A better way of collecting fines

Although I’ve been involved in economic policy debates for most of the last 40 years, it’s not often that I can point directly to a substantive outcome, in the sense that a policy proposal I’ve generated is implemented, or at least adopted by a major political party. There’s nothing surprising in that. There are lots of people involved in the policy process, and most successful policy proposals reflect the efforts of many people, combined in such a way that it’s hard to tell whether any one person mattered.

But I was happy to see this proposal from the Labor Party to allow state governments to collect criminal fines through the tax and welfare systems (as with HECS debts and child support), rather than jailing defaulters as at present. This was idea I put forward in a paper with Bruce Chapman, Arie Friedman and David Tait, back in 2004 (paywalled, unfortunately).

As is argued in Labor’s press release, there would be obvious improvements and cost savings, as well as the avoidance of unnecessary suffering for people who can’t afford to pay. But for me, the change in collection mechanism is of interest mainly because it makes possible more radical reforms.

First, with a more effective way of collecting fines, it would be possible to expand the use of fines to more serious offences that currently attract good behavior bonds or short prison sentences. As far as I can determine, good behavior bonds are fairly ineffectual and short prison sentences are positively harmful.

Second, the collection mechanism would make it possible to relate fines to capacity to pay, so that high income earners would be unable to shrug off a fine as a lifestyle expense. In the 2004 paper, we discussed the idea of “day fines”, equal to a day’s income. That’s probably too radical, but we could get close with a system where the fine was set to a fixed amount or the maximum that could be collected at a given rate of deductions over (say) a year, whichever was less. So, for example, if the fine was $1000 or 2 per cent, someone with an income greater than $50 000 would pay the full amount, while someone on a lower income would pay 2 per cent of that income.

Somewhat to my surprise, I note that the Institute of Public Affairs agrees with Labor’s proposal and (at least implicitly) with the first point above, the need to replace imprisonment with less costly alternatives. This has happened a few times lately. Perhaps some of the high-profile departures in recent years have increased the influence of genuine classical liberals like Chris Berg and, it seems, Andrew Bushnell who wrote the piece of linked.

35 thoughts on “A better way of collecting fines

  1. Cheers, GrueBleen. I think I misread your sarcasm, and interpreted you as being dismissive/contemptuous of their comments, rather than taking them on board as fairly reasonable responses.

    I was unfamiliar with the concept of progressive punishment until now (still always learning something new at JQ’s blog!) so perhaps got a bit carried away with the idea.

    I still think it’s fine in principle, and the concerns you have don’t bother me so much. The main obstacle I see is how you go about making federal income tax records available to state-based law enforcement.

    https://en.wikipedia.org/wiki/Day-fine

    The person who is punished with a fine is responsible for giving accurate information concerning their income. Lying about one’s income (Finnish: sakkovilppi, Swedish: bötesfusk) is a crime punishable with a fine or up to three months in prison.[12] The police can, however, access the taxation data of Finnish citizens and permanent residents via a real-time datalink, so the chance of lying successfully is minor.

    Constitutional issues aside, I wouldn’t want to guess at the cost of setting up that real-time datalink in Australia. Conceptually, there’s not much to it. But we don’t do that kind of thing cheaply and effectively here in Australia, where anything IT/tech related seems to be a recipe for squander.

  2. @Nick

    Ah well, sarcasm is as sarcasm does, perhaps, but mostly it’s without really evil intent.

    Anyway, good luck with your campaign but remember that “progressive punishments” such as fines only really work properly for the middle range of incomes: people who earn enough to be able to pay a moderately substantial fine but not wealthy enough to hide a very significant part of their income and/or assets.

    Also keep in mind the distinction between revenue earning fines (in other words, a kind of voluntary ‘taxation’/lifestyle charge) and those fines (or other actions) that are genuinely intended to inhibit or hopefully prevent certain behaviours. For instance, a fine for parking for three hours in a two hour zone is just a lifestyle expense, but a fine for serious speeding on a public road – which may, and often does, end in death – should be aimed at stopping that kind of behavior. And no, it doesn’t really work.

