Once upon a time income taxes were difficult to collect, because income was hard to cheaply monitor. So governments used less efficient taxes, and arguably this was a reason the size of government was lower. Today it seems that we can cheaply monitor the act of paying wages, and so income taxes are feasible, and government is larger.
Income taxes are inefficient, however, because people respond by substituting leisure and home production for wages. But this inefficiency need only apply if we assume that we cannot cheaply monitor time spent working for wages. And as the technology of surveillance improves, it should get easier to monitor this. Perhaps in the future, the government will randomly check on each person ten times a year, and see if they are working for wages at that moment. Taxes would then depend the fraction of times that, when checked over the last few years, they were found to be working for wages. Of course to implement this each person will need a cell phone, beeper, or some way to be contacted at random times when they are working for wages. But since most people will have such things for other reasons, the presumption will be that the exceptions are doing it to avoid taxes, and so failure to contact will be coded as not working for wages. Anyone ever estimated the size of the deadweight loss from the income tax distortion? Robin Hanson [EMAIL PROTECTED] http://hanson.gmu.edu Asst. Prof. Economics, George Mason University MSN 1D3, Carow Hall, Fairfax VA 22030-4444 703-993-2326 FAX: 703-993-2323
