienent to the bridges. That's true of any infrastructure. But the likelyhood of harm is much less then the likelyhood of harm from a complex tax code. The bridge will be used if its usful infrastructure. The tax code isn't useful infrastructure. The bridge gets used by people because they find it useful. Yes it effects people's decisions, but its not reasonable (at least in all but the most unusual cases) to call building such infrastructure an attempt to control people). If the bridge isn't useful to you than you won't use it. If the tax break is for something not useful, you might take advantage of it anyway, and do something totally useless, so that less money gets extorted from you.

And a tax break is a selective alleviation of the harm.

In a sense yes, but it also causes harm.

These problems that you bring up all arise because the harm is selectively alleviated. But that is precisely what happens when bridges are built from the island to the mainland.

Providing useful infrastructure is very differant than siezing wealth and giving it back if you follow orders. Even though the infrastructure does change decisions, it is different in that its useful, and also its less likely to cause perverse decisions. And you don't have much complience costs. People moving towards the bridges would at worse fall under perverse incentives, and it is less likely to be perverse than the tax code. The "complience costs" in the bridge scenario are the time and effort it takes to get to and cross the bridge. Normally those would be much lower than the time and effort to calculate taxes due and pay the tax.

Moving from your example/analogy/story/illustration to the real world. To the extent that arguments like yours convince libertarians or libertarian leaning people to oppose removing special tax breaks, they will help the tax code become more complex (over time special interests will get some new tax breaks, we need to eliminate some just to stay where we are in terms of tax complexity and intrusiveness). A complex tax code imposes real dollar complience costs that a significant percentage of the total costs of taxes, and that doesn't even consider the non-dollar costs to personal freedom of greater government control.

It might not be totally unreasonable to argue that major selective tax breaks should be given up only in the context of lowering tax rates. Neither one of us wants the total tax burden to go up (which it would if the rates where the same but many breaks and "loopholes" where removed), but arguing that its always wrong to eliminate existing targeted tax breaks (even in the context of lowering rates) is an argument that can only have poor results in both practical economic terms (both from pervice incentives and complience costs), and in terms of individual freedom from government control.

Re: bridges

The bridges are almost pure benefit. The complience cost to use a bridge is minimal..

That depends on how big the island is and how far apart the bridges are. Maybe it is a long distance to get to them, but still worthwhile in order to get off the island. Well. I'm worried that you may be getting caught up in the particulars of the scenario, so I'll move back to a purely abstract level of discussion. A tax is a harm and a tax break is a reduction of the harm. Whether the tax break is targeted or blanket, it is still a reduction of the harm.

If a targeted reduction of the harm causes people to incur costs (compliance costs) in order to benefit from the reduction of the harm, that is still (from their point of view) a reduction of the harm, because they would not incur those costs if they did not think that on balance they would benefit from changing their behavior in order to avail themselves of the targeted reduction of the harm. So a tax break is (from the point of view of the taxpayer) a reduction in harm even though he incurs compliance costs.

This conclusion is not affected by the magnitude of the compliance cost. However big it is, the taxpayer will not comply unless he believes that, adding up the compliance cost and the tax break, the net result is a reduction in harm.

Reduction of harm

Yes the tax breaks will normally be a reduction in harm for the specific individual who gets the tax break. But they are not the only person affected by it.

Many others have to spend extra time and effort to prepare their tax returns do to the extra complexity of the tax code. And the distortion in the economy also has wider effects. In some cases the compliance costs and distortion of the economy probably cause more dollar harm then the value of the tax break itself, when you include this harm to 3rd parties. And that's just the dollar harm. I'd consider having greater government control to be additional harm above and beyond the dollar cost.

Also the benefit to the people who receive the tax break is less than the amount of the break (because of their costs) and the difference is a dead weight loss. From a non-libertarian viewpoint it might be considered better for the government to have those resources, rather then them simply being wasted. I'm not so sure I would agree with that idea, but at least the trade off of giving up the tax break in exchange for lower rates (and thus not increasing the government's take, when you decrease the deadweight loss) would almost always be positive.

To put in another way a tax is a harm. A tax break is a reduction in that harm, but 1 - Its less of a reduction than the amount of the tax break, and 2 - It implies the result of a more complex and intrusive tax code, and a such a tax code is a harm as well.

