A noticeable increase in social strains has recently been observed across the globe, and more specifically in several European countries; the most obvious phenomenon is definitely the "yellow vest" movement that emerged in France, but other movements also appeared in several countries like Belgium, Germany, The Netherlands, and even in Australia. If the list of claims from protesters is heterogeneous and often not very well defined, there is a clear call from activists for a more "egalitarian" tax income. If it is difficult to define what an equitable tax income is or should be, it seems people mostly worry about, (1) the amplitude of tax income, (2) the unfairness of the tax brackets applied, and (3) the misunderstanding of the usage of those revenues by the authorities.
If the amplitude of tax income will not be discussed in this post, one wants to open up the debate on a way to reconcile taxpayers with their fiscal duties; let’s explore two avenues that could contribute to this:
- Greater Transparency About the Tax Income Allocation
The Government spending breakdown tends to be published by fiscal authorities on dedicated websites, this often takes the form of classifying the core missions financed by the different sources of revenue, including tax incomes. Summarizing that info right away into tax declarations - rather than obliging people browsing a website - offers the chance to taxpayers to better understand how their contribution is allocated, and potentially makes people more involved and concerned about government spending policies. Also, this could help fighting a few clichés regarding the cost of several missions; for instance, did you know that financing immigration is only 0.3% of the 2018 French budget? This effort to improve transparency can be interpreted as when a flat owner pays his service charges; on an annual basis he usually receives a detail statement with the charges breakdown, the same logic could be applied to tax incomes. This information should be clear and concise, easily understandable by everyone, and should not require any complementary browsing to figure out the meaning.
- Ask the Taxpayers’ Opinion on the Contributions Breakdown
Once taxpayers are informed about the effective budget allocation (or at least a high-level approximation), it becomes very convenient for authorities to ask them what they find an optimal spending breakdown. Of course, people should only express their views on buckets susceptible to be changed, for instance, it is irrelevant to ask their views on reimbursing the interest burden since this is a necessity, not a choice. This kind of “direct democracy” is a powerful tool allowing politics to understand the desiderata from taxpayers and electors while keeping the flexibility to apply them or not. Let’s be honest, the output obtain from this exercise cannot be applied stricto sensu since a budget is a constant trade-off between (1) the real financial needs to make the state work, (2) the government inclination to invest more into specific buckets, i.a.to sustain economic growth, and (3) the willingness of governments to please the population regarding specific topics; but authorities can nevertheless extract key signals from this survey, for instance, are taxpayers interested to invest more in renewable energy, or less in any other bucket?
We don’t expect the above thoughts to provide the ultimate solution to quiet the social rumbling; because through this exercise, it is obvious that many people will attribute allocations based on a sentiment rather than on a rational thinking. In addition, the budget breakdown is a tough exercise for politics, and people definitely are not as well informed as politicians, hence can only make biased decisions. Nevertheless, if this exercise if taken for what it is, authorities should be able to extract interesting signals susceptible to be analysed.