Pro Bono
So it's a tricky issue, but I think Timothy Noah is wrong to criticize U2's tax avoidance (note: avoiding is legal, evading is not).
U2 is moving part of its business to Amsterdam (I don't know the details) to take advantage of lower taxes. This is hypocrisy, according to Noah, because Bono supports government spending to alleviate poverty.
What U2's doing is legal, though (or at least, Noah gives no hint that it isn't). The "fair" amount of taxes to pay is presumably whatever the tax code requires. I doubt Noah would consider it hypocritical for Bono to claim deductions for charitable giving, or to buy duty-free booze in an airport.
The government isn't a charity. This was a conscious choice on the part of the designers of the system. The government taxes and spends in part to solve market failures, as when it provides public goods. If it were run as a charity, the market failures would reappear: people would free-ride off the contributions of others.
If you want more revenue, you should change the code. You shouldn't depend on taxpayers to refrain from taking advantage of legal structures that will reduce their taxes. It's not hypocritical to desire higher spending and yet to pay only what you are legally required to pay. Bono recognizes the value of charitable spending. He also recognizes that it's not enough, and he wants governments to step in. None of this implies that he owes the government more than he is legally required to pay it.
U2 is moving part of its business to Amsterdam (I don't know the details) to take advantage of lower taxes. This is hypocrisy, according to Noah, because Bono supports government spending to alleviate poverty.
What U2's doing is legal, though (or at least, Noah gives no hint that it isn't). The "fair" amount of taxes to pay is presumably whatever the tax code requires. I doubt Noah would consider it hypocritical for Bono to claim deductions for charitable giving, or to buy duty-free booze in an airport.
The government isn't a charity. This was a conscious choice on the part of the designers of the system. The government taxes and spends in part to solve market failures, as when it provides public goods. If it were run as a charity, the market failures would reappear: people would free-ride off the contributions of others.
If you want more revenue, you should change the code. You shouldn't depend on taxpayers to refrain from taking advantage of legal structures that will reduce their taxes. It's not hypocritical to desire higher spending and yet to pay only what you are legally required to pay. Bono recognizes the value of charitable spending. He also recognizes that it's not enough, and he wants governments to step in. None of this implies that he owes the government more than he is legally required to pay it.
posted by James | 8:02 PM
2 Comments:
Yeah. And in addition Bono surely thinks he can put his money to better use than a government.
An interesting issue is whether donations to nonprofit organizations should be tax deductible. (I'm not sure exactly what the law is; is it all nonprofits; surely there's a cap?) On the one hand, there's a strong argument that it's undemocratic to allow individuals to effectively control the expenditure of tax dollars. Sure, Congress passed this policy, but perhaps it can be considered an illegitimate delegation of decision-making authority - someone can decide to direct $x that would have otherwise been spent by Congress to some nonprofit that, if I'm right about the law, need not meet any standards of broad social value. (Of course, this raises the issue whether only donations to a certain class of nonprofits should be tax deductible.) On the other hand, the tax deduction is a powerful incentive for charitable donation, which charities surely depend on. The reliance argument aside, there's also the point that many charities are more efficient and fair than the government, which has to placate special interests, cater to the dumb populace, and go through bureaucracy in order to allocate tax dollars. So the donation incentive might be socially utile. It depends on where people are putting their money.
The logic is that it's actually fairly democratic. People "vote" with their contributions. Since the government only subsidizes a fraction of the donation (and yes, there are limits to the deduction), it's likely that the money accurately reflects citizens' values. It's not a perfect system, and I can think of arguments for eliminating it, but it can't stray too far from our values.
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