  3. You really do need to join the dots with rich tax evaders. If the ATO+plod can go after drug dealers for proceeds of crime using the “show us how you can afford that on your legitimate income” I don’t see why they can’t do the same to Kerry Packer. Especially since they should reasonably be able to say “here, use this legal aid lawyer”… and insist that that was the only legal representation he was allowed, since that was all he could afford 🙂

  4. @Moz Inoz
    The problem is (correct me if I’m wrong) the rich fat cat evaders are “legally” (careful not to use the word “legitimately”) claiming losses on things like accounting costs and probably even legal costs. Losses on this, that and whatever they can claim on. Claiming losses on all these offshore services (which they’re probably supplying themselves) so their effective income after the claims is bugger-all. All the spondulas is being consumed by these offshore services operating in tax havens. So, if these offshore service providers (a corporate entity with a cryptic ownership connection to the individual) decides to purchase a $200M yacht from, say Spain, with all their low taxed profits, then who can legally do anything about it without proving the link from the individual to the service provider?

  5. Troy, it gets very complex very quickly because Australia is proud to support offshore tax havens, very definitely. I would be quite happy to see a great deal more “either you own it, and you can show how you can afford it; or you’re hiring it and the person that owns it is paying GST on it”. But currently our tax system s designed very specifically so that the 1% pay sod all tax, and we can’t really expect to fix that as a minor side-effect of making fines more progressive.

  6. Im surprised to see such a focus on the potential problems associated with collecting fines from zero income wealthy tax evaiders. Are we really expecting a petty crime wave from wealthy individuals or is this just a case of comentators’ popular virtue signalling? By far the greatest contribution to petty crime comes from the lower socioeconomic status individuals and this is why the idea is unworkable. Many petty criminals have no legitimate income to speak of and have no plans to change that. Their welfare is often tied to dependent children (which no government will touch) and any remote thought they may have of one day re-entering the workforce will be quashed when they realise a large portion of their hard earned minimum wage will go straight to paying down a string of income contingent fines.

  7. @Latebowl

    The great number of *convictions* come from the lower classes, definitely, but observation suggests that this is due to what the legal professionals call “improper influence”, or more charitably, the hassle of attaching a petty conviction to someone who can afford a proper defense. Look at the difficulty the police have had in Sydney trying to convict a QC even after he was found passed out in his car after crashing it (search impossible, too many lawyers specialising in getting criminals off that particular offence… which makes my point too, I think)

    This is also part of what is being paid for by the use of private schools. When someone from an “elite” school commits rape or uses drugs the school will shield them from the law and treat it as an internal matter as far as they can. They will generally go to quite some lengths to do so, and “encourage” the victim(s) to quiet down via a combination of threats and bribery that would do the Mafia proud. But the same problem at a poor school is often an excuse to send the drug squad in an convict the little criminals.

  8. @Latebowl

    ” Are we really expecting a petty crime wave from wealthy individuals …”

    No, we’re expecting a continuing set of very fine-worthy offences from wealthy individuals such as tax evasion. Perhaps you’ve heard of that ?

    Besides, the poor are used to being gaoled for non-payment of fines, aren’t they ?

  9. @Moz @GrueBleen @Nick
    We have invented and prototyped a software system to implement swarm intelligence. The Software will be provided to the Commons as Open Source Software. I am approaching appropriate organisations to trial the approach. It just so happens that I am talking to a regulator about Law Enforcement. The approach could implement fines tailored to discourage speeding by reporting fines in an anonymous way taking into account the context of the offense. The community can help evolve adequate punishments. Individuals identify themselves and provide appropriate context when they commit an offense. The individual does not identify themselves to the community only to Law Enforcement. However, the community can see the punishments the context and the rationale for the punishment. The idea is to experiment with different approaches to see which are the most effective.

    First we have to start with identity. The identity system allows the individual to provide evidence of who they are through the use of swarm intelligence. That is, the individual proves they have existing relationships with others and the others confirm those relationships. This swarm intelligence provides the person with an identity.

    https://kevinrosscox.me/2016/06/22/an-electronic-identity-system-with-law-enforcement-by-design/

  10. @Kevin Cox

    A short but intense read, Kevin. Probably too short for me to claim that I even managed to bring into my consciousness everything that you thought you were conveying.

    But one small bit did intrigue, where you say: “An approach to Law Enforcement is for citizens to know their transactions were lawful. If asked they should be able to prove they have complied with all relevant laws.”

    I thought that was kinda edging towards a repudiation of “innocent until proved guilty” in the sense that I’ve always thought that, if law enforcement has a problem, they have to be able to prove my guilt rather than me, even if aided by Swarm Intelligence, having to prove my non-guilt.

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