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Taxes, Direct Deposit, and Choice
By Gray Rinehart March 15, 2007

As spring approaches in the northern hemisphere, renewal sweeps over the land like the scent of newly-opened blossoms. It's a glorious time, all the better for U.S. citizens because it aligns with tax time. How better to respond to the earth's rejuvenation than with an outpouring of generosity on that special day, April 15th?

Tax day offers us the privilege of demonstrating our civic duty and pride by giving our fair share--though ideas about what constitutes a "fair share" may differ. We get to watch our government in action as, in its sincere pursuit of our happiness, it humbly accepts our poor offerings and divides them with the wisdom only a truly enlightened government can. Because, of course, the government spends our money exactly as we would, if we could. Doesn't it?

* *

No one believes that claptrap about mid-April generosity--we know to beware the ides of April. The tax code is a bad dream from which we struggle to wake: a dream marked by miniscule adjustments to exemptions, deductions, tax rates and other details, and punctuated by proposals for flat taxes--which are not truly flat, but rather proportional--"value-added" taxes, national sales tax, etc. These notions are great for political purposes--with enough plausibility to get peoples' interests, enough ambiguity to avoid nuisance questions like "What's in it for me?", and enough staying power to last only a few days after an election--so the tax code remains as dense and dark as ever.

Perhaps like me, when you write your annual love letter to the Internal Revenue Service, you daydream of ways to reform our tax system. Not that it's broken, necessarily, just that it could be better. How so? It might take less of our money, perhaps, but what if it gave us the chance to get involved in how our money is spent? We don't feel connected to the important work being done with our money, but imagine if we could allocate our money to programs we want to fund: direct deposit to the government agency of our choice.

No other tax reform idea addresses the basic fact that the government retains control of how tax dollars are spent. Individual freedom is nonexistent with respect to government financing: control rests in the hands of elected officials, and the individual's power to exercise any real choice is nil. This denies you the opportunity to take action on issues that are important to you. Direct allocation, however, would give you control. It would take the purse-strings away from Congress, and probably make a mockery of the President's budget, but it would be the closest thing to a true democracy since the Athenians gathered in the public square.

Personal choice guides all of our other financial decisions, after all. For example, if feeding the poor is important to you, you might donate food or money to charities that do such work, or you might volunteer to cook or deliver food yourself. If it is less important than other priorities, you will do less in that regard, but the point is that you have a choice of how to what priorities to pursue. Under the current tax system, because your money lies in a huge communal coffer, you are unable to pursue your own priorities with your own tax money.

If you had the choice, where would you want your tax money to go? Social Security? Defense? Education? Welfare programs? Agricultural subsidies? How could you direct Congress to spend your money the way you want?

Imagine if we had a new 1040-series form (more paperwork, what a bureaucratic gem) with boxes for various agencies and programs from Agriculture to Commerce to Transportation and beyond. You could check as many boxes as you like, to split your money between different agencies.

Want to fund the War on Terror? Check the boxes for the Department of Defense and the Department of Homeland Security (which, it seems, should be the Department of War and the Department of Defense). Want to fund anything but the War on Terror? Leave those boxes blank and check others that reflect your priorities.

Want to fund the Mission to Mars? Check the box for NASA. Think space travel is a waste of time, but alternative energy research is vital to the future? Check the box for the Department of Energy.

Think of the power you could wield.

* *

This idea of directly depositing tax dollars into specific agency accounts is simple in concept but would be extremely convoluted in execution. In that regard, it may be the perfect government program. Tabulating the amount of money that would go into the agencies' budgets would require a huge database and powerful computers. The IRS might need to buy a few supercomputers--the kind that do complex fluid dynamics calculations for NASA--which would prove that doing taxes is more like rocket science than anyone thought.

How much of your tax would be discretionary? Probably not all of it-- Representatives need something to do in Washington besides entertain lobbyists. If the split were 50-50 (or some other fraction), whatever money you contributed to an agency would belong to that agency to use as it sees fit, not to be taken by Congress for any other agency or purpose. The rest of your money would go into the general Treasury fund to be spent as determined by Congress, and would make up deficiencies in any under-funded categories. Taxpayers could, if they wanted, even check a box to contribute all their tax to the general fund and let Congress decide what to do with it.

If we had the power to direct our taxes to the programs or agencies we wanted, many of us would allocate government spending to our own benefit. For example, a millworking family whose eldest child is attending college on a Federal loan might split their taxes between Labor and Education; when their child graduates, they could give all their tax to the Labor department. Or, if their product is made for export, they might split their taxes between Labor, Commerce, and State, and possibly even foreign aid. Who can blame them if direct allocation resulted in self-serving distribution of funds? That is more desirable than paying taxes and receiving nothing in return.

The situation would certainly be dynamic--call it exciting--but not much worse than budget battles and an endless string of continuing resolutions. Its economic effect might even be positive. If political campaigns pump up the national economy by pouring hundreds of millions of dollars into mass media, imagine Federal agencies campaigning for your direct contributions to their important work!

This could be a lot of fun. Imagine having the chance to evaluate which government functions or services are most valuable to you. Imagine Cabinet members or agency officials becoming secular televangelists in their own "infomercials;" if you listen closely, the Secretary of the Interior sounds like Oral Roberts: "If we don't get $10 billion, this department will be called home."

* *

Fantasies like this are harmless fun, but the chances of a proposal like this being enacted are as good as a snowball's chances in an Al Gore video. (Heavens, whatever would we do if some government agencies went unfunded?) Yes, this proposal is tacitly unConstitutional; but Constitutionality has not stood in the way of too many government programs. But, in the end, this country was never intended to be truly democratic. Our Founding Fathers' choice of a representative government instead of a pure democracy was sound. Considering the difficulty of conducting a public forum on every issue, the difficulty of achieving any meaningful compromise (much less actual collaboration) between large groups of people, and the danger of a "tyranny of the majority," their wisdom in selecting our form of government is clear. Unless we really embrace chaos theory, we should not wish for a true democracy.

Yet the possibility of a "grassroots" campaign against income "taxation without representation" is intriguing. Perhaps the next political party will revive an old and revered symbol in their search for individual choice and responsibility: their rattlesnake-emblazoned flag will still read, Don't Tread on Me.

Copyright © 2007 by Gray Rinehart


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