The Significance and Methodology of Taxation

Financial Tribune, accessed 12/3/2017

Taxation is like paying your dues to society for society. Without effective taxation on the private sector's activities, society will become more dysfunctional than it already is with the lack of public and social investment. Effective taxation, in my definition, means the following:

Taxation that provides enough revenue to support necessary public services (anything the for profit private sector doesn't do well), such that the government is able to provide those services adequately (they're able to run cost-effectively with enough volume to clear public demand) without actually inhibiting or unreasonably complicating private sector economic activity. 

Unfortunately, to my knowledge, there are few effective tools for understanding how different tax regimens affect the private sector economic activities that enable revenue to be generated for public use. Most models I know if are only theoretical, and many neoclassical models don't include the benefits that private economic actors receive from the programs and policies that governments are able to provide better than the private sector. 

To tackle this intellectual and practical problem, I would propose a different way of understanding economies beyond the neoclassical paradigms of supply and demand dynamics in Cartesian space, and price elasticities. I would propose a computer game with taxation, commodities to buy, sell, produce, consume, and dispose of, where income can be derived from labor or investments, and can be passed on through different generations over time. Humans may be included as players in the game, with possibilities for neurological and behavioral economic studies as well, or, computer generated agents may be had with different mixes of different utility functions to try to understand how to more effectively tax societies for public projects.

By getting an approximate, but more accurate simulation of the whole economy (inclusive of a public sector that provides social services), and identifying different variables to test from real world systems, I believe governments can begin to get a better grasp of how to effectively define, collect, and spend tax dollars. This will undoubtedly provide an advantage to the societies who adopt this technology best and first.  Without this knowledge of how to effectively collect taxes and raise revenue from the private sector, the public sector work that needs to be done will degrade in quality, or be eliminated entirely.  One can look at contemporary examples, such as the island of Sicily or modern Greece to see what happens when taxes are not collected effectively, and the public sector is not making wise investments in people and physical infrastructure.

Fortunately, there are such simulation programs being worked on as of January, 2018.  The computer game company Strange Loop Games is currently developing such a simulation game called Eco, which could lay the groundwork for future interactive simulation software.  With this platform, social scientists may finally have the ability to learn how to collect taxes and provide adequate services without needing to intervene directly in the society first.  With this knowledge, we can learn how public institutions can raise revenue from the private sector, learn what is needed in which social and political contexts for investments, and ultimately produce healthier societies on average than would otherwise happen without those social supports from the public sector.