This paper aims at providing a concise description of the current state of the discussion around the mechanism of Harberger taxation, and Posner & Weyl’s proposal to universally implement it. In a second part, some thoughts on the consequences of a particularly relevant concern are explored: the failure of agents to assess the value of their property. This might lead to the Harberger tax placing potentially rather different effective tax rates on asset owners, depending on their personal characteristics.
In their book "Radical markets: Uprooting capitalism and democracy for a just society", based on a series of papers by the authors and affiliates, Eric Posner and Glen Weyl introduce the idea of partial common ownership: every asset in the economy is constantly auctioned through a mechanism that has been existent in a small strand of literature for quite some time—Harberger taxation. The mechanism has been endorsed by some scholars for its combination of simplicity and incentive compatibility (regarding truthful revelation of valuations), enabling the economy to move to a state of higher allocative efficiency. Other scholars have pointed to some practical, but fundamental issues that might cripple a system of universal Harberger taxation (such as failure to assess value).
Table of Contents
- Introduction
- Basic Notions of Harberger Taxation
- The Academic Discussion Around Harberger Taxation and the COST
- Attribute-Dependent Taxation
- Heterogenous Evaluation Cost
- Heterogenous Degree of Loss Aversion
- Conclusion
- Appendix
Objectives and Key Themes
This paper explores the current state of the discussion surrounding the Harberger tax and Posner & Weyl's proposal for its universal implementation. The paper focuses on the implications of imperfectly introspecting agents, specifically considering the potential for attribute-dependent taxation, where the COST might place different effective tax rates on individuals based on personal characteristics rather than wealth. The paper delves into the effect of differing evaluation costs and loss aversion on the efficacy of the Harberger tax.
- Harberger taxation as a mechanism for improving allocative efficiency
- Potential complications arising from imperfectly introspecting agents
- Attribute-dependent taxation and its impact on effective tax rates
- The role of evaluation costs and loss aversion in determining tax burdens
- The need for further analysis before considering implementation of a universal Harberger tax
Chapter Summaries
- Introduction: This chapter provides an overview of the paper's objectives, highlighting the central argument that the Harberger tax, while potentially beneficial, could lead to unintended consequences due to individual differences in evaluation abilities and risk aversion. It also introduces the concept of the COST (Common-ownership self-assessed tax) and its potential to improve allocative efficiency.
- Basic Notions of Harberger Taxation: This chapter outlines the core concept of Harberger taxation, explaining how it aims to improve allocative efficiency by partially eliminating private ownership. It introduces a formal model of the mechanism and explores the relationship between tax rates, owner valuations, and optimal price announcements.
- The Academic Discussion Around Harberger Taxation and the COST: This chapter summarizes the ongoing academic debate surrounding the Harberger tax, focusing on its universality and self-enforcement properties. It examines the advantages of the COST in addressing allocative efficiency concerns and its potential to overcome limitations of traditional property taxation schemes.
Keywords
This paper focuses on the Harberger tax, a mechanism for self-assessed property taxation, as well as its universal application in the form of the COST. It explores the potential for attribute-dependent taxation, which can arise from individual differences in evaluation costs and loss aversion. The paper examines the implications of these factors for the effectiveness of the Harberger tax in achieving allocative efficiency.
- Quote paper
- Ulrich Roschitsch (Author), 2019, The Common-Ownership Self-Assessed Tax and the current state of Harberger taxation, Munich, GRIN Verlag, https://www.grin.com/document/492635
