The Halloween Parent Tax

.@smbrnsn How about a post digging into the “parent tax” on children’s Halloween candy?

— Jason A. Kerr (@jakerr35) October 27, 2016

I was asked on Twitter about the Halloween Parent Tax. And with Halloween coming up, it seemed like it needed a post. So here you are:

Design Considerations

You’ve got a couple options here. Are you going to create an income tax? A consumption tax? A head tax? Each is slightly different, in certain relevant ways:

Income Tax: This is probably what you think of when you think of the Halloween Parent Tax. Essentially, children are required to give their parents some percentage of the candy they get. (My wife’s parents imposed a 15-percent Halloween Parent Tax when she was growing up.) There are some design complications here—for example, are you taking a percentage of the number of pieces of candy the kids get? Or do different kinds of candy have different values? And do you take size into account in calculating candy?[fn1]

Consumption Tax: Like the income tax, a consumption tax will require children to give their parents some percentage of their candy. Unlike the income tax, though, the Halloween Parent (Consumption) Tax doesn’t take it upfront. Rather, it applies when the child eats candy. If it’s a 10-percent tax, that means that for every ten pieces of candy the child eats, she has to give her parents one piece. In real life, this probably encourages saving, because you don’t pay taxes on interest or investment returns unless and until you spend them. Candy doesn’t really provide investment returns. Still, if your child is patient, she can defer the Halloween Parent Tax as long as she wants, which means you don’t get your candy until later.

Head Tax: Although you probably intuitively thought of an income tax, this is probably what you (or, if you’re a child, your parents) actually impose as the Halloween Parent Tax. A head tax is a tax on the person. That is, you take the same amount of candy from each child, irrespective of how much candy they collect. Example: “Each Child shall pay the Parents 5 Snickers, 2 Butterfingers, and 6 bags of M&Ms (Peanut or Plain).” Note that a head tax is really easy to administer, but is extremely regressive.

Fairness

If you have more than one child, fairness matters, too. Tax fairness encompasses a couple considerations:

Horizontal Equity: Horizontal equity requires that similarly situated taxpayers pay similar amounts in tax. If you have three kids, then, and each of them collects about the same amount of candy, each of them should owe about the same amount of Halloween Parent Tax.

Vertical Equity: Vertical equity says that taxpayers with higher income (or higher wealth, but see footnote 1) should pay more taxes than a taxpayer with lower income. That might mean we have a proportionate tax, or it might mean we apply progressive rates (that is, the more candy your kids get, the higher percentage of candy they have to turn over), but either way, on fairness grounds, we pretty much preclude the head tax.

Predictability: With a fair tax, your kids will be able to figure out how much they owe you (assuming, of course, that they’re old enough to do simple arithmetic). I mean, you can always impose a stealth Halloween Parent Tax; your kids, after all, go to bed before you do, and you know where they keep their candy. And there’s something to be said for this kind of stealth tax—for one thing, it’s not terribly salient, so it won’t distort their behavior,[fn2] but it’s not fair. And it’s not really a tax, or at least not the kind of tax that a country (er, family) devoted to the rule of law would apply. That looks more like a kleptocracy.[fn3]

A “Tax”

I’m seeing a bunch of sites that suggest that the Halloween Parent Tax is what your kids pay you to take them trick-or-treating. It most definitely is not—that would be some kind of Halloween Parent Fee. A fee is something you pay in exchange for goods or services that the government (or, in this case, your parents) provide you. A tax is an amount you pay the government/parents, not for particular goods or services, but to support it/them in governing. So please don’t tell your kids they have to pay the Halloween Parent Tax because you spent your time accompanying them when they got their candy; they owe you the Halloween Parent Tax as a civic duty, and they owe it whether you went out with them, they went out with friends’ parents, or you let them go on their own.

Conclusion

Look, you only have a couple day left until Halloween. Honestly, if you haven’t drafted your Halloween Parent Tax yet, well, you’re not out of time yet, but I’d recommend getting on it, stat. You have important decisions to make, including rate structures and the value of different candies. But these principles will at least guide you in designing a fair, comprehensive Halloween Parent Tax.

[Cross-posted at The Surly Subgroup.]

[fn1] There’s a fourth option: a wealth tax. I’m assuming, though, that most kids don’t carry over candy from previous holidays (especially since there’s a holiday candy drought that lasts roughly from Easter until Halloween). If that’s right, there’s essentially no difference between a Halloween Parent (Income) Tax and a Halloween Parent (Wealth) Tax.

[fn2] Much, at least. If they realize you’re doing it, they might try to hide their candy better.

[fn3] Which, I suppose, your family might be. In which case, go right ahead.