# Economics/Psychology of Taxation **URL:** \ **Category:** Great Debates\ **Created:** [July 1, 2012, 12:46am UTC](https://boards.straightdope.com/t/economics-psychology-of-taxation/626865 "2012-07-01T00:46:46Z")\ **Posts on this page:** 17\ **Page:** 6
**Author:** ![Frylock](https://avatars.discourse-cdn.com/v4/letter/f/ce7236/32.png) [@Frylock](https://boards.straightdope.com/u/Frylock)\ **Post date:** [July 5, 2012, 7:30pm UTC](https://boards.straightdope.com/t/economics-psychology-of-taxation/626865/101 "2012-07-05T19:30:21Z")
> [@Jas09](#): > > That’s exactly what I’m saying. Given that, I was interested to know what you’d say in response to **Indistinguishable** ’s next paragraph: > [@Indistinguishable](#): > > Well, that’s quite possibly true, but it’s an example of what I would happily consider foolishness in people’s decision-making process. Yes, it behooves the offerer to communicate their offer in such a way that people respond optimally to it, exploiting or defending against foolishness as need be. But if the offerer fails, for whatever reason, to choose the framing of their offer that would lead to greatest popularity, intelligent people should not denigrate the offer, qua offer, merely for having not been marketed better. ---
**Author:** ![Frylock](https://avatars.discourse-cdn.com/v4/letter/f/ce7236/32.png) [@Frylock](https://boards.straightdope.com/u/Frylock)\ **Post date:** [July 5, 2012, 7:33pm UTC](https://boards.straightdope.com/t/economics-psychology-of-taxation/626865/102 "2012-07-05T19:33:36Z")
> [@Maeglin](#): > > Abortions for some, American flags for others. I don’t understand you. > [@](#): > > I suppose I am a little bit jealous, all told. The author has a knack for taking simple ideas by other people, wrapping them in pretentious language, and repackaging them. Deep down, I’d love to be a well-paid hack. Is there something I don’t know about this author? I thought he was just showing how you can make things seem different by describing them differently. Not a mind-blowing revelation, but a nice thing to be reminded of occasionally, and a fairly well-done demonstration, is what I thought. All this stuff about it being “bonkers,” “pretentious,” “hack”-like, etc, I’m not seeing at all. And what’s this about “taking simple ideas by other people and repackaging them?” Is there a reference here I’m not familiar with? Which ideas are you talking about? Which other people? ---
**Author:** ![Jas09](https://avatars.discourse-cdn.com/v4/letter/j/d07c76/32.png) [@Jas09](https://boards.straightdope.com/u/Jas09)\ **Post date:** [July 5, 2012, 7:35pm UTC](https://boards.straightdope.com/t/economics-psychology-of-taxation/626865/103 "2012-07-05T19:35:00Z")
> [@Frylock](#): > > Given that, I was interested to know what you’d say in response to **Indistinguishable** ’s next paragraph: Well, I’d say I agree with it, assuming I’m understanding the main points. 1. Different types of financially equivalent policies have different results due to psychological factors 2. Policy-makers should consider these factors when drafting policy 3. Just because a policy is sub-optimal doesn’t mean it’s automatically bad policy ---
**Author:** ![Indistinguishable](https://avatars.discourse-cdn.com/v4/letter/i/90ced4/32.png) [@Indistinguishable](https://boards.straightdope.com/u/Indistinguishable)\ **Post date:** [July 5, 2012, 7:37pm UTC](https://boards.straightdope.com/t/economics-psychology-of-taxation/626865/104 "2012-07-05T19:37:38Z")
> [@Frylock](#): > > I don’t understand you. It is a reference to a joke on The Simpsons about market-segregatingly pandering political candidates, in case that part was unclear to you. ---
**Author:** ![Frylock](https://avatars.discourse-cdn.com/v4/letter/f/ce7236/32.png) [@Frylock](https://boards.straightdope.com/u/Frylock)\ **Post date:** [July 5, 2012, 7:39pm UTC](https://boards.straightdope.com/t/economics-psychology-of-taxation/626865/105 "2012-07-05T19:39:51Z")
> [@Indistinguishable](#): > > It is a reference to a joke on The Simpsons about market-segregatingly pandering political candidates, in case that part was unclear to you. I get it now. It was hard to understand because it has nothing at all to do with what I said. ---
