Tax Referenda and the Voluntary Exchange Model of Taxation: a Suggested Implementation

Abstract

The voluntary exchange model of taxation implies that taxes are the price paid for public sector output. The current public sentiment for tax reduction and tax reform suggests that the present structure of taxes does not conform to this voluntary exchange model. This article presents a simple method of holding a referendum in order to allow the taxpayers themselves to determine both the level and mix of governmental expenditures. The method is simple enough for voters to understand, and provides the incentive for all voters to state their true preferences. The implementation of such a referendum system would make the tax structure more closely resemble the voluntary exchange model of taxation.