Democratic governments can choose what and how much to tax and how to spend the resulting revenue without undermining essential aspects of good governance: accountability, representativeness, rule of law, transparency, public deliberation, and the ability to learn from experience. In fact, better governance tends to accompany higher government spending.
Regulation is more difficult to square with democratic values and other aspects of good governance. Complex regulatory systems create tensions with democracy and other political values, which I briefly explore below.
This is why I am hopeful about proposals like the Green New Deal, which promise to address profound crises by taxing and spending. Insofar as we must also address the climate crisis by regulating (which may be necessary), we’ll face more difficult tradeoffs between ends and means–between essential environmental outcomes and improving our politics.
In any republic, whether a true democracy or not, we must know who the decision-makers are and what they do in order to hold them accountable. We must be able to predict the consequences of their actions to plan our own behavior, thus gaining a reasonable level of control and responsibility.
These two principles imply that state decisions should be made by finite groups of clearly identified actors, e.g., the 535 Members of Congress and the President, acting on the record. Their policies should be as clear, uncomplicated, and durable as possible. As Madison writes in Federalist 62:
The internal effects of a mutable policy are … calamitous. It poisons the blessings of liberty itself. It will be of little avail to the people, that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood: if they be repealed or revised before they are promulg[at]ed, or undergo such incessant changes, that no man who knows what the law is to-day, can guess what it will be to-morrow.
Taxation is compatible with these principles. A tax usually requires a recorded vote in Congress and the president’s signature, so we know who enacted it. Although there can be some ambiguity and unpredictability about who ultimately pays–companies try to pass their taxes on to consumers–you often know if you are paying a tax. You can decide if you think it’s worth it.
Regulation can also be compatible with these principles. If Congress banned automatic weapons, that would be a clear regulation for which representatives could be held accountable. No one can be sure of its downstream consequences, such as its effects on the homicide rate. But the direct effect is very clear: companies must stop selling automatic weapons to consumers.
However, regulations often violate these principles. In a complex society, regulations that are designed to maximize outcomes (such as safety or efficiency) will be complicated, and they will have to change frequently to keep pace with changes in society. Congress cannot write such regulations. It is composed of too few people with too little time and expertise. Congress almost inevitably delegates its regulatory power to regulators. Those people are often dedicated, underpaid civil servants. Yet they are anonymous and numerous, and they have interests and biases that are hard to know, let alone control. They can write regulations to benefit incumbent companies and industries and to discourage competition. Special interests can capture the regulatory process. Meanwhile, Congress has every incentive to take credit for the declared intentions of a law while delegating the tough choices to regulators, thus dodging responsibility. A particularly common move is to pass a law that requires incompatible outcomes–like safety and economic efficiency–and then complain about the actual regulations.
To be sure, taxes can also be designed in ways that are complex, mutable, opaque, and biased in favor of incumbent interests. The federal tax code is 2,600 pages long, with too many exemptions and loopholes. However, the Code of Federal Regulations is 186,374 pages long, or 72 times as long. Several times as many pages are added to the CFR each year (including under Trump) than comprise the entire tax code.
Big differences in quantity (like a 72-to-one ratio in page numbers) can turn into qualitative differences. Taxing and spending are more transparent and predictable than regulation.
I vote for parties and candidates who are relatively favorable to both regulation and taxing-and-spending. Often those interventions promote equity and the public good. I understand them as components of a mixed or pluralist political economy, which is the kind I support.
Nevertheless, it is always important to consider the costs and risks of good things. For the drawbacks of taxation and regulation, it’s worth reading or rereading classical liberals/libertarians and public choice theorists. I believe they offer stronger arguments against regulation than against taxation. Their concerns are especially relevant when the regulatory state lacks both legitimacy and actual capacity. Then the odds are low that agencies will achieve clear victories as they address complex public problems. Their impact is likely to be ambiguous and contested, at best. Under these circumstances, it is much more promising to raise revenues and purchase solutions that all can see.
See also: on government versus governance, or the rule of law versus pragmatism; on the Deep State, the administrative state, and the civil service; The truth in Hayek; how a mixed economy shapes our mentalities; China teaches the value of political pluralism; better governments tend to be bigger; A Civic Green New Deal; and the Green New Deal and civic renewal.