Wednesday, October 27, 2010

This would not be an issue of the MTA were profitable

Last August saw the introduction of a commuter tax for residents of New York City and surrounding counties. It was to be specifically levied at employers and the self employed. This tax is to be paid even if a person does not use any of the services of the Metropolitan Transit Authority. This is because this tax (which is used as a subsidy to the MTA) is the conclusion of a public decision. George Stigler’s paper on regulation illuminates that:

The democratic decision process must involve “all” the community, not simply those who are directly concerned with a decision […]. The political decision process does not allow participation in proportion to interest in knowledge.

This is more succinctly termed the universality of public decisions. It has angered a great deal of metro area because many of these people do not have any need for public transit. One CPA is quoted as saying

“I don’t think it’s enough of a number for people to say, ‘Oh my God, I’m moving out of New York,’” said Samuels, who is planning to notify his clients about the tax in October. “Just the concept alone is enough to get people up in arms in this city.”

This highlights another portion of Stigler’s work: the reason these taxes (and from the other viewpoint, subsidy) can be passed is that they spread the costs and concentrate the benefits. It’s not within the taxpayer’s interest to fight every single small tax increase, but it is certainly within the MTA’s best interest to accrue such a large subsidy. Personally this really hurts my family (my Dad gets taxed once and my Mom twice) but it’s not enough of a cost to require action from my family. At least anecdotally, Stigler is proven right in this case.

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