With liberty and taxes for all
Best way to limit growth of government is to make sure everyone has "skin in the game."
"They'll turn us all into beggars 'cause they're easier to please."
That's a line from a 1980s rock song, but it's a pretty concise summary of the Obama administration's political approach: Vote for us because we'll take other people's money from them and use it to buy you stuff.
Whether it's Sandra Fluke's contraceptives, Obama's "spread the wealth" response to Joe The Plumber, his 1998 plan to make welfare recipients a majority coalition or the free phone in the viral "Obamaphone" video, that's the gist of it. And it obviously works.
This was the essence of Mitt Romney's worries about the 47% of Americans receiving government benefits. But things aren't as bad as he fears. Happily, Americans are more sensible than that. According to a national poll last week, 79% of Americans think that all Americans should pay income tax, regardless of their incomes. That includes 85% of Republicans and 83% of independents. Even Democrats agree, by an overwhelming majority: 71%. Politicians should take note: these are huge margins.
These Americans understand instinctively what a recent report from the Tax Foundation said: "Aside from the revenue impact of not having 58 million Americans pay income taxes, economists worry about the social and political effects of having so many people disconnected from the cost of government — a phenomenon known as fiscal illusion. The concern is that when people perceive the cost of government to be cheaper than it really is, they will demand ever more government benefits because they either don't feel the cost directly or believe that others will be paying those costs. Indeed,when one takes into account those who do not file, about half of all households pay no federal income tax, making the situation particularly worrisome in a majority-rule democracy."
One response, of course, is that people who don't pay income tax still pay other taxes, like Social Security payroll taxes, Medicare, and various federal excise taxes. That's true, of course, but it misses the point. The point isn't whether people are "freeloaders" who don't pay any taxes. It's whether people have "skin in the game." If you take me to an expensive restaurant for dinner but let me put money in the parking meter out front, that doesn't provide me any incentive not to order the lobster. Splitting the check, on the other hand, will cause me to think twice. It's like health insurance, where experience shows that even a small co-pay makes a difference in what people spend.
With the likelihood of some sort of tax reform in the next four years, we should look to structure things in ways that discourage overspending, and over borrowing, by your elected leaders. Giving everyone some skin in the game might do that.
I'd like to see a system where everyone pays some minimum amount of tax — enough to notice, say 2%-5% of gross income. And that amount should go up noticeably when the federal government spends more, and go down noticeably when it spends less.
In a given year, that might only affect some individuals by a few hundred dollars, but as anyone who has followed local-government property tax fights knows, people can get pretty exercised over a few hundred dollars when they know it's coming out of their pocket and not someone else's.
We're going to have to get federal spending and borrowing under control. Making over spending painful to the electorate is a good way to start. And a lot of Americans seem to get that. Politicians, take note.
Glenn Harlan Reynolds is professor of law at the University of Tennessee. He blogs at InstaPundit.com.