What is the Forced Rider Problem?
A forced rider is when someone is forced to pay for a good/service that they do not benefit from. The forced rider problem is that the good/service is thus overprovided. Assuming that other people don’t simultaneously free ride, the good/service provider will have too much money. That is a problem for if one good/service provider has too much money then mathematically other good/service providers must have too little money. Those other good/service provider thus has a smaller ability to provide their good/service.
A city government passes a law stating that all inhabitants must pay hundred dollars in additional tax to subsidize a store that sells widgets. Everyone has to pay the tax, the people who care about widgets (they get a benefit) and the people who don’t care about widgets (they don’t get a benefit). The latter are forced riders. The store will thus be over funded based upon the amount of value they provide. That means other stores are underfunded. If the money goes to the widget store, that means the money didn’t go to the electronics store, or the bookstore, etc. With that one hundred dollars, a forced rider could bought something that they wanted more and thus valued more. That city tax lowered the value provided to its citizens. The widget store has more money so they can buy inventory that people don’t want to buy. The book store doesn’t have enough money to buy the books people do want to buy. In the aggregate, people are worse off.
|Rate||Assets Under Management|
|1.00%||Between $125,000 and $750,000|
|.85%||Between $750,000 and $1,250,000|
|.80%||Between $1,250,000 and $1,750,000|
|.75%||Between $1,750,000 and $2,500,000|
|.70%||Between $2,500,000 and $3,250,000|
|.65%||Between $3,250,000 and $4,250,000|
A single rate is applied to the entire account. So a person with a $750,000.01 account pays less than a person with a $750,000 account. I will waive personal tax return fees for accounts over $1 million. For accounts that are above $5,250,000, we’ll need to discuss a custom rate.
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Questions for the comments
Did my explanation make sense? Do you agree or disagree with what I said?