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10.2.3 HYPOTHESES REGARDING THE WILLINGNESS TO CONTRIBUTE TO REDISTRIBUTION

H1: The willingness to redistribute on the basis of hard-core altruism is greater when the assistance is well targeted, preferably at ensuring the survival of a specific person or a worthy institution whose demise would represent a personal loss.

H2: Reciprocal altruism derivable from personal mutuality has a place primarily in intergene rational support in old age. However, there is a risk here of freeriding. More rigorous separation of pension benefits and maintenance of strict state control would increase the acceptability of this (de facto tax) payment, as it might then be better understood as provision for one's own economic survival.

H3: People's inclination toward authority and their willingness to give up part of their prosperity to it rise at times when a sense of uncertainty and threat dominates. The stronger the authority, the more acceptable this type of redistribution is. Greater willingness to pay these taxes is displayed by wealthier individuals, as they are more concerned about their property, and, in extremely poor countries, by the poor, who are concerned about their own physical survival.

H4: People in smaller communities behave more considerately and cooperatively and are more willing to redistribute wealth among members of the community. As a result, local (e.g. municipal) taxes are more acceptable to taxpayers, as they provide for the survival of a closer community, i.e. a more significant element of one's personal "me”.

H5: Knowledge of the opportunities to deceive and abuse others for one's own benefit increases hand in hand with growth in the benefits of mutual cooperation. High acceptability of taxation is conditional on the elimination of free riders and of the scope for their free rides, which threaten the economic survival of the community and therefore reduce people's willingness to pay taxes.

H6: People prefer their money to be used in well-targeted ways and therefore prefer assigned taxes, where they get a say in how the money collected is spent

H7: People are often irrational when it comes to taxes. In sociological studies, they regard progressive direct taxation (a higher tax rate on higher income) as fairer than taxation hidden in the price (VAT, excise duty). Ceteris paribus, however, the latter tends to be identified by taxpayers as a smaller perceived loss than income tax.

The following table tries to characterize the aforementioned hypotheses and identify the individual types of motives to pay/accept various for ms of tax.

Table 7: Identification of taxpayers' motives to accept taxes

motive / type of tax

leaning on authority

reciprocal

altruism

interest of the state

interest of the municipality

free

riders

excise duty

yes

property tax (local)

yes

yes

yes

income tax

yes

yes

pension insurance

yes

health insurance

yes

After verifying and supplementing these hypotheses regarding taxpayers' motives for accepting individual types of tax, it would be possible to find a micro- economic starting point for thinking about the appropriate shares of individual taxes in taxpayers' budgets and thus get a handle on the supply side of redistribution. What we have here is a noteworthy area of common interest between economics and sociology.

10.2.4 THE "DEMAND SIDE" OF REDISTRIBUTION: THE INFORMATION PROBLEM

Deliberate distortion of information is a problem with any allocation of resources where a higher authority has decision-making powers. If the welfare or even survival of agents is dependent on allocations "from above" the information they provide cannot usually be trusted. Wealth-maximizing agents will distort information in such a way as to maximize their own benefit.

This was proven true by the functioning of communist centrally planned economies (CPEs). Even in a market economy, where [unlike in a CPE) agents can ultimately cease to be, one has to assume that a large proportion of agents will, in a crisis, try to reduce (minimize) their probability of extinction by deliberately distorting information.

The danger of deliberate information distortion by information providers was identified as an information problem in CPEs, and possible methods for at least partially eliminating such deliberate distortions were discussed.[1] These methods included the following:

A Concentrating on information that incentivizes information objectivity, in the sense that distorting such information is disadvantageous for providers (reduces their individual prosperity).

B. Decomposing the system so that the synchronization of criteria at individual hierarchical levels is enhanced by the obligation forcentral authorities to be involved at lower levels of the hierarchy (e.g. at local level).

C. Giving greater weight to agents that behave unselfishly.

A: Information flows that incentivize information objectivity

Certain types of information give agents an incentive to tell the truth. With such information, providers of false information are automatically economically penalized so severely that it does not pay them to be dishonest.

Information flows from producers to a higher (central) authority usually contain information about:

• production capacity, especially in relation to subsidies granted,

• production plans, especially investment and innovation plans, and ways of increasing exports,

• optimal work force size,

• emissions reductions through the use of greener technology.

The essence of incentivizing information objectivity is to set multiple constraints and allow the subsidy recipient to reduce the strictness of one condition at the expense of another (referred to in centrally planned economies as "substitution of the strictness of plan constraints” or "accommodative planning"[2]).

These options, which were originally considered during unsuccessful attempts to make centrally planned economies more efficient, also exist in market economies despite their fundamentally different economic conditions. Such economies have multi-source financing, with substitution of strictness of conditions for entitlement to individual partial subsidies.

Another possibility is to rigorously consider the agent's "subsidy history”, i.e. to threaten to turn off the central subsidy tap in the future if the recipient makes empty promises.

The complexity of the information problem in the provision of central support to producers consists in the fact that we have to work with two criteria in the set of feasible solutions of each agent seeking a redistributive subsidy: the criterion of the subsidy recipient and the criterion of the donor, or central authority, distributing resources among multiple agents. Generalized economics offers a suitable modelling toolkit for doing so.

B: Decomposition of the system

The information superiority of the subsidy recipient over the central authority decreases with decreasing distance of the authority to the recipient. On the other hand, the more local authorities there are, or the more complicated their hierarchical structure is, the more difficult it is to coordinate redistribution.

The information problem of redistribution (the threat of intentional distortion of information by a subsidy recipient) can be partially reduced by establishing an appropriate hierarchical structure for the redistribution process. This will allow:

• more efficient use of resources by permitting a higher-level authority to make its subsidies conditional on the involvement of a lower-level authority that has a better knowledge of the recipients of redistributed resources,

• the setting of subsidy limits for agents in a subsystem managed by a local authority,

• control of lower levels by optimally empowered higher levels in the hierarchical structure of the redistribution process (optimal in the sense that the higher level must not have strong enough powers to excessively restrict the local authority's freedom to make decisions).

C: Giving greater weight to agents that behave unselfishly

Giving greater weight to agents that behave unselfishly in the economy obviously reduces the problem of intentional distortion of information, regardless of whether such unselfish behaviour is motivated by:

• fear of compromising the goodwill of the firm and thereby reducing the prosperity of the potential subsidy recipient,

• respect for authority, for example a professional community,

• the agent's interest in enhancing the strength or quality of the community as a whole,

• a shared interest leading to shared consumption of public or community [club] goods.

Here again, it holds that under certain conditions, being trustworthy (including not yielding to the temptation to make easy money by distorting information) can pay in terms of an agent's material interests. This is a special case of the parable of the hawk and the dove.[3]

  • [1] The information problem is formulated, and possible ways in which the central authority can incentiv-ize the provision of undistorted information for CPEs is assessed, in Hlaváček, J.: Objektivizace informací v plánovacím dialogu—možnosti a meze. Praha: Academia, 1989, and Kotulan, A.: Konstrukce stimulační funkce indukující nezkreslené informace. Politická ekonomie 32, 2(1984): 250–65.
  • [2] This was a purely theoretical concept, a procedure which did not and could not work in the anti-efficient climate of central planning. See Hlaváček, J.: Objektivizace informací v plánovacím dialogu—možnosti a meze. Praha: Academia, 1989, pp. 128–30.
  • [3] See Frank, R. H.: Microeconomics and Behavior. New York: McGraw-Hill, 2006, pp. 236–39. In terms of the probability of personal survival it is better under certain conditions to be a cooperative and truthful “dove” than a selfish and thoughtless “hawk”.
 
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