**Author:** ![Indistinguishable](https://avatars.discourse-cdn.com/v4/letter/i/90ced4/32.png) [@Indistinguishable](https://boards.straightdope.com/u/Indistinguishable)\ **Post date:** [July 5, 2012, 7:42pm UTC](https://boards.straightdope.com/t/economics-psychology-of-taxation/626865/106 "2012-07-05T19:42:16Z")
> [@Jas09](#): > > Well, I’d say I agree with it, assuming I’m understanding the main points. > > 1. Different types of financially equivalent policies have different results due to psychological factors > 2. Policy-makers should consider these factors when drafting policy > 3. Just because a policy is sub-optimal doesn’t mean it’s automatically bad policy I’d say I was considering financially equivalent policies to be equivalent qua policies, but perhaps better or worse in their marketing. And that intelligent people\* should not denigrate them, qua policies, for flaws in their marketing. They can denigrate them as poor politics, but not poor policies. (\*: By which I mean people in the mood to try to reason intelligently, not some particular elite class of fixed people) ---
**Author:** ![Maeglin](https://avatars.discourse-cdn.com/v4/letter/m/8baadc/32.png) [@Maeglin](https://boards.straightdope.com/u/Maeglin)\ **Post date:** [July 5, 2012, 7:52pm UTC](https://boards.straightdope.com/t/economics-psychology-of-taxation/626865/107 "2012-07-05T19:52:00Z")
> [@Frylock](#): > > I get it now. It was hard to understand because it has nothing at all to do with what I said. Yes, it does. This isn’t just a matter of different messaging to the abstract and concrete types and getting everyone to magically improve their cognitive deficiencies. This has to do with material differences between consistent ideas of social justice in which labels, concepts, and starting positions matter and the idea of social policy as a basket of incentives whose starting points and labels are subordinate to the revenue. I think the current state of our discourse and politics suggests that this is not a false dilemma. But I am open to other interpretations. As for my opinions of the Less Wrong blog, well, that seems to be less relevant strictly speaking to the discussion. I am going to ask you to believe me that I do not like it. I would think that _anyone_ using the world dukkha outside some very specific contexts would immediately be considered pretentious, and I read Sanskrit, too. But the world never ceases to surprise me. ---
**Author:** ![Jas09](https://avatars.discourse-cdn.com/v4/letter/j/d07c76/32.png) [@Jas09](https://boards.straightdope.com/u/Jas09)\ **Post date:** [July 5, 2012, 7:57pm UTC](https://boards.straightdope.com/t/economics-psychology-of-taxation/626865/108 "2012-07-05T19:57:12Z")
> [@Indistinguishable](#): > > I’d say I was considering financially equivalent policies to be equivalent qua policies, but perhaps better or worse in their marketing. And that intelligent people\* should not denigrate them, qua policies, for flaws in their marketing. They can denigrate them as poor politics, but not poor policies. > > (\*: By which I mean people in the mood to try to reason intelligently, not some particular elite class of fixed people) Hmm. In that case I might have to tentatively remove my agreement. 🙂 I’m not sure I buy the distinction between policy and politics here. Or, put differently, the policy is the marketing for the _action_ being encouraged/discouraged. Tax breaks for electric cars is a form of marketing electric cars. Advertising the tax breaks would be marketing for the policy. There are undoubtedly times when good policy is poorly marketed. But there are also times where equally good policies (in the strict financial sense) are rendered unequal due to their failure to equally encourage the desired behavior. No amount of marketing of the policy will correct this gap in outcomes if we believe what the social science is telling us. A quick example: We, as a nation, decide that encouraging fuel-efficient cars is something we want to do with tax policy. Two different regimes are considered: (a) a tax credit if you purchase a fuel efficient vehicle or (b) an equivalent per gallon hike on the gas tax. This can