Sunday, March 09, 2008

Why Does Every (Non-incarcerated adult) Get One Vote?

In my new book, One Nation Under Debt, I mention that we might want to consider allowing taxpayers to allocate their taxes themselves. Under our current system, we elect politicians to do this for us. The problem is that to get elected and stay in office, politicians have an incentive to spend more than the government brings in as taxes or other revenues. That creates chronic deficits which over time leads to a mammoth national debt, now over $9 trillion or $30+k per person! (And that is just the recognized part of the debt. Various contingent liabilities are much larger but nobody knows precisely how much.)

Early in our history, we managed to repay our national debt because both politicians and voters thought maintaining a debt was bad policy. We also had a relatively popular tax base (duties and customs, especially in the North) and little desire in either party for bigger government. None of those conditions hold today.

Many things could be done to alleviate the current situation. One is to make politicians start talking about what they are going to do about federal deficits and the debt and voting for the one with the best plan. Good luck with that one! Larry Sabato also has some interesting ideas on a balanced budget amendment in his A More Perfect Constitution.

Another idea is to allow taxpayers to decide how their taxes are spent. The goal here is to increase tax revenues by giving people an incentive to pay their taxes. Through April 15, millions of Americans will huddle with their "people" or their own consciences and decide, within parameters, how much to pay in federal income taxes. Most will shoot for the low end of the range, reasoning that everybody engages in tax aversion (if not evasion) and that most of the money will go for unwanted projects (the occupation of Iraq, bridges to no where, etc.) anyway. If people could decide where their taxes went, they would pay more in taxes I believe. Increasing taxes and holding the line on expenditures is of course the only way to relieve our debt problem.

When I floated this idea before, some people got very angry because they foresee the rise of a "plutocracy," or rule of the rich. I find this objection confusing because we're pretty close to that already. Everybody knows the rich (and famous) can afford the lobbyists and big campaign contributions that can gain politicians' ears. I think my proposal is actually conducive of democracy because no group could use the tax system to expropriate resources from other groups. As more taxes are taken from a group, the more voting power the group gains under the system, thus giving it the power to repeal or reduce its tax burden.

A similar system has worked well for corporations. Since the founding of the republic, corporations, with a few early and late exceptions, have allowed shareholders to vote based on the number of shares they owned, sometimes 1 to 1, sometimes with caps (no more than 10 or 100 votes), sometimes on what Alexander Hamilton called a "prudent mean" basis. If every shareholder had just one vote, few investors would risk much and hence equity finance would be much more expensive. What we have in the political realm is analogous -- very few wealthy people are vested in the current government in any major way. So they think little of shifing jobs overseas, setting up tax havens, etc.

Another objection is that extremists would rule the system. In fact, extremists would essentially cancel each other out, just as they do in the marketplace. Maybe X says put all my money into national defense while Y says all mine into education, and so forth. It'll all come out in the wash, as they say. And of course most people won't be so extreme and interest groups (AARP, NRA, NAACP, etc.) would be entitled to propose allocations which anyone would be free to adopt if they see fit.

Voting on the basis of taxes paid would essentially take back the proverbial power of the purse, the power to spend our own money the way we see fit. Some current programs would be pared back, others would disappear for lack of funds. No just war or other important project, however, would die for lack of funding. And if the American people don't want to burden their children and grandchildren with debt they would have the power to pay what they owe instead of looking on helplessly as politicians borrow and spend to the hilt, year after year and decade after decade.

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