Tax choice

In public choice theory, tax choice (sometimes called taxpayer sovereignty, earmarking, or fiscal subsidiarity) is the belief that individual taxpayers should have direct control over how their taxes are spent. Its proponents apply the theory of consumer choice to public finance. They claim taxpayers react positively when they are allowed to allocate portions of their taxes to specific spending. The term tax sovereignty emphasizes the perceived equal status of state and taxpayer, instead of the traditional view of the dominant position of the state in taxation. Tracing back to the legitimacy of the state, Viktoria Raritska points out that “the legitimacy of the state as a formal institution is substantiated by the people’s refusal of their freedoms and an agreement to submit to government in exchange for the protection of their guaranteed rights”. Proponents of tax sovereignty believe that in a traditional system of taxation, the taxpayer gives up their natural liberty in exchange for the protection from the state and the provision of public services; which impels the state to take public interests as its obligation to maintain social order and citizen safety. This mutual relationship makes taxation a link between the state and taxpayers. Proponents of tax sovereignty believe that in such a relationship, the taxpayer endows power to the state to ensure the satisfaction of the public interest. Furthermore, they propose that the taxpayer has granted the state tax sovereignty. “It is due to the fact that the taxpayer endows the state with tax sovereignty. Thus, state has not only the rights on taxation, but also the obligations, which correspond to the taxpayer's rights”. Therefore, the existence of the state's perceived tax sovereignty is attributed to the taxpayer. The Swedish economist Knut Wicksell’s theory also argues that "taxation should be based on the principle of value and counter-value, as if taxation was a voluntary transaction between the individual and the state". Daniel J. Brown examines tax-target plans in educational programs.