Democratize Tax
Our vision of an Open Society is largely government led. It involves costly policies, culture changes to public spending, and a radical reallocation of funds – this brings the issue of taxation – and the ways in which the principles of democracy and liberty can be brought into it – right to the forefront.
Moreover, NGOs are shackled by the bureaucratic process, having to meet multiple people in government over a number of months in order to secure funding. In a number of months, however, our climate has deteriorated further, homelessness has increased, the migrant crisis grows, suicide rates increase, and much more.
Solution: Direct citizen NGO funding
We propose cutting out the middleman, making NGO funding a direct conversation between taxpayers and the civil sector. This sort of system allows for more dynamism, and could reflect more accurately the agenda of the people, as they will be able to vote with their money directly. That means the people can directly fund the issues close to their heart.
The idea is simple: Individuals will pay a lower mandated rate of tax (to fund a basic social programme), then will have agency over a percentage that previously would have been allocated for the civil sector. They can use this percentage to fund the NGOs dealing with the issues important to them, known as the extended social programme, better described in the figure below.
Solution: Regulate free market principles and their issues
At the very core of the argument is the free market. The free market is both liberal and efficient, fixing the two problems we posed above. By allowing agency over a proportion of taxation, we create a self- regulating system of taxation and redistribution. If there is a demand for solving a particular issue, then market forces will distribute the income. While this achieves liberty and efficiency, there is another non-economic element to this. As in the market, agents have direct control of their actions – the people will also be forced to be at some level directly involved in society. This means citizens will be far more engaged in our political systems, social issues, and have direct control over what society they would endeavour to see.
Unfortunately, as with the free market, there are some tangible dangers. First is the idea that by freeing a proportion of taxes, there could be some level of immorality and exploitation in the system. As a measure to stop this, while maintaining efficiency, is by digitising this decision-making process. NGOs would apply and be assessed by an independent board, which will consider the ethical nature of the company. For example, a specific danger would be that this system may be corrupted by individuals reinvesting this income into their own business, rather than in the spirit in which it was intended: to solve some social issue. The independent board would stop this. While we accept individuals are inherently moral, we don’t want some individuals exploiting the system in malign self- interest.
Another problem with the application of the free market is that there are in cases some NGOs which aren’t particularly marketable that may lose out, even if they are achieving some morally and socially good outcome. This is alleviated by the percentage of tax left under government control, which, as the figure above shows, leaves enough taxation for the government to fund basic social programmes. However, the excess to be used for investment in pertinent social issues prior to the tax reform, will now be democratised, so that individuals decide how to allocate to an extended social programme. In sum, the government will still pay some income to allow NGOs (who will receive less income under the new system) to continue to function and advertise until the issue that they are promoting becomes important to the public, with the democratised portion of tax serving only to supplement and extend the basic governmental social programme.
By implementing these free market principles, we solve the original problems of inefficiency (and rigidity in allocation) and the paradox posed by the question of liberty. With the amendments and regulation of the free market, we solve the subsequent problems that the free market of taxation creates and as such, we consequently have an implementable demand that is durable and superior to the current system.
Open Questions
Beyond the conceptualisation of this new tax regime, how and when would people decide where their taxes will go? Similarly, to what extent would this reflect the “agenda of the people”, considering top earners’ preferences would be “worth” more and weigh more in the overall extended social programme expenditures? These two key aspects would be worth discussing to further strengthen and expand on the proposal.