unleashing leviathan: public goods under involuntary taxation
DESCRIPTION
UNLEASHING LEVIATHAN: PUBLIC GOODS UNDER INVOLUNTARY TAXATION. Johnnie B. Linn III Concord University Athens, WV 24712. This Model. Many competing firms, each in its own arena, facing “outliers” who use force only. Ratio Rule Government enters arenas. - PowerPoint PPT PresentationTRANSCRIPT
UNLEASHING LEVIATHAN: PUBLIC GOODS UNDER INVOLUNTARY
TAXATION
Johnnie B. Linn IIIConcord UniversityAthens, WV 24712
This Model
• Many competing firms, each in its own arena, facing “outliers” who use force only.
• Ratio Rule• Government enters arenas.• Government is viable if individuals are better
off with government than in anarchistic arenas.
Outliers
• Outliers are force-using individuals who do not act collectively on the margin (they are like an open-access fishery).
• In short run, number of outliers is an environmental variable, like a price.
• In long run, per-capita winnings of outliers is comparable to the wage they would have earned if employed as workers or guards.
Government
• Tax collectors receive residual they extract from firms beyond amount they are required to forward to government.
• Tax collectors act on the margin at the direction of government.
• Government force is a public good.• Individuals have recourse to government force
in private disputes; and government against firms, but not firms against government.
The Force Ratio Rule
(1)
Input Elasticities
(4)
(5)
Government Force Input Elasticity
(6)
Tax on Outlier Income
• Tax is defined on range [0, ]
(7)
Competitive Equilibrium
(13)
Range of Share-of-Winnings Function
0 1
I II III
0 1
1
Range of the Competitive Equilibrium
0
1
1
Q
Outliers’ Share of Income
(14)
Tax on Firm Income
(7’)
Competitive Equilibrium
(13’)
(14’)
Firm’s First-Order Conditions
(8’)
(9’’)
Estimators of Firm Parameters
(17)
(18)
Government Budget Condition
(15)
Use of the Surplus
Public GoodTax Collectors
TB
TC
Surplus
Gross Winnings
Non-Public-Goods Outlays
Government Winnings under Exponential Force Function
(19)
Estimator of Government Parameters
(16)
Government Superior to Anarchy
(21)
Results
CATEGORY SOURCE 2002 2008 DESIGNATORAfter-Taxes Tax Rate OECD 0.36 0.37 t
Tax Collector IncomeOES Sector 99 (13-2081)
$3.2 billion $3.5 billion wT
Tax CollectorsOES Sector 99 (13-2081)
69,320 66,030 T
Law Enforcement IncomeOES Sector 99 (33-0000)
$73.4 billion $91.1 billion
Non-Public-Good Gov’t Worker Income
OES Sector 99 (00-0000 less 33-0000)
$340.70 billion $378.3 billion wT0
Non-Public-Good Gov’t Capital Outlay
U.S. Census Bureau
$96.1 billion* $105.9 billion* wK0
Outlier Income FBI $17.1 billion $17.8 billion wUGuard Income OES 33-9032 $20.6 billion $27.0 billion wGGuards OES 33-9032 977,650 1,046,070 GGov’t Surplus Multiplier 3.31 3.99 bTax Collector Advantage 6.43 8.83 c
Worker IncomeOES 00-0000 (less sector 99) less OES 33-9032
$4045.2 billion $5,204.4 billion wL
Statistic for 196.37 192.76
Statistic for 1.20 1.52
Threshold before-tax rate for government viability
0.108 0.093
*Inferred from ratio of capital outlays to employee compensation in 1992.