Taxation, Representation, and Negative Feedback

I was reading a post last night from @calaber24p about hardfork 19 and voting and it got me to thinking about systems design, which got me to thinking about back when the US colonists were trying to figure out how they wanted their society to function.

One of the big complaints they had was Taxation without Representation. They believed as subjects of the English crown that they were entitled to the traditional Rights of Englishmen. Starting with the Magna Carta in 1215, English society slowly built up expectations about what constituted a fair relationship between individuals and government, which eventually included many of the things that showed up in the American Bill of Rights that the citizens demanded be attached to the second American Constitution (the currently used one) before they would ratify it. These Rights of Englishmen included prohibitions against imprisonment without cause and forced billeting of soldiers, the court's right to examine evidence against an individual before allowing imprisonment (called habeas corpus), the right to have free elections, free speech, and the right to bear arms.

Englishmen also expected the right to have their political representative be involved in any decision about taxation they would have to bear. But what interests me is -- why does this seem "fair", and what does this sense of "fairness" really emanate from?

It is easy to intuitively understand why this seems fair -- if you are not involved in spending decisions, then it is possible for others to impose costs on you that you have no ability to escape or change. But I believe that our appreciation for the fairness of linking taxation and representation goes deeper than most of us think. We all understand the concept of "skin in the game" and how that changes choices.

For example, my daughter used to like to get out new plates and bowls and silverware all the time -- she would go through several plates each meal. And if we tried to limit those, it would always be a fight and struggle. But then we had her start doing the dishes. And all of a sudden -- magical change. Once she had skin in the game, we all started to pull in the same direction. She went from not caring to telling her brother that he couldn't get out extra plates either. Because everyone was subject to the same costs, everyone had the same motivations. Getting everyone to have skin in the game thus improved group cohesiveness and unity. Allowing some people to not have skin in the game promoted disunity and instability.

This is understandable from a systems standpoint. Stable systems are systems that are built around negative feedback. This means that the output of a process affects the process by decreasing it. Thus a spike in output comes back around to dampen the output process, and the process calms back down to baseline. Like nerves and pain. You step on a tack, you jump and get off the tack, and the system goes back to baseline.

The opposite system design would be positive feedback, in which the output comes back around to increase the process, which would be like when a microphone starts howling -- the sound from the microphone comes out of the speaker, goes back into the microphone as a louder sound,which then comes out of the speaker louder, and it goes around and around, getting louder and louder, until no one can hear anything but the microphone howling.

Taxation without representation is a positive feedback system. It tends to encourage mounting taxation and mounting government spending without end, because it has no negative feedback loop that reduces the taxes other than outright revolution. And thus the real problem with it, the real reason why all of us intuitively sense that it is "unfair", is that it is unstable.

In contrast, a stable taxation system would be one built around negative feedback, in which mounting taxes become uncomfortable to those deciding on the taxes, and the taxes are therefore voluntarily reduced. Everyone is pulling in the same direction.

The trouble with our current taxation plan here in the US, however, is that we only have a very tenuous link between taxation and representation. A representative can get one vote from someone who pays zero taxes and actually gets money back from the government, and can also get one vote from someone who pays 30% of their income in taxes, and those two votes are counted as exactly the same. Thus this system really doesn't have much of a feedback loop, which means that there are a lot of people who don't have skin in the game, and we can see the effects of no skin in the game playing out in our societal memes in which half of the country is calling the other half lazy, who in turn are calling the first half greedy. This is the classic outcome of a badly set up feedback system -- fractured group unity with everyone pulling in different directions.

So what if we took the idea that Taxation linked to Representation builds a better system and maximized it? Linked that Taxation and Representation as tightly together as possible so that those being taxed had representation that was exactly proportional to their taxation? What if we made your vote proportional to how much tax you pay? $1 of tax equals $1 worth of vote?

The immediate response I get to this is usually howls of "but then the rich would have all of the voting power!" And yes, they would -- for one election. At which point they would reduce their taxes, which would reduce their voting power, and the whole thing would reach equilibrium. Negative feedback and skin in the game -- keys to a healthy, harmonious society.

Thoughts?