be structured such that it is financially equivalent (the loss of the credit is the same as the increase you pay at the pump). I’d hypothesize that (b) is more likely to increase the fuel efficiency of purchased vehicles because people respond more readily to a repeated loss than to an equivalent future gain. And because of that, (b) is better policy, in the sense that it better accomplishes our stated goal. The point here is that no amount of marketing of the tax credit will give it equivalent results, just like no amount of promising you’ll pay the test takers will do as well as giving them money and then taking it away. It’s somehow hard-wired. Alternatively, you could throw up your hands and use these cognitive “flaws” to argue that we shouldn’t try to modify this behavior through public policy in the first place. ---
**Author:** ![Maeglin](https://avatars.discourse-cdn.com/v4/letter/m/8baadc/32.png) [@Maeglin](https://boards.straightdope.com/u/Maeglin)\ **Post date:** [July 5, 2012, 7:58pm UTC](https://boards.straightdope.com/t/economics-psychology-of-taxation/626865/109 "2012-07-05T19:58:21Z")
> [@Jas09](#): > > Yeah, it’s definitely been mixed. Humans are complicated, and attempting to influence behavior is difficult at best. Whether it’s even worth trying is an entire separate discussion. > Right. It goes to the heart of complaints over generous social safety nets as well - paying people not to work _feels_ unjust somehow, even it it actually increases prosperity for everyone else. There’s plenty of social science on this effect as well - that people will voluntarily reduce their own reward in order to punish people that cheat the system or somehow violate the rules. > Interesting. I hadn’t seen that one. It doesn’t seem implausible (nor does the one paying the students). Your giving the student a reason to think that they matter as individuals rather than just cogs in the school machine. > > There does seem to be something wrong with the current incentive structure for schooling - there is little real-time punishment for doing poorly and any incentives for doing well are often years removed as well. Cutting down the length on the feedback might not be a bad idea, whether that’s emotional rewards or financial ones. [Here](http://news.sciencemag.org/sciencenow/2011/01/want-to-ace-your-test-share-your.html?rss=1) is a write-up of the recent work on exams, feelings, and performance. ---
**Author:** ![Frylock](https://avatars.discourse-cdn.com/v4/letter/f/ce7236/32.png) [@Frylock](https://boards.straightdope.com/u/Frylock)\ **Post date:** [July 5, 2012, 8:00pm UTC](https://boards.straightdope.com/t/economics-psychology-of-taxation/626865/110 "2012-07-05T20:00:27Z")
To be blunt, and not to intend what I’m about to say too seriously, I just want to make sure it’s understood that _to me_ you guys sound like you’re saying “people are idiots, and we have to talk to them like idiots, and because we have to talk to them like idiots, it’s our right to manipulate them as we talk to them.” Whereas _to me_ us guys sound like we’re saying "If people are idiots, our responsibility isn’t to talk to them like idiots (though we may have to sometimes) but rather figure out how to help them stop being idiots (and our first responsibility is to make sure we’re not being idiots ourselves). ---
**Author:** ![Maeglin](https://avatars.discourse-cdn.com/v4/letter/m/8baadc/32.png) [@Maeglin](https://boards.straightdope.com/u/Maeglin)\ **Post date:** [July 5, 2012, 8:03pm UTC](https://boards.straightdope.com/t/economics-psychology-of-taxation/626865/111 "2012-07-05T20:03:16Z")
And [this](https://en.wikipedia.org/wiki/Nacirema) is the wiki on Nacirema. It summarizes a paper on perspectives in anthropology written in 1955 and shows how important framing is. On looking at the wiki, I see that some poor bastard made a John Rawls RPG. I love role-playing games and I love John Rawls, but dear lord, there are some good things that should never be combined. ---
