Sunday, March 18, 2012

When the Taxpayer Is Also the Recipient

The video above is a discussion of future unfunded pension obligations regarding public sector workers of the city of San Diego, CA. A referendum will soon appear for voters to decide upon new hires of the city of San Diego having a 401k-type retirement plan rather than extending to new hires the defined pension plan currently in place for current workers.

Putting aside defined pension plans and future unfunded pension obligations, one might want to examine 5:14 into the video where the union representative states “I’m a taxpayer too” when the discussion moves to taxpayers faced with funding pensions at the expense of core services. In other words, the taxpayers have to weigh the cost of providing pensions as they stand today at the expense of core services -or- realign pension funding in order to preserve core services. Note that the union representative immediately interrupts the discussion to point out that she too is a “taxpayer”.

Yes, she is a taxpayer.  However, upon further examination, she is exhibiting a classic public choice theory proposition regarding the taxpayer also acting as the taxpayer-recipient. "I'm a taxpayer too" comment exposes the proposition that the incremental cost to her [union rep] is rationally smaller than the summation of thousands of incremental tax increases, applied to the highly diffused taxpayers, which are then, the summation thereof, funneled back in a focused way to her benefit.

That is, the classic public choice theory example is: taxpayer A supports and campaigns for a tax increase of say $1 as rationally she understands the $1 incremental cost is to her - much, much smaller than the summation of incremental tax increases applied to the greater amount of taxpayers A-Z, of which, is then aggregated, then bestowed upon her [$1 tax increase to her is less than the benefit bestowed upon her].

Hence its rational for her to suppot, campaign for and happily pay the tax increase [tax increase required to fund a defined benefit plan and pay for core services] and its pure politics for her to make the claim that "I'm a taxpayer too" as she is making the implicit argument that she too is “a concerned taxpayer”. However, in effect she isn't really acting in the role of "taxpayer" she is really acting as the "recipient-of-the-taxpayer". She plays two roles: as taxpayer and recipient. Her taxpayer position less costly than her benefit in the recipient position.

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