I was encouraged by the comments
when Tyler Cowen linked to my last post
on tax futures. There is, unfortunately, an obstacle that wasn't touched on. Tax futures would have a tremendous hedging utility and would therefore likely fall under the jurisdiction of the CFTC. The CFTC must be reauthorized by Congress every five years, and must pass through the Senate and House Agriculture Committees. (Incidentally, the House committee is headed by Rep. Bob Goodlatte
.) The CFTC is also currently funded by the anachronistically named Senate Appropriations Subcommittee on "Agriculture, Rural Development, and Related Agencies". (Incidentally, this subcommittee of fifteen includes Sen. Byron Dorgan, who led the charge against the Policy Analysis Market
and, ahem, always demonstrates such a kind eye toward market mechanisms.) In recent years, the Senate Banking Committee has begun signaling jurisdiction over the CFTC. This could point to an eventual merging of the CFTC and SEC under the Banking Committee. The combined agency would be in a more politically secure position, which would make tax futures incrementally more acceptable.
For now, I suspect - well, know
- that the CFTC will not approve contracts tied to acts of Congress. The question then becomes: In which countries would tax futures be most feasible from a political and regulatory standpoint?
Tax futures came back to mind upon learning of Cato Director Jim Harper's WashingtonWatch
, which estimates the "cost" or "savings" to households of various bills passing through Congress. While still in an unrefined state that ignores specific tax incidences and basically just gives one an idea of the total revenue or spending attached to bills, this resource seems perfect for use with tax futures. The hedging utility of tax futures would give dispersed interests recourse against government spending and implied future tax burdens. If contracts were attached to specific bills, then concentrated interests could also hedge against losing a subsidy or other special treatment, for instance. This might decrease the demand for congressional favors and ease the unwinding of wasteful spending legacies.