An argument used against abolition of the penny is that by doing so it would, “deprive the government of significant seigniorage.” (Aside: seigniorage refers to the profits to be made by the making (literally) of money). Two thoughts for the day:
- Since when is the proper goal of public policy to be the maximization of government revenues? Seriously, this is one reason I don’t discuss the Laffer curve much – I don’t want people to get the idea that the “right” place is the top of the curve. For me, this would be a benefit of abolishing the penny, but only if it led to the reduction of spending somewhere else to “pay for it.”
- Suppose we take it as gospel that the goal of public policy is correctly focused on maximizing revenues (or “profits” so to speak) toward government. What then can explain the hostility of the public to the maximization of profits by firms? It cannot possibly be on consistent economic grounds. After all, when firms maximize profits, they do so by lowering costs, expanding quality and by providing valuable goods and services to voluntarily paying customers. That profit is a signal that they are doing a great job. Think of what a large “profit” in government would mean. It would mean they are reducing services, or extracting lots of non-voluntary “revenues” for the delivery of the same level of services. My point is that if you view the latter as virtuous and desirable, then intellectual consistency demands that you hold the former in at least as high, if not higher, esteem.
I suppose you could reconcile these a little bit by arguing that the reason people hate profits is because they think those profits are “taken” from helpless and unwitting customers, that all profits are had only because the grace of good government allows companies to operate peacefully (there is some truth in this), and that generally no one has a right to property, so it all belongs to “the state” (which really means a few people exercising power in the name of the many).
Our local government officials often proclaim that one of the benefits of industrial land development is how much more tax revenue it will bring to the township. Conversely, they oppose residential development on the grounds that the new residents will not pay enough in school taxes to cover the cost of additional children in the government schools. It’s as if the people are mainly taxpayers, and that their main function is to finance the activities of government.
I like the Laffer Curve, as it assumes the government ought to tax only to pay the bills and not just take revenge on the Czar and his family.
This blogpost was pretty informative. Dan Mitchell of the Cato Institute has a pretty cool lecture series on the Laffer Curve. You might want to check it out. Here it is (in 3 parts):
http://www.youtube.com/watch?v=fIqyCpCPrvU
http://www.youtube.com/watch?v=YsB_rnzBA08&feature=channel
http://www.youtube.com/watch?v=Mw7LtVwDCbs&feature=channel