Which doesn't mean all tax breaks are automatically bad, or that supporting removal of the breaks (esp. when you can't get a rate reduction out of the deal) is automatically good. But at least if the government's take is steady (or less) wouldn't a simpler tax code be massively preferable?

Re: reduction

Fair points, with the possible exception of "I'd consider having greater government control to be additional harm above and beyond the dollar cost." I wonder if you might not be double counting here. If some antagonist limits my options (thus exercising control over me), so that my remaining best option is worse than it would have been otherwise, then it is easy to show that he harmed me and by what means: he has harmed me by reducing my options. My options are reduced, my best option is not as good as before, and so I am harmed, and that is the harm visited on me. You seem to want to add the control that he exercises over me (by reducing my options) as an additional harm over and above the reduction of the options itself. But that seems to me to be double-counting the same harm.

Double counting?

I'm not so sure it is double counting, as much as it is breaking down what you see as one thing in to two peices (if you do recognize both parts but where lumping them together), or pointing out a different, harder to measure form of harm.

There is the harm done by the fact that the option you are encouraged or pushed to pick is less beneficial to you (has a lower return, costs more, isn't as enjoyable, whatever), and there is a harm from having the government influence or even control, more and more decisions that goes beyond the direct harm.

Imagine the government forces you to make a choice. Now imagine that choice is a very good one, perhaps its even a rare case where the government's choice for you might be better than your own. If your forced, I'd say that is still a harm done to you, even if other then the force, the choice turns out to not be harmful, and even beneficial.

In this case there is less direct massive force on your decision. No on is going to shoot you if you decide not to structure your finacial affiars so as to take advantage of tax breask, but still the tax is implimented by force, and you still get penalized by it if you don't go along, its just that the penalty is a much smaller one than being shot. In this case you get harm from the reduction of options, even if the choice left to you (or the choice forced on you) is beneficial.

There is harm from reducing or controling your options, and there is harm from having the option you pick (presumably the best one left) be less beneficial. They may be both caused by one action, but they are still two forms of harm

---

 

 

Try this approach

There are two elements here:

a) The reduction of your options.

b) The influence over your actions.

These can be separated as follows: influence can be separated from reduction of options by letting the mechanism of influence be an increase of options. An example of this is the offer of a reward. I might offer you money if you paint my house, for example.

In this way we can separate influence from reduction of options. But such influence is no harm. In fact it is the basis of a market economy. Thus it seems to me fairly clear that influence itself is no harm. What is a harm is the reduction of options.

re: your approach

I'm was not seperating reduction of your options from influence over the actions.

I was seperating the poorer results from the opinions you wind up picking, from either of those ideas.

If I'm pressured to accept on option that costs me $10 instead of an option that costs me $5, I didn't just have the cost of $5, I have the cost that I have less choice.

As for influence not being harmful, well it isn't inherently harmful. But the government having more influence is harmful. Its one more way you expand government power. If the government taxes away $1bil in order to give incentives to people to act in certain ways, then maybe the main harm is the billion dollars people have to pay in taxes, but the increasing influence and power the government has is harmful to freedom, and incentives based around political choices are more likely to be perverse incentives then the incentives that are the basis of a market economy.

re: approach

I was seperating the poorer results from the opinions you wind up picking, from either of those ideas.

If I'm pressured to accept on option that costs me $10 instead of an option that costs me $5, I didn't just have the cost of $5, I have the cost that I have less choice.

But you do not have less choice if you have a tax break. If there is a tax break, you actually have greater choice than before. Let's look at a toy situation. You can eat a PB&J sandwich or a tuna sandwich. I will now describe three tax regimes:

A) You are not taxed at all, whatever you do.

B) You are taxed if you eat a PB&J sandwich, but not if you eat a tuna sandwich.

C) You are taxed whichever sandwich you eat.

In (A) you have greater choice than in (B), and in (B) you have greater choice than in (C).

In (C) you must pay a tax. You do not have the choice not to pay a tax. In contrast, in (A), you have a choice (a no-brainer choice but a choice nonetheless) of either gifting that same amount to the government, or keeping it. So what is an option in (A) (either keeping or giving the money) is no longer an option in (C). In (A) you have four options:

A1) Eat tuna, do not pay.

A2) Eat tuna, pay.

A3) Eat PB&J, do not pay.

A4) Eat PB&J, pay.

