22 March 2011

Tax Choice

EconLog | Arnold Kling | A Whiff of Liberaltarianism from the Lef

Cait Lamberton writes,
Promote the concept of tax choice. What exactly is tax choice? Simply put, it is a policy that would permit taxpayers to allocate a percentage of their income taxes to any portion of the discretionary federal budget. In a tax choice program, a taxpayer who wishes to support public education, for example, could send some of her income tax dollars specifically to that part of the federal budget, while a taxpayer who feels strongly about the military could allocate a portion of his income tax payment accordingly."
That actually sounds like a terrible idea to me.

First of all, votes are already completely unaware of how much money is being spent on what. Why give people with an ignorance of the current allocation the ability to change the allocation?

Secondly, this will end up funneling more money to the popular and sexier programs rather than to necessary or efficient ones. Space exploration will get extra lucre, but who will be the ones checking off the box on their tax forms for sewage treatment or the department of weights and measures?*  Observe the same effect in fund-raising for disease research: most diseases raise money out of proportion to their lethality.

(* Legislators could attempt to minimize this problem by underfunding NASA in favor of NIST, knowing people will voluntarily give more to support the former when Tax Day comes.  But then what's the point of tax choice if the budgets can be made in advance to anticipate it?)

This brings us to the third point: if you want more money to be spent on X, then donate your money to a group which addresses X. No need to have the IRS take it from you.

Tax choice sounds like a nice way to sidestep the poor decisions of legislatures, but in binding their hands I think you'll end up with more problems than you started with.  Various California budgetary rules have had the same effect.

This is one place I am distinctly not in favor of choice. I think the federal budgeting process is a complete mess, but it at least hints at sober adults making considered judgements. At its worst it becomes largely uninformed people making highly emotional judgements. They way to address that is not tax choice,  because that is also uninformed people making emotional judgements.

5 comments:

  1. Taxes should be seen as money put into a collective pot, to help everyone and to contribute to the functioning of government overall. Taxes are not something we should use to promote our pet projects or interests.

    I really don't get the American distrust of expertise--why on Earth would the average taxpayer be thought to know how to allocate funds better than people whose entire career is centered around exactly that?

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  2. Because those experts end up giving us things like farm subsidies.

    And I agree with you about what they should be for, but even without tax choice they are already something used to promote pet projects and interests.

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  3. On both counts (distrust of supposed experts and propensity for the current system to reward pet projects) see The Tribune's article yesterday "NASA still ordered to waste $1.4 million a day"

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  4. I appreciate your thoughts on this topic...unfortunately, with the system as it is, lobbyists have an enormous impact on allocation, and they do so by persuading 535 legislators to allocate dollars according to their preferences. That's a nice small number of people to persuade, and they can do it without any logical argument about why a given project or area should be funded. It's purely driven by the lobbyists' particular interests. With the Citizens United decision, the power of special interests and corporations only grows.

    And I have no bias against experts. While it is true that much of the populace is underinformed politically, one may argue that this is at least partially due to a sense of learned helplessness and disengagement. Allowing them to allocate even a small portion of their tax money may prompt greater engagement. Further, to effectively drive money toward "pet projects," lobbyists would have to enter the field of public discourse in a way that reaches millions, rather than only 535. Note that I have proposed allocating only a small portion of tax dollars because I agree that the Federal budget system can't be driven by the capricious whims of the mob, exactly. However, one excellent function of experts is to inform their constituents about priorities, and such a plan might increase the flow of information from legislators back to their voters.

    Yup, it would take a sea change in the role of government for it to work. But I think it's worth trying something that will provide more voice to individuals, given the huge forces that continually erode it.

    Smart people are writing and posting on this blog. Would love to hear your ideas on what might work better! And thanks again for the interest...

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  5. @clamberton
    I have been contemplating this very idea for months, and recently started researching the topic and found your article in Democracy this morning. I happen to think with the right mixture of protocols, it could be a very powerful and positive change. I'm interested in knowing if you have taken a stab at early logistics or interface design of such a project post-study? I guess I'm asking, as a visual person, how do you envision this functioning at the end-user level, in digital and traditional forms? To better educate the masses, there could be a real dynamic educational component to this system, giving historical data on each section of Gov needing funding, with statistics, goals, projections, and mission statements. Lobbyist influence needs to be curbed, this could be one of the most american ways to enact such reform... I love the idea, would like to see to what lengths you have taken it-

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