Can You Farm Taxes?
Of course you can. Lets look at what farming is.
Farmer pays X for seeds.
Farmer plants seeds and hopes the plants that grow will be worth more than X.
Farmer harvests the plants that came from the seeds, sells them for Y, and has Z left over.
That’s Y – X = Z, or some such thing. The point is, the farmer pays for his seeds, and yes, all the other crap he needs, and hopes to sell the resulting crops for more than he spent on seeds. The question you should be asking now is, “Nate, what do I have to plant to be able to harvest taxes?”
The answer is a time machine seed, because I am not aware of this going on in the world today, but at one point, people known as “tax farmers” were common in many parts of the world. I’ll show you how this worked.
Taxes are finicky things. Provided you have been conscious the last few years, you might have noticed that tax revenues are lower in times of recession than the times when we don’t have Obama as a president (Obama jokes, always fun, but stay with me). It’s not such a problem these days, because, hell, revenues have no relation to spending whatsoever. In times past, it was much harder for governments to raise revenues because it was rather difficult to just print more money or borrow it from the Chinese, and no one likes a revenue starved government. (I do, now that I think on it.)
One of the tools that governments used in the middle ages was this tax farming thing, it’s simple and clever:
I have money. Government needs money. Government “leases” me an area in which there are taxes that will be due in the future. I get to keep the whole ball of wax.
So the government gets the pocket change they need to, invade France lets say, $50 should do it. In return, I get to collect and keep this years taxes from, Detroit. I might profit, I might not. Given the state of the American auto industry, I’d say its really an open question.
This is an interesting idea. Taxes are not only uncertain, but expensive to collect, believe it or not, but there is a real cost to the US Government for each dollar it collects, the boys at the IRS don’t squeeze our balls for free after all. (the TSA might… note to self, write to Obama suggesting this.) The main problem with this, is that there was obviously a lot of guesswork for the “farmer” and the government also isn’t going to be happy if there is a bumper crop this year and they leased the “farm” to you for a fraction of your take. The Romans did this to great effect, instead of creating a bureaucracy to collect taxes, one guys pays them and than its his problem to collect.
It was also a common arrangement in feudal England, and few other places too. It’s largely a thing of the past these days, or is it..?
Like I said in up above, I’m not aware of any jurisdiction that has a program substantially similar today. Many towns and cities do contract tax collection out to private companies, often it’s a cost saving measure though, rather than a scheme to reduce risk for the government. It isn’t always cost effective to hire people to manage collection, the companies that do this type of work bid for it and make their profit by scale rather than a big take in any one jurisdiction. They also don’t always receive a percentage, sometimes the collecting work is done for a flat fee. So that doesn’t make for a good example.
There is something that does.
Red light and speed cameras. With the contract tax collection I was just talking about, the fact that the profit is relatively small compared with traditional tax farming means that there is not much incentive for abuse, especially if the contract was for a flat rate. In the last few years, cities, towns and counties haven’t just been contracting for camera monitoring and maintenance, they have actually in some cases sold the right to collect traffic fines, saving on police, but encouraging abuse because they get a really decent chunk. Furthermore, there are cases where the government gets no per ticket revenue, they simply bid for a flat rate, the government picks the highest bidder, gets paid in a lump sum and the contractor is on the hook if the camera never catches a single speeder.
I find it disgusting that this goes on. Not because private enterprise is doing the tax collection (traffic violations are essentially a tax on people who break traffic laws) but because many of the more liberal cities engage in this behavior. Simultaneously decrying the abuses of the private sector. You can’t have your cake or eat it because Michelle Obama says cake is the devils plaything, but more importantly, you can’t cry about private sector abuses and than hand them what was a police power, not long ago. It just doesn’t follow.