UNLEASHING LEVIATHAN: PUBLIC GOODS UNDER INVOLUNTARY TAXATION

1
UNLEASHING LEVIATHAN PUBLIC GOODS UNDER
INVOLUNTARY TAXATION

• Johnnie B. Linn III
• Concord University
• Athens, WV 24712

2
This Model

• Many competing firms, each in its own arena,
  facing outliers who use force only.
• Ratio Rule
• Government enters arenas.
• Government is viable if individuals are better
  off with government than in anarchistic arenas.

3
Outliers

• Outliers are force-using individuals who do not
  act collectively on the margin (they are like an
  open-access fishery).
• In short run, number of outliers is an
  environmental variable, like a price.
• In long run, per-capita winnings of outliers is
  comparable to the wage they would have earned if
  employed as workers or guards.

4
Government

• Tax collectors receive residual they extract from
  firms beyond amount they are required to forward
  to government.
• Tax collectors act on the margin at the direction
  of government.
• Government force is a public good.
• Individuals have recourse to government force in
  private disputes and government against firms,
  but not firms against government.

5
The Force Ratio Rule
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Input Elasticities
7
Government Force Input Elasticity
8
Tax on Outlier Income

• Tax is defined on range 0, ?

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Competitive Equilibrium
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Range of Share-of-Winnings Function
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Range of the Competitive Equilibrium
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Outliers Share of Income
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Tax on Firm Income
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Competitive Equilibrium
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Firms First-Order Conditions
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Estimators of Firm Parameters
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Government Budget Condition
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Use of the Surplus
TB
TC
Surplus
Tax Collectors
Public Good
Gross Winnings
Non-Public-Goods Outlays
19
Government Winnings under Exponential Force
Function
20
Estimator of Government Parameters
21
Government Superior to Anarchy
22
Results
CATEGORY SOURCE 2002 2008 DESIGNATOR
After-Taxes Tax Rate OECD 0.36 0.37 t
Tax Collector Income OES Sector 99 (13-2081) 3.2 billion 3.5 billion wT
Tax Collectors OES Sector 99 (13-2081) 69,320 66,030 T
Law Enforcement Income OES Sector 99 (33-0000) 73.4 billion 91.1 billion
Non-Public-Good Govt Worker Income OES Sector 99 (00-0000 less 33-0000) 340.70 billion 378.3 billion wT0
Non-Public-Good Govt Capital Outlay U.S. Census Bureau 96.1 billion 105.9 billion wK0
Outlier Income FBI 17.1 billion 17.8 billion wU
Guard Income OES 33-9032 20.6 billion 27.0 billion wG
Guards OES 33-9032 977,650 1,046,070 G
Govt Surplus Multiplier 3.31 3.99 b
Tax Collector Advantage 6.43 8.83 c
Worker Income OES 00-0000 (less sector 99) less OES 33-9032 4045.2 billion 5,204.4 billion wL
Statistic for ? 196.37 192.76
Statistic for ? 1.20 1.52
Threshold before-tax rate for government viability 0.108 0.093
Inferred from ratio of capital outlays to employee compensation in 1992. Inferred from ratio of capital outlays to employee compensation in 1992. Inferred from ratio of capital outlays to employee compensation in 1992. Inferred from ratio of capital outlays to employee compensation in 1992. Inferred from ratio of capital outlays to employee compensation in 1992.