Issue #20, Spring 2011

Your Money, Your Choice

Rethinking Taxes: Proud to Pay

Cait Lamberton

Perhaps more important, people given the opportunity to allocate a portion of their tax dollars had a weaker sense that paying taxes was a restriction on their freedom—they had lower general reactance toward taxes. These results held regardless of ethnicity, age, income, political affiliation, and conservative or liberal media exposure. As a whole, the results demonstrate that tax choice substantially increases individuals’ sense of benefit from paying taxes and reduces their sense of frustration toward payment in general.

More Butter, Fewer Guns

One significant benefit that tax choice portends is its moderating effect on the United States’s inflated spending on defense.

Defense spending currently consumes about 58 percent of the discretionary federal budget. In the last ten years alone, military spending has increased by 87 percent, dwarfing the rate of growth of any other federal outlay. The ten-year growth rate of military spending climbs to an astonishing 145 percent when the cost of the wars in Iraq and Afghanistan is included.

Scholars such as Andrew Bacevich, the late Chalmers Johnson, and William Pfaff have persuasively argued that these numbers do not represent popular will, but reflect the political influence of a highly entrenched and enormously powerful group of special interests that benefits from military spending. Survey results were consistent with this argument: Taxpayers who did not see the current allocation of the discretionary federal budget opted, on average, to devote less than 20 percent of their total allocable taxes to the military. And while self-identified Republicans were likely to allocate significantly more to the military than Democrats (25 percent v. 11 percent), neither approached anything like the current allocation figures.

Comparing actual current allocations to how our survey respondents said they would allocate tax dollars yielded some intriguing results. Respondents across the board shifted spending toward education, training, and social services—all areas that are major job-creation engines and paths to sustainable improvements in standards of living. Democratic respondents allocated 25 percent of their allocable tax dollars to education, training, and social services, while Republicans allocated about 21 percent.

Other categories also saw substantial gains. Most notably, energy, the environment, and science increased from approximately 4 percent to 16 percent of spending. Even Republican respondents showed substantial upward movement in this category, allocating about 14 percent to energy and scientific issues. Bipartisan consensus also prevailed on housing and community development funding, which more than doubled for both parties, from 5 percent to about 11 percent. Interestingly, dollars for anti-poverty measures did not change substantially, holding at approximately 13 percent of the budget overall, but higher among Democrats, who allocated 16 percent to such efforts, compared to 10 percent among Republicans.

Remember that the allocations, at least in the scenario sketched out in the study, are for only 10 percent of a taxpayer’s total payment. Legislators would still have a job to do. But tax choice would allow their constituents an opportunity to voice clearly their policy preferences. And from the results of our study, they want to scale back money spent on defense and scale up investments in other areas.

A Check Against Special Interests

Tax choice also has implications for the distribution of political power. That distribution is heavily weighted toward the wealthy, who have the resources to influence the political process. Their hold on power has only tightened in the wake of Citizens United v. Federal Election Commission, which endowed corporations with a First Amendment right to spend unlimited funds on speech advocating the election or defeat of particular candidates for federal office. By tying political expression to wealth, the Court distorted a political system based on the principle of “one person, one vote.” Under Citizens United, the more dollars you have, the more you can spend to secure the election outcomes you prefer. And that is exactly what corporate interests did. As the Sunlight Foundation reported in January, political groups that depend on corporate cash spent nearly $500 million in 2010, up 66 percent from the $300 million spent in the 2006 midterms.

In their decision, the Citizens United majority reassured us that “[t]he appearance of influence or access will not cause the electorate to lose faith in our democracy.” But in fact, the electorate has never been more cynical about what their government does and whom it does it for. In the mid-1960s, less than a third of Americans agreed that “government is pretty much run by a few big interests looking out for themselves.” By 2008, the share was more than 70 percent. Virtually everyone senses what the American Political Science Association documented in 2004: “Citizens with lower or moderate incomes speak with a whisper that is lost on the ears of inattentive government officials, while the advantaged roar with a clarity and consistency that policy-makers readily hear and routinely follow.”

Tax choice restores some of the citizen’s voice. While hardly a comprehensive solution, tax choice can mitigate the problem of unequal democracy by permitting individual taxpayers to speak with their taxes, without draining their own disposable income.

TAGS:
Issue #20, Spring 2011
 
Post a Comment

Arik:

Very interesting article. My initial thought is that there should be a two to three-year gap between a taxpayer's choice and the year the funds are allocated. Because...

Administrators and budget directors at each agency would likely require a several-year time period in which to prepare for large budget swings from year to year. (For example, a multi-billion-dollar agency would have a difficult time with staffing if they received $2B more one year and $2B less the next.)

I for one would love to go to sleep knowing that a percentage of my tax dollars are not going to federal agencies which are antithetical to my ethical principles.

I am scared, however, that the generally ignorant public will make poor choices--just look at who they sent to DC!

Mar 17, 2011, 3:16 PM
Mike D:

I've been studying this idea since the early 1990s.

