The Right Coast

Editor: Thomas A. Smith
University of San Diego
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Thursday, December 6, 2012

Gov. Bobby Jinday, Cliff diving - Print View

Today it’s the fiscal cliff, but that surely will not be the end of it; next year it will be the fiscal mountain, after that the fiscal black hole, and after that fiscal Armageddon. But the truth is Washington already drove us off the fiscal cliff while no one was looking. A nation that has a $16.3 trillion debt, a debt that is larger than our entire economy, has already driven through the guard rail and is in free fall with the cliff somewhere in the rear view mirror.

I had the honor of serving in Congress. Here’s what I learned – there will be no significant change without structural reforms. That’s the polite way of saying it. The less gentle version is that Congress and this administration are psychologically incapable of getting our fiscal house in order without laws that give them no other alternative.


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One aspect of the fix we are in is that Congress has strong positive feed backs for spending, and little negative feedback. Making little changes around the margins will not correct the tendency of Congress to spend more and more. We must change the motivations that drive congressional spending.

The current tax and budget system rewards high spending members of the legislature that vote for more spending than low spenders. The high spending members achieve positive press by supporting new spending, the approval of their political contributors, and “bring home the bacon”. This increase in spending is paid for with increased taxes by all citizens, not just the local district and contributors that put the representative in office. This lack of linkage between spending by a representative and the district tax rate rewards high spending representative’s districts, and other representative’s districts unfairly suffer the high tax rate with less of the high spending benefits.

This imbalance could be corrected with a tax system in which the personal and corporate tax rates would adjust such that districts of high spender representatives would pay a higher rate than an average district.

The legislative record of votes on spending bills would provide the required spending information. This would require that all spending bills be passed by recorded vote, not with a voice vote. It would also require that the all of the government spending be subjected to an annual vote, or at least every two years so as to match the election cycle. To fully capture spending, votes to approve tax deductions, refunds or any other changes to the tax code resulting in a reduced tax due to the treasury should also be included in the representatives total spending. The sum of each representatives voting would provide their total spending, and the average of all the members numbers would provide an average spend per representative.

If a member’s vote record matched the average, the tax rate for the district would remain unchanged at 100% of the stated tax rate. If a member voted for 50% more spending than average, the district tax rate would be changed from 100% of the stated rate to 150% of the stated rate. With the US Congress, the district rate would need to reflect the House representative and both senators. Districts that value high government spending would be willing to pay a higher tax rate and send high spending members to Congress. Districts that value lower tax rates over higher government spending could send members that reflect their wishes.

The district representative adjustments would reset each tax year, and the adjustment for each House and Senate member would be clear and separate line in the tax form. The rate would be based on the average for the representative for the years from the last election cycle. The tax rates would be computed on the votes for spending from October to the next years September, and announced on the second week of October, so as to be known to the voters prior to the elections.

This proposal if adopted should change the motivations of our representatives, making them more sensitive to high levels of spending.

I am just trying to get what I think is a valuable alternative idea injected into the mix as the discussion of how to balance the budget evolves. The question is would taxing districts of higher spending representatives at a higher rate have the effect of reducing spending? If it would work, what advantages would it have over other policies? The US constitution has been amended many times. It is not easy, but can be done. A balanced budget amendment is what some see as a solution. Would this be a superior alternative? I do not know, but if this concept is made public, considered, challenged, and compared to other plans in open debate, we will know. If this idea of proportional taxation never sees the light of day, it will have no impact.
I took a look at the US constitution. The sections on tax and equal protection are

Article 1, Section. 8. Powers of Congress
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

Hum, they forgot to say tax in the second half. Does that mean that taxes do not have to be uniform? If taxes have to be uniform, then our current income tax with multiple rates and deductions would clearly be in violation. Is the current federal income tax unconstitutional?

Amendment 14 Equal protection
1. All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.
The states have to allow equal protection to every citizen. But the states already have tax codes that tax incomes at different rates, and deductions for some activities and not others. Are the current state taxes unconstitutional?
Amendment 16 Income tax
The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration

So, incomes can be taxed. We have to avoid apportionment or the use of census counts. To my non-lawyer eye, it does not say everyone has to pay the same rate. But wait, ever one already does not pay the same rate. We charge higher rates at higher incomes, deduct home mortgage interest but not other interest, also deduct state taxes and so on. Why not set rates based on districts representatives spending votes?

This is written from the perspective of US national government. It could also be applied to state government, or any governmental unit worldwide with local district representation.

Posted by: James | Dec 7, 2012 6:42:01 PM