Conscription Tax

The public debate about military draft is back. Resources of the U.S. Army are stretched, the war with terror is far from being won, and military expenses have reached a level not seen since the Cold War. Several legislative proposals to reinvent the draft were made in the Congress, but were declined by the majority of votes. The most salient topics in public discourse are of socio-political kind: Is the society ready to bear the burden of draft? Is draft plausible politically? Another question of enormous importance is whether all-volunteer force is more capable for national defense. However, a draft reform requires also a careful inquiry into the fiscal applications: how will it affect the labor supply? Is "conscription tax" (and each of its varieties: lottery, general draft, with or without exemptions), given the current tax system, fair? What are the intergenerational consequences? An analysis of conscription through the glasses of tax policy is an important and somewhat novel idea. Public finance and political science scholars have never performed a systematic evaluation of draft using the public finance methodology. With an exception of widely discussed efficiencies of the volunteer-based versus drafted military in terms of basic economics of comparative advantage, tax analysis of the draft raises several issues mentioned only briefly in the literature, like relative costs of enforcing and administrating "conscription tax" and conventional tax compliance (and variables affecting them, e.g. a perceived inequity of different modes of conscription) and transitional problems. Distributional, including intergenerational, aspects of transition from draft to voluntary force are fascinating from the theoretical perspective. However, they are also of practical importance. Following the end of Cold War, some developed countries abolished draft and adopted the volunteer army; others are considering whether to follow the suit. Societies (concerned with horizontal inequity between veterans and those who did not serve) that seek to offset distributive impact of conscription by respective adjustment of income tax or that are interested in Pareto-efficient draft reform that minimizes labor supply distortion, must be informed about incidence of conscription burden on their citizens. In economies with weak tax administration and imperfect redistribution of income by taxation such offsetting is implausible and the adopted form of military procurement therefore has a direct effect on allocation of wealth in society.