**Author:** ![Maeglin](https://avatars.discourse-cdn.com/v4/letter/m/8baadc/32.png) [@Maeglin](https://boards.straightdope.com/u/Maeglin)\ **Post date:** [July 5, 2012, 8:06pm UTC](https://boards.straightdope.com/t/economics-psychology-of-taxation/626865/112 "2012-07-05T20:06:52Z")
> [@Frylock](#): > > To be blunt, and not to intend what I’m about to say too seriously, I just want to make sure it’s understood that _to me_ you guys sound like you’re saying “people are idiots, and we have to talk to them like idiots, and because we have to talk to them like idiots, it’s our right to manipulate them as we talk to them.” Whereas _to me_ us guys sound like we’re saying "If people are idiots, our responsibility isn’t to talk to them like idiots (though we may have to sometimes) but rather figure out how to help them stop being idiots (and our first responsibility is to make sure we’re not being idiots ourselves). Depends on who you mean by “you guys.” I definitely do not mean to be coming off that way. If anything, I am trying to say that how you frame things has real meaning and consequences and isn’t just how you market to morons. I don’t think that people are idiots and I do think that their considerations of justice matter, even if they are not always perfectly consistent with what we usually think of as individual rationality. ---
**Author:** ![Jas09](https://avatars.discourse-cdn.com/v4/letter/j/d07c76/32.png) [@Jas09](https://boards.straightdope.com/u/Jas09)\ **Post date:** [July 5, 2012, 8:09pm UTC](https://boards.straightdope.com/t/economics-psychology-of-taxation/626865/113 "2012-07-05T20:09:33Z")
> [@Maeglin](#): > > Depends on who you mean by “you guys.” I definitely do not mean to be coming off that way. If anything, I am trying to say that how you frame things has real meaning and consequences and isn’t just how you market to morons. I don’t think that people are idiots and I do think that their considerations of justice matter, even if they are not always perfectly consistent with what we usually think of as individual rationality. Agreed on all counts. And thanks for the link to the _Science_ article. ---
**Author:** ![Frylock](https://avatars.discourse-cdn.com/v4/letter/f/ce7236/32.png) [@Frylock](https://boards.straightdope.com/u/Frylock)\ **Post date:** [July 5, 2012, 8:09pm UTC](https://boards.straightdope.com/t/economics-psychology-of-taxation/626865/114 "2012-07-05T20:09:56Z")
I think everyone’s considerations concerning justice matter as well. But it seems clear to me that people who treat the OP’s two scenarios as different aren’t doing so based on different conceptions of justice but rather based on not understanding the effect that language is having on their minds independent of content. If you walk them through it and show them that the distribution of goods in both cases is identical, they should see that any conception of justice would treat the two cases as identical. ---
**Author:** ![Indistinguishable](https://avatars.discourse-cdn.com/v4/letter/i/90ced4/32.png) [@Indistinguishable](https://boards.straightdope.com/u/Indistinguishable)\ **Post date:** [July 5, 2012, 8:12pm UTC](https://boards.straightdope.com/t/economics-psychology-of-taxation/626865/115 "2012-07-05T20:12:41Z")
> [@Jas09](#): > > Hmm. In that case I might have to tentatively remove my agreement. 🙂 Well, what you say in this post is something I can’t disagree with. I suppose in saying “Financially equivalent policies are equivalent”, I wasn’t analyzing tax policy via its effectiveness at encouraging actions in a world of imperfectly reasoning beings, just via its financial implications for those in each particular situation. Re: the individual mandate, I suppose part of what it is meant to accomplish is to encourage everyone to purchase health insurance. Although I seem not to feel any reason to denigrate it if it ends up not as encouraging on this front as it can be, simply for marketing reasons… I’ll have to think more about why that is and whether it should be. ---
