Why taxpayer receipts aren’t a good idea
Everyone is all aflutter over the idea from Third Way that people should get receipts for their federal income and FICA taxes that itemize them by program. It’s a neat gimmick, but at the end of the day, it’s just that: a gimmick. And it’s somewhat surprising to see so many bloggers who are normally skeptical of government gimmicks think that this one is somehow different.
People, of course, already know how much they pay in taxes, though the standard (and plausible) libertarian line is that, because we don’t write annual checks to the Gummint, we don’t really grasp the cost. It’s like the cost of regulation, which is high and real, but we don’t feel the pain of having money sucked out of our bank accounts. But stipulate for the moment that people understand, at least on some level, what they pay in taxes.
The idea of these receipts is to let people find out not just what their they’re putting into the system but what they’re getting out of it. And that’s a great idea — it would be fantastic if people understood exactly what their tax money was going to. But these receipts won’t do this, and here’s why.
- The receipts will be gamed. The way that you amalgamate or disaggregate programs will have a massive impact on perceptions, and there’s no clear logic for how this should be done. On the Third Way prototype, the Iraq and Afghan wars are clumped together. Why? To make them appear higher. There’s no rhyme or reason, no inherent way, to display costs. If the government put out these receipts, these decisions will be made politically. (Democrats will disaggregate social spending, Republicans will disaggregate military spending.) And if they’re done by third-party groups, expect them to reflect the values of those groups.
- The receipts list outputs, not outcomes. There’s no sense of what’s achieved here, what the final product is. When I get a restaurant bill, they bill me by the item, not the ingredient. The outcome is I get a hamburger. What is the outcome of health research or the DEA? Taxpayer receipts won’t give any meaningful sense of what social goals are achieved, thus giving taxpayers no sense of the benefits and costs of their tax dollars.
- The receipts will lead to “earmarked” (and hence non-itemized) revenue streams. When I lived in Iowa, they had signs up in the interstate rest stops telling you that vending machine money went to support programs for the blind. Most states’ lotteries go to education. But money is fungible, and dedicating revenue streams to particular projects is just an accounting gimmick (think: “lockbox”). So if Amtrak wants to get off the tax receipt, all they have to do is lobby to get their funding from, say, the federal gasoline tax. And presto! It’s off the income tax/FICA receipt. Unpopular programs will make this standard operating procedure, so that educating children and feeding puppies will be the only things left on the receipts.
- The receipts perpetuate budgetary lies. The federal budget and its supporting premises are already chock full of gimmicks, as my friend and colleague Veronique de Rugy has shown. Receipts do nothing to change this. All they do is take one multi-trillion dollar snow job and divide it by your tax bill. If you’re serious about getting accurate data into the hands of voters, start by getting an honest assessment of public long-term liabilities.
- And finally, and most damningly: What of the fact that about half of American households don’t pay income taxes? What will their receipts show? That everything from incarceration to student aid is a freebie? It seems to me the last thing we should be encouraging is further divorcing the costs and benefits of programs. For half of America, then, receipts won’t give them a better sense of how their taxes are being spent. It will just remind them that they can vote for more spending because they don’t have to pick up the tab.
In the end, all these taxpayer receipts would do is lead to more budget shenanigans and a murkier citizen understanding of how the federal government spends its money and why. Sure, it’s a nifty gimmick. But it’s no more serious a plan for getting a handle on spending than a grammatically and intellectually inchoate call for slightly cutting a small fraction of the federal budget.