How to Sell a Tax Increase

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12 Responses

  1. Avatar Mark Thompson
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    says:

    To a large extent, I’d like to see this applied to far more than just tax increases for specific programs. For instance, I’d like to see an itemization of how much each government department (you could divvy it up along the lines of how Congress breaks spending bills down) is allocated, plus the amount allocated for interest on the debt. I think it would be a great way of getting people to understand just where their money is going, and how much of it.

    Somewhat relatedly, and now delving into fantasy land, I’ve occasionally played around with the idea that the best, most moral, and most democratic form of taxation would be if taxpayers could choose how their taxes are allocated, department by department. What would be cool about this is that the result would be a fairly accurate aggregation of our collective values. You’d have to put some restrictions on it, of course, to ward against conflicts of interest and self-dealing (so, e.g., people in the defense industry could not allocate their taxes to, well, the defense industry). Combine this with a negative income tax to ensure that the poor are in better shape, and there you go. And yeah, I realize there are going to be some flaws in this idea, which is very, very poorly developed.Report

    • Avatar Bo in reply to Mark Thompson
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      says:

      My sense is that taxes and spending would have to actually bear some relation to each other for either of these plans to work. OTOH, for the first, you can break it down without too much effort using the budget receipts and budget outlay reports provided by the treasury. (PDFs for 2008) Just use the so-called ‘on-budget’ numbers, which exclude the SS and Medicare receipts/outlays.

      PS The international assistance section has one charming factoid: Foreign military financing program = $4.661 billion, Military sales program = -$4.657 billion. Only the US could lose money in arms dealing.Report

  2. Avatar Sam M
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    says:

    “A tax, by definition, is a compulsory payment for which no specific benefit is received in return.”

    This seems like splitting hairs. By this logic, we could reduce our tax rate by a tremendous amount by specifying a large percentage of the income tax for defense spending. See, that’s not a tax. It’s a special withholding for which we get a specific benefit.

    I am generally opposed to these schemes for the very reason Jamelle prefers them: Because they are easy to sell and, in the end, result in higher levels of taxation. Or service fees. Or whatever it is you call them. I think it’s particularly important to keep in mind that it’s really quite easy to divert these monies from the intended goals. For instance, a pittance of the tobacco settlement money actually goes the things we originally said it would go for. In Pennsylvania, they just hammered through a budget by diverting a good chunk of the tobacco money to the general fund.

    I might be old fashioned, but I prefer a system that’s a little more honest than that. As much as I dislike the idea of higher income taxes or a VAT, I would much rather see that than a piecemeal approach that taxes Pepsi for the expressed purpose of feeding babies, or taxes gasoline to fund health reform. But again, more broadly, Jamelle is of course correct; special taxes aimed at funding specific programs are far more politically palatable than general tax increases. (On a side note, they are also quite often regressive, as is the case with a soda tax.)Report

  3. Avatar Clint
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    says:

    While I agree that transparent and concentrated user fees are a better alternative to pay for anything, I think you underestimate the opposition on both sides of the aisle to any mechanism resembling a tax. This is not just a problem with the Grover Norquist absolutist set.
    Perhaps the most logical and simple example of what I think you are proposing is the funding mechanism for federal-aid highways- the Highway Trust Fund and the gas tax. It is a dedicated funding source (except when it is raided for other programs) for an agreed-upon public good. Among its advantages: it is transparent, relatively accurately prices vehicular impact on roads via the correlated use of fuel, and it funds basic infrastructure requirements that most people want. Despite this structure and despite almost-universal agreement on the need for expanded highway monies to maintain existing capacity, there is almost no political will for a subsequent increase in the federal gasoline tax. Obama and Secretary o’ Transportation LaHood have both unequivocably ruled it out. This suggests to me that no matter how benign and logical a user fee is, it will inevitably lack a political constiuency strong enough to overcome American disdain for taxes.Report

  4. Avatar Sam M
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    says:

    “the best, most moral, and most democratic form of taxation would be if taxpayers could choose how their taxes are allocated, department by department.”