One of the more interesting aspects of tax choice is that it would not eliminate lobbyists, per se, but that you would become the target of their lobbying, for good or ill.

One of the schemes I've considered is to have three options available to a taxpayer:

1. Basic tax choice, in which taxes are allocated generally -- Defense, Education, and so on.

2. Detailed tax choice, in which the taxpayer can disburse his contributions in finer categories, such as watershed protection as opposed to merely "Environmental Protection" just for example.

3. Opt out -- Let legislatures decide how to spend my contribution, as they do now

(And we also recommend Arik's comment, or some version of it, to assure stability in the budget allocation and to account for emergency spending)

Let us spread the word on tax choice. It can work!

Apr 19, 2011, 1:21 PM
Bovlb:

If the legislature controls 90% of the budget, what's to stop them from simply allocating around the tax choices? Then the chosen amounts (some fraction of 10%) are simply a floor below which a specific budget can't be lowered.

Apr 19, 2011, 7:54 PM
Bram Scheers:

How can i get in contact with Cait Lamberton. I'm working on a project in the Netherlands that really looks like this. i'm very interested in her ideas.

May 11, 2011, 6:38 AM
Ed:

I have actually thought of this idea independently myself when paying last years taxes. With the current budget battle going on in Washington I started to look around b/c I was sure someone else had already thought of this.

I like Mike D comments. As for the opt out issue I think it should not be a blanket opt out. A taxpayer should be able to allocate a certain percentage to their congressman as well as other programs.

The entire idea I think would be positive in the long run. It would force our representatives to campaign for those issues they want funded.

While we're at it let's also adopt approval voting system as well!

I don't believe this type of change would be universally better for any specific party. On a personal note, I cringe anytime I hear "progressive" as I think it is an arrogant way to label oneself.

One issue a tax system like this will need to address is the acceptability of having rich people, who pay most of the taxes, having more power to shape the governments discretionary policies. Maybe since they carry most of the burden then that is an acceptable trade off.

Also, how about businesses and how will their taxes be allocated? Should they be able allocate funds as well?

Jul 28, 2011, 4:22 PM
Ed:

When I said rich people pay most of the taxes, I may have been incorrect.

What I was aiming for though is that someone who is rich and pays more taxes would, on an individual basis, have more influence than someone that pays little or not taxes.

Jul 28, 2011, 4:27 PM
Xerographica:

Thanks Mike D for sharing this article with me!!

Like a few of you I thought of this idea independently as well...but I didn't have any luck finding anything written on the topic. So I took the liberty of giving this idea a name..."pragmatarianism"...and dedicated a blog to the concept...

http://pragmatarianism.blogspot.com/

The word "pragmatarianism" is a combination of pragmatism and libertarianism.

The "pragmatism" is primarily from my hero Deng Xiaoping who said that he didn't care whether the cat was black or white...what mattered was whether it caught mice. As a result he managed to raise the standard of living for 100s of millions of people in China. It shouldn't matter whether an organization is public or private...what matters is whether it produces results.

The "libertarianism" is from Hayek's "partial knowledge" which ties into Bastiat's "opportunity cost" which ties into Smith's "invisible hand" which ties into Buddha's idea that we are all just blind men touching different parts of an elephant.

Yeah, "pragmatarianism" is pretty ungainly but after you say it a couple hundred times it's not so bad. I'm kinda attached to it but don't let that stop you from coming up with a better label. An idea can't get very far if you can't google for it.

If you get a chance you should check out my blog and search google for "pragmatarianism".

As I mentioned to Mike D...to help get the ball rolling I highly encourage all of you to create a blog either partially or completely dedicated to the subject.

Dec 7, 2011, 10:07 PM
Eselpee:

Ed brings up some good points about how much power is given wealth (individual and business) in a tax choice program.

I hope this stimulates some good discussion!

Dec 12, 2011, 4:34 PM
Xerographica:

Eselpee and Ed...it boils down to whether there is a correlation between wealth and values...

http://pragmatarianism.blogspot.com/2011/11/other-peoples-values.html

Dec 13, 2011, 9:04 PM
Xerographica:

Created a Wikipedia entry for this concept... http://en.wikipedia.org/wiki/Tax_choice

Feb 15, 2012, 7:47 AM
Attila Kovacs:

I have been advocating tax-choice for years. In my native Hungary, a 1% system has been in place for some 20 years now, and people seem to love it. I wish something on the 10% level would come to the US. I'm glad to see such a nicely argued piece on the subject. Thanks Cait! The question is how we bring this to our 2012 return? (or soon thereafter)...

Feb 15, 2012, 1:01 PM
Xerographica:

Here's the 1983 short science fiction story by Jack C. Haldeman II that is based on the idea of tax choice...We, The People...

http://www.sff.net/people/jack.haldeman/people.htm

Apr 18, 2012, 7:09 AM

Post a Comment

Name

Email

Comments (you may use HTML tags for style)

Verification

Note: Several minutes will pass while the system is processing and posting your comment. Do not resubmit during this time or your comment will post multiple times.