In C you only have two choices:

C1) = (A2)

C2) = (A4)

In B you have more choice than in (C) but fewer choices than in (A):

B1) = (A1)

B2) = (A2)

B3) = (A4)

If government had previously imposed (C) and then changed that to (B), then that is a tax break (on tuna sandwiches). It will tend to cause people to switch to eating tuna sandwiches so as to take advantage of the tax break, but it does so not by decreasing choice, but by increasing choice. Since people will tend to eat more tuna sandwiches in order to take advantage of the tax break, one can say that they are "pressured" by the tax break to eat more tuna. But since it's a move from (C) to (B), this "pressure" is actually the result of an increase in choice. Under (B), you can do (A1), which you were not able to do under (C).

 

The comments are getting narrow

 

The way comments work here, replies to replies get narrower and narrower. Instead of replying here I've made my fist post on this blog

http://distributedrepublic.net/archives/2007/07/31/do-targeted-tax-breaks-give-you-more-choice

Harm

"When the state taxes people, that is a harm. They are both harms - they are both wrongs."

Well, many things 'harm' me. Like paying my fuel bills. The question is whether it is just.

I actually flipped my opionion on this twice. I used to think that taxes weren't obviously 'wrong'. Then at one point I decided that they were in fact always a violation of rights. Now I've changed my mind back again.

I've also decided that full blown pacifisim is a form of freeloading, and that pacifists in fact endanger their neighbors. Given sufficient quantities of them it's clear they become an a base upon which criminality can build power to attack the non-pacifist.

I think taxes are a valid way of ameliorating this freeloading, and endangerment. If you aren't going to pay to keep the rats off your property that are coming over onto mine then I have the right to 'tax' you to deal with the problem.

blockquotes

Tim, I fixed your blockquotes by using the "indent" button on the WYSIWYG editor.

"The other people on the

"The other people on the island grab the lunatic and throw him into the lava and tell the agent of Leviathan, "never mind him, please, proceed."

They threw him into the taxes? I'm confused...

As long as you assume this

As long as you assume this (and as long as you consider this to be reason enough to oppose), then you must oppose the elimination or reduction of any tax at all short of a blanket reduction.

I'm not sure exactly what "blanket reduction" means.

The only changes in law I approve of are Pareto improvements. Is that close to what you're saying?

Probably

Pareto improvements (i.e. hurting no one) sounds like something I would endorse. But that comment you're responding to is over a year old. I have things I'd rather do than re-read stuff I wrote over a year ago to see whether you interpreted it correctly.

One other example that

One other example that spring to mind is the case of Blackstone IPO where a "loophole" allows them to keep being taxed at 15% as capital-gain. Many otherwise libertarian voices say "it's unfair". Of course what's unfair is the other companies being taxed.

Isodomy Fallacy

Your isodomy fallacy is only clearly a fallacy if one accepts other things upon which you might be mistaken.

For instance if I am not sure whether a particular law is the right or wrong thing to do then isodomy is the way to go in a society because morality is based on reciprocity.

If I'm not sure that "taxation is theft" then making sure that tax law is 'fair' is the best approximation to 'just'.

BTW, you can add to your list of isodomy fallacies the belief that if a citizen is allowed to go anywhere in the country then based on isodomy an non-citizen should also be allowed. Isodomy fails if the individuals are not in fact equal. As say owners and non-owners are not equal, or members and non-members, contributors and non-contributors, etc.

The isodomy fallacy is

The isodomy fallacy is generally present when the person acknowledges that the situation is unfair and wishes to make it fairer by making it unfair to everyone.

Incoherent Equivalence

- Claiming that a flat-tax is a "fair-tax" because everyone faces the same rate.

This is an example of something I'm pondered for a long time, though I don't think I've written about it. I've been calling it Incoherent Equivalence(TM).

I believe I was reading a piece by James Buchanan when it first occurred to me as I think of it now. Buchanan just blandly asserted that a progressive tax fairly distributed the costs of government. I asked myself why that was fair but a flat tax or a poll tax would not be. I'm well aware of the fairness arguments that proponents of these various taxes offer, but can find no basis whatsoever for giving any of the arguments priority. I realized it's simply incoherent to say that taxes should or even can be divided fairly.

I guess I'm saying that isonomy simply doesn't exist in many contexts where people assume it does. I think what you would call an appeal to perverted isonomy is what I would call an appeal to an incoherent equivalence.