Academic Commons

Reports

Tax-collection costs, public welfare and the predatory state

Findlay, Ronald E.; Wellisz, Stanislaw H.

The collection of taxes, in any economic system, clearly requires the use of resources. In modern democratic states tax legislation is almost always controversial, and subject to extensive lobbying. In developing counties the wealthy often successfully avoid payment of taxes and the burden has to be borne by relatively impoverished rural classes, who are themselves not easy to tax directly because of poor record -keeping and difficulty of communications. In earlier times kings and princes often lacked the necessary means of direct taxation and were forced to rely on decentralized institutions such as feudalism. To convince the skeptical reader that the issue of tax-collection costs is neither trivial nor obvious, we pose the following question. What is the effect of greater efficiency in tax collection on the welfare of the tax-paying public? If the government is benign, taxing only to defray socially necessary public expenditure, a reduction in the costs of collecting these minimal taxes would clearly be a 'good thing'. What, however, if the state is inherently "predatory" in nature, as argued by Brennan and Buchanan (1980) and a number of others? In this case the state taxes not only to pay for public services but also to raise revenue for its own, possibly nefarious, purposes. Would an increase in the efficiency if tax-collection be undesirable under this alternative scenario?

Files

More About This Work

Academic Units
Economics
Publisher
Department of Economics, Columbia University
Series
Department of Economics Discussion Papers, 0304-02
Published Here
March 24, 2011

Notes

September 2003

Academic Commons provides global access to research and scholarship produced at Columbia University, Barnard College, Teachers College, Union Theological Seminary and Jewish Theological Seminary. Academic Commons is managed by the Columbia University Libraries.