**Author:** ![Left\_Hand\_of\_Dorkness](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/left_hand_of_dorkness/32/7156_2.png) [@Left\_Hand\_of\_Dorkness](https://boards.straightdope.com/u/Left_Hand_of_Dorkness)\ **Post date:** [July 6, 2012, 2:05am UTC](https://boards.straightdope.com/t/economics-psychology-of-taxation/626865/116 "2012-07-06T02:05:29Z")
> [@jtgain](#): > > I’m not sure of your question. Are you asking that since I don’t believe that taxes should be used to control behavior then it logically follows that the child tax credit must be unconstitutional, no matter if it is structured as a penalty or an incentive? I’ll make sure this is what your contention is before I type out an answer. 🙂 That’s related to my question, but that’s not my question. I suppose I’d ask the question like this: 1. Does congress overstep by adding exemptions to the tax code for people who engage in a certain behavior? 1a) Does congress overstep by increasing taxes by a set amount, regardless of behavior? (I’m almost certain you’ll say no here; I include it only to referencein the third question). 2. Does congress overstep by adding penalties to the tax code for people who engage in a certain behavior? 3. If you answered differently for 1 and 2, would congress overstep by increasing everyone’s taxes by a set amount and then by adding an exemption to the tax code equal to that set amount for people who engage in a certain behavior? ---
**Author:** ![UltraVires](https://avatars.discourse-cdn.com/v4/letter/u/ecccb3/32.png) [@UltraVires](https://boards.straightdope.com/u/UltraVires)\ **Post date:** [July 6, 2012, 2:52am UTC](https://boards.straightdope.com/t/economics-psychology-of-taxation/626865/117 "2012-07-06T02:52:55Z")
> [@Left\_Hand\_of\_Dorkness](#): > > That’s related to my question, but that’s not my question. I suppose I’d ask the question like this: > > 1. Does congress overstep by adding exemptions to the tax code for people who engage in a certain behavior? > 1a) Does congress overstep by increasing taxes by a set amount, regardless of behavior? (I’m almost certain you’ll say no here; I include it only to referencein the third question). > 2. Does congress overstep by adding penalties to the tax code for people who engage in a certain behavior? > 3. If you answered differently for 1 and 2, would congress overstep by increasing everyone’s taxes by a set amount and then by adding an exemption to the tax code equal to that set amount for people who engage in a certain behavior? I’ll answer #1 at the end, because it’s the longest. #1a: No #2: Yes #3: Connected with #1 #1: If the purpose of the exemption is rationally and in good faith related to the tax in question, then no. For example, if a person/couple has a child, then that person/couple has a legitimate, rational expense that is well above and beyond someone that doesn’t have a child. To structure an income tax to only tax people for income above and beyond what is needed to survive is a rational, non-punitive purpose. Nobody would suggest that Congress wants to punish childless couples. Everyone agrees that the child tax credit is a realization that couples with children have a hell of a lot more obligations and need a little more help. Everything about the child tax credit lends credence to the idea that people with children have more basic expenses, expenses that are otherwise realized in basic deductions, and are therefore rationally and in good faith related to taxing income above basic sustenance. Mortgage interest? Yes. I always felt that ALL interest should be tax deductible for the same reason. If you are paying interest, that’s a rational offset against your income for that year. If you make $40k per year, but pay $5k in other interest to creditors, you didn’t really make $40k, you made $35k. It used to be that way, but they eliminated a lot of other interest for policy reasons: Can’t have lazy, welfare people with credit card debt claiming deductions! When we get into other stuff: solar panels, hybrid cars, etc. I think it is unconstitutional. Those things have no rational relation to a tax on a person’s income and go into regulating behavior that the federal government has no business being involved in. Same way with “not having health insurance.” The Supreme Court decided 5-4 that the feds can’t regulate that. As such, it is a legitimate choice to not have health insurance and there shouldn’t be a backdoor regulation to prohibit it with a tax/penalty. [Previous page](https://boards.straightdope.com/t/economics-psychology-of-taxation/626865.md?page=5)