    Careful. Remember, as much as people talk about who pays how much in taxes… the very rich and the middle class pay a HUGE chunk of what rolls into fedral coffers. As has been muched discussed, a pretty good percentage of people pay no federal income tax at all. If you put people in charge of what their taxes pay for… I suspect we would get even more nice schools for nice neighborhoods, even more roads to exurbia, even more subsidies for stadiums, etc. That is, when they are looking at the tax bill in the comfort of their pown homes, and it comes time for the middle class attorney to choose between funding WIC or funding something that his family uses… which box is he going to check?

    On the other hand, this might be a good way out of farm subsidies.Report

  5. Avatar Bob
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    says:

    Cut taxes, income, sales, whatever, and people will soon notice what taxes pay for. It might be a lesson well worth teaching.Report

  6. Avatar Pithlord
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    says:

    This is a really bad idea from a policy perspective: see State of California, fiscal crisis in. If you “hypothecate” revenue to specific spending projects, you create bloat in that sector and starve others. Payroll taxes are particularly bad, because they punish employment.

    America needs to raise its broad-based taxes or cut its defence spending. The American people need to grow up.Report

  7. Avatar North
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    says:

    I fantasize sometimes that we will do something like this. That somehow Obama or someone will raise the taxes some and slice the spending some (from bloated Agriculture and Defense especially oh please rainbow Jesus please!!!). And that the budget is either fully in the black or significantly and inarguably closer to the black. I would be fascinated to watch conservative heads explode as they tried to explain how Democrats are the fiscally irresponsible party. If we could just claim the mantle of fiscal sensibility how could the right wingers hold their coalition together? I mean I know our politicians are as corrupt as any politicians can be but damnit can’t someone figure out a way to do it? The republicans are out of power; can’t we gore enough of their sacred cows to get our senators in line and get the budget under control?

    But while I’m dreaming I’d love to have a sailboat.Report

    • Avatar Bob in reply to North
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      says:

      “I would be fascinated to watch conservative heads explode as they tried to explain how Democrats are the fiscally irresponsible party.”

      Yes yes yes, in 3-D and slow-motion, on a loop.

      But here’s the thing, cutting defense, is communist – I’m pretty sure.Report

  8. Avatar Chris Dierkes
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    says:

    I have nothing to say relative to the actual debate, only that, I’ll be damned if Jamelle hasn’t in one week got in a Sliders AND Childhood’s End reference. That is seriously impressive.Report

  9. Avatar grandmute
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    says:

    Sam M is actually tapping into an even more powerful counterargument to turning taxes into voluntary “user fees.” An elementary result in welfare economics shows that many people will want to support programs only if they know others will pitch in as well. The classical example goes as follows:

    A and B are rich. Z is poor. A and B both want to see Z’s income raised by one dollar (out of altruism, self interest, or whatever – the specific motivation doesn’t matter). However, neither A nor B want to give Z a dollar. However, both A and B would each pay 50 cents to see Z get a dollar. In this simple model, A and B can get together, talk their preferences over, and see to it that Z gets the dollar. However, if we assume that A and B cannot coordinate their actions (a reasonable assumption for real-world taxpayers), neither A nor B would transfer any money to Z. (Neither is willing to spend a dollar on Z, and seeing Z’s income rise by less than a dollar does not interest them.)

    That’s where government and taxation come in. A government that collects a tax of 50 cents from all rich people to fund a $1 transfer to Z will efficiently redistribute income and overcome the coordination problem.

    Back in reality, not only would a “user fee” system of taxation underfund projects that the bulk of taxpayers don’t care about, it would also underfund projects that the bulk of taxpayers do care about. If it costs, say, $1m to maintain a stretch of road, all the people using that road would want the road to be maintained, but none would pay $1m to maintain it. Asking people to voluntarily contribute an arbitrary amount to road maintenance will result in many cases as above, wherein any one individual has no incentive to pay her share of the maintenance bill since she has no assurance that others will pay theirs.Report

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