Frank makes a definitive value judgment: “when the pressure to trim budgets starts turning asphalt roads into gravel ones, that’s a credible signal that cuts have gone too far.”
He calculates that “potholes and other road-surface irregularities cause an average of more than $100 in damage each year to every car and truck on the road, not to mention many needless deaths and serious injuries. When road maintenance is postponed by even two or three years, the cost of repairs more than doubles.” An investment into roads yields “a rate of return of more than 18% a year.”
The reason why so much cash is left on the table is the anti-tax ideology that has paralyzed governments.
Now 18% seems very high, but there are two issues here that Frank neglects to point out.
First, economists suggest ways to economize. If Smith judges the sacrifice of his private enjoyments that he would be required to make to pay the tax to be too great relative to the benefits, then he will be harmed from the tax hike. It’s not economic for him to be subject to the tax.
Second, in the free market people choose their consumption bundles freely, voluntarily. On the other hand, if I and Frank unite to outvote Smith 2:1 to increase the tax to fund the highways, then Smith is forced to pay up. It’s not worth it to him, and he would not agree to surrender the cash if he were not afraid of the IRS. He is robbed, placed under duress, coerced.
The difference between tax-supported and free market projects is that the latter discriminate between those to whom the project is worth the money and those to whom it is not, and these latter will spend their money on something else. Taxing people does not discriminate: the authorities demand payment from both the happy and unhappy customers alike.
Frank quotes a voter, Bob, who rejected a road tax proposal in his county as follows: “I’d rather my kids drive on a gravel road than stick them with a big tax bill.” I think Frank wants to dismiss Bob’s preferences as vicious, as morally perverse, as we dismiss the preferences of murderers and, as Frank himself points out, of sadists. Frank is free to do so, of course, but there is a price for it: he ceases to be an economist and becomes a philosopher, and that is not his area of expertise. At any rate, I know of no philosopher who has defended the idea of the alleged transcendent value of good highways.
Frank can again point out that taxation is a convenient revenue generating mechanism. But there are all sorts of convenient things we can do yet refrain from doing, because doing them would be wrong. It may be convenient for me to kill my aunt for inheritance money, but I do not do this. It is convenient for me to rack up a huge debt and then disappear. I don’t do that either. Frank can reply, “What else are we supposed to do?” This plea suggests that he has run out of solutions. Perhaps, if taxation were more disreputable, intelligent people would have a greater motivation to succeed where Frank has failed.
As a last resort, Frank can invoke the principle “America (or California), love it or leave it.” If I don’t like paying taxes to the US government, why don’t I go back to Russia? I don’t see why he should insist on beating me on the head with this ultimatum. The costs of leaving the US for me would be considerable. I can’t help it if most other countries are even worse than the US. In fact, this argument has force only on the local, such as city, level. It is reasonable to say, “If you don’t like the way Akron is run, then move to Canton.” Or, “If you don’t like this condominium, then sell your property and relocate elsewhere.” It is not reasonable to give me a faux choice to leave the country as a whole.
Frank’s argument is that the money for the government can come from taxing socially wasteful activities. He believes that private waste far exceeds public waste. Therefore, Smith does not, in fact, have to be coerced into paying for highways; all we need are “relatively simple, unintrusive changes in [government] incentives.” I’m eager to see what he proposes.