On Tax Collection

OK, so he published this for April 15, and I'm behind on my reading.

yesh omrim : A timely thought: According to the American Institute of
Philanthropy
, “$35 or less to raise $100 is reasonable for most
charities.”

By comparison, the Federal government, in its fiscal '04 budget, plans to spend about $40 billion on “administration of justice” and about $10 billion on tax collection, in a total budget of about $3250 billion. So even if we attribute the expense of the entire Justice Department and Federal prison system to the cost of government “fund-raising”, it costs the government less than $2 to raise $100. (These figures are from the National Budget Simulation.)

The next time someone tells you that private charities are “more efficient” than the government at achieving some worthy goal, remember these figures.

This could, however, be an economy of scale. Or, perhaps, think of it a measure of how much it is better to be feared than loved?

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2 Responses to On Tax Collection

  1. Sniffy McNiickles says:

    Yes, if the Sierra Club could jail me for not giving, I suspect they could achieve a better looking ratio, too.

  2. Seth Gordon says:

    I don’t think it’s an economy of scale. If you’re on the board of some non-profit, and someone presents you with a credible argument that such-and-such an advertising campaign, direct mail drop, fund-raising dinner, etc., etc. will cost $20 million but is likely to rake in $100 million of donations, you’d be a fool not to vote in favor of it.

    More likely, it’s the result of monopoly power. All these charities are competing with each other for the disposable income of potential donors, so they have to differentiate themselves through their marketing campaigns. If there were a dozen well-armed militias competing for the title of “United States Government”, and all of them were sending out tax bills to the same people, each militia would probably have to spend a lot more than 2% of its budget on enforcement.

    I should also note that in Argentina, where tax evasion is (I am told) practically a national pastime (and therefore, it seems, both fear and love for the state are in short supply), the Ministry of Justice accounted for less than 6% of federal spending in their 2002 budget (the latest one I could find online).

    Sniffy: I’m not arguing against claims regarding the fundamental immorality of government; I’m arguing against claims regarding the fundamental inefficiency of government.

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