Why can’t I earmark my taxes?

There are many ways people find to be upset about taxes – too high, too wasteful, meaningless, or ineffective.  Most Americans see taxes as evil, intrusive and a general pain in the wallet.  There is a growing group on the Left, probably best articulated by Ben Affleck (believe it or not), who are excited to pay higher taxes in exchange for more social programs and government services.  So, ultimately, we’ll acknowledge there are deep ideological divides between how many Americans view taxes and indirectly, interact with the government, or idea of government.  No big surprise there.  This is not going to be a column defending raising taxes (however I do think that sometimes that is necessary as a consequence of our government’s previous decisions).  On the other hand, I don’t think it makes sense to write a piece about how low I wish our taxes were in an utopian version of efficient government.  As a policy, it seems to me that it’s always better to deal with the reality of a situation and not how amazing things would be if I were President.

So, I’m advocating a new approach to how we use and understand taxes.  Let’s be honest, no matter how conservative one might be, we have to acknowledge that we’re never going to return to significantly lower tax rates than we have right now.  These rates may decrease by small percentages here and there only to be raised slightly at another time.  Even if a President succeeded in streamlining government, reducing waste and lower taxes to some degree, the federal government is just too large for taxes to disappear or be reduced in a major way.  So, the question remains – how can we make a difference working within the system to improve the way taxes are levied, used, and understood?

I’ve long since had this idea that one reason European and Scandinavian countries are more willing to accept higher tax rates is the way the government relates taxes to services.  Meaning, those governments are more successful at tying taxes to the value they offer society.  Whether those citizens like paying taxes is irrelevant because I get the impression that they at least see the connection between their functioning society and taxes.  On the other hand, it seems to me that many Americans either don’t make the connection or demand incredible, robust services without fully connecting the impact it has on our taxes.

As a result, my first recommendation is a new approach to presenting the taxes we already pay.  Remember pay stubs, which used to accompany our paychecks? I mean, I guess they still do, electronically in an ADP or finance database, but I digress.  If anyone looked at the breakdown of our income tax, it usually showed how much money goes into – social security, state taxes, 401K, etc.  I’m proposing a pie chart or some graphic, which begins to tie income and property taxes directly into certain government budgets or programs.  Obviously looking at taxes per capita is a recipe for confusion since our taxes go into thousands of different budgets.  Yet, I do think we could do a better job of tying taxes to government expenditures.  I’d like to see a graph showing where my tax bracket’s (or age group’s) tax dollars are being spent – 1.0% on roads, 2.5% on national defense, 13% on social security, etc.   I know this probably unrealistic because our money gets spliced up into millions of tiny contributions and even if the government tried to give everyone a report it would be purely theoretical.  However, my overall point is that we should have a better connection with our tax dollars.  This highly contentious and animus relationship we seem to have with taxes isn’t always necessary.   I think the American people would start to make a deeper connection with government spending and making sacrifices (or “tough choices” in today’s parlance) if there were clear breakdowns of what segments of our society are funding.  You’d have a little chart and see different percentages for government agencies, programs or budgets.

One great side effect of this new awareness would be a clearer sense of what we are willing to pay for and what we are not.  I believe that the government does waste a lot of money as a side effect of it’s sheer size and responsibility. However, I also believe that the American people would be willing to pay for certain programs or services if they understand that a tax increase was being directed at a specific problem – i.e. national debt, health care reform, or student loan incentives.

Cue segue way.

Which brings me to my next point, infusing our government spending with a healthy dose of competition.  I’d like to see Senators competing for our tax dollars and “selling” their constituents and the American people on their ideas.  Look, even though they represent 1 state, they are making collective decisions for all of us.  Let’s put these ideas against each other, competing for limited funds and let the American people decide.  Our tax rates may not change, but at least we’d have a bigger say over how the money gets spent. I’m imagining allowing Americans to move around their tax dollars the same way we invest in our 401Ks.  Allowing Americans to pick the ideas, programs or services that they want to invest in would also encourage Senators/Presidents/etc. to make the programs the more efficient and ultimately more likely to succeed.  I’m assuming there would have to be a minimum amount required for some programs.  We’d have to split tax money into funds which are already allocated and those which could be discretionary.  Kinda like the government already does with it’s budgets.  So, I’d contribute a certain percentage to the mandatory spending and then have 17% of my taxes, which I could allocate to any proposed issue – paying down the debt, national health care, climate change, you name it.  In this way, I suspect we’d get a better idea of what programs Americans truly support by the fact that they are willing to spend money on them.

Let’s see who really wants to support risky and expensive programs by submitting our own “earmarks”.  I’d like to earmark some of my taxes for increased spending on innovative medical research and incentives for small businesses.  Obviously, the logistics of a system or mechanism like this are a complete daydream.  On the other hand, beginning to think about it in these terms would serve the greater purpose of getting the government to start improving this relationship.

We got the technology and the social media culture to support this type of change.  And all it really takes is a shifting belief of how the government interacts with its citizens and how we approach government, taxes and general policy.  The Obama administration seems to have made advances in terms of providing the “behind the scenes” information and making his leadership’s thought-processes more accessible.  They improved the flow of information by engaging blogs, webcasts and all the other interactive tools we’ve become accustomed too.  This would be accelerating the next step.

I hope that the next generation of politicians begins to recognize that the future of governing is much more in fiscal policy and problem solving than social policy and ideology.

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3 responses to “Why can’t I earmark my taxes?

  1. You’re absolutely right that the welfare states of Europe do a better job of linking taxes to services. But they have also done a lot of work to cultivate a culture of care (my own term!) whereby many citizens feel it is their duty to pay their taxes so as to help fellow citizens who have less (not to mention to help themselves should they fall ill). Of course this seems very foreign to the individualistic attitude of most Americans.

    I thought this link might be helpful; obviously it’s not broken down for the individual, but it gives a good general picture of where the money goes:

    http://www.washingtonpost.com/wp-srv/special/politics/budget-2010/

    • That is a great graphic especially to get a sense of the size of the largest buckets. Thanks for passing it on. Now we have to start asking ourselves and our politicians – is it worth it? Each reviewed or proposed budget item can be measured against our willingness to pay for it. I guess that’s what Obama is trying to do with his line-by-line review, but it remains to be seen how successful that will be. Though, it’s a start.

  2. Tax choice is a great idea…but it’s not easy to find via a Google search. So I took the liberty of giving it a Google friendly label…pragmatarianism.

    Here’s the Wikipedia article…
    http://en.wikipedia.org/wiki/Tax_choice

    …and my blog entry with a list of other pages on the topic…
    http://pragmatarianism.blogspot.com/2012/08/choose-where-your-taxes-go.html

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