Why Are Donations to Government So Small?
My new baby has delayed my intended post on the Matt Zwolinski-Will Wilkinson debate, but late is better than never. Matt kicked it off:
[W]hile government is, in principle, able to do some good, there are
very often (almost always?) superior non-governmental alternatives for
better achieving the same end.
I think all of us know this on some level. Even people like Warren Buffett
who publicly beg for the government to tax them more. After all, if
Buffett really believes that he ought to be paying more taxes, then
what’s stopping him?
The Federal Government of the United States accepts donations.
Seriously. They go right into the general fund, just like your taxes…
Of course, not a lot of people do this. About $3.2 million was given
to reduce the debt in 2011, and you can find the (generally much lower)
figures for others years here…
Why so little? One possible explanation is that people are selfish –
they’d rather spend the money on themselves, and they aren’t going to
give it away to help others unless they’re forced to, as they are in the
case of taxes. But this explanation is difficult to square with the
large amounts of money that Americans give to charity each year – over $300 billion in 2009, the vast majority of which came from private individuals and bequests, not big corporations looking for a tax break.
So if selfishness isn’t the explanation, what is? I suggest the following: most
people know that there are better and more efficient ways of using
their money to help other people than giving it to government.
Will objects that Matt ignores the obvious Prisoners’ Dilemma:
I think this is a pretty lousy argument, and I can’t see why
libertarians keep making it. I know Matt understands collective action
problems in, say, the provision of public goods. So…
Anyway, this could be any question about the rationality of
complying with a rule that (1) you support, but (2) will only have its
desired effect if general compliance with the rule is high, and (3) you
suspect general compliance will not be high…
Matt seems to think there’s something significant about the fact that
Americans contribute lots of money to charity, but I can’t quite see
what it is.
I think Matt explained the significance quite well in his original post. But I think I can make his point even clearer. Here goes:
“What’s stopping Warren Buffett from paying more taxes?” is a red herring. The fundamental question is: “Why is government’s share of the voluntary donations market so damn small?” All genuinely charitable donations suffer from the Prisoners’ Dilemma problem that Will describes. That’s probably a big part of the reason why charity is only a few percent of GDP. But none of this explains why out of the more $300 billion that Americans give to charity, the American government garners about $3 million. Despite widespread nationalist and statist sentiments, Uncle Sam’s share of the charity market is microscopic – less than .001%. How very odd.
Suppose you start a new charity to provide free haircuts for hippies. You only manage to raise the money to pay for three haircuts a year. The Prisoners’ Dilemma might explain why people aren’t more generous with their money in general. But the Prisoners’ Dilemma doesn’t explain why the other charities raise so much more money than yours. If you ask “Why don’t people give more money to my charity?,” the best answer is that people hold your charity in low esteem. Similarly, if total donations to the U.S. government add up to a few million dollars a year, the best explanation is that people see lots of better ways to spend not just their dollars, but their charitable dollars.
I do wonder, though: Could the U.S. government attract a lot more donations with better marketing? What if the President spent less time raising money for his campaign and more time raising money for the Treasury? What if Congress publicly acknowledge the ten biggest donors in an annual ceremony? I can easily believe that donations to the U.S. government would rise a hundred-fold. But even then, Uncle Sam’s share of national charity would be a mere .1%.