Selective Tax Capital: Thoughts on Tax and the Public's Money

"I can vote, but I cannot choose"

I heard this phrase during a presidential election some years ago and at the time it seemed like a clever statement about the power (or powerlessness) of an individual U.S. citizen's ability to exercise a change in leadership. "I can vote, but I cannot choose." Over time, I have begun to consider another interpretation for this statement - a very powerful realization of the limits of democracy and the inherent power imbalance it creates in a free American society. One clear result of this power imbalance is an equal imbalance in the way the public's money is spent in modern America.

Consider for a moment the method our elected government uses to gather, channel, and spend the public's money (otherwise known as federal tax dollars). We the public essentially vote leaders into power who then are given the charge to spend public capital wisely by establishing national and state budgets - the idea being the best and brightest among us is best to choose how to spend the collective wealth of society, for society. Elections to place these individuals in power are, of course, never unanimous and the elected official essentially gets voted into office through majority rule. This elected official then places individuals whom they trust (not necessarily within the public trust) in positions to decide/discern the public needs and create a proper budget according to those perceived needs. How do the elected official and their team perceive those public needs? Through a messy and confused process of lobbying, personal letters to congressmen, town halls, polling, and through their own direct observance of the populace - all of which create a distorted and confused vision of public need amplified by the relationship between that elected official and those delivering that message.

So to sum up.. As a typical citizen you can easily find yourself in a situation where an elected official you do not support, appoints cabinet officials and financial advisers you had no part in electing, ultimately spending your money in a manner that you might totally disagree with. How democratic is that?

Another Way

Let's take a moment to consider an alternative system.. What if each citizen could actually choose how and where their tax dollars are spent within state and federal budgets? There are general budget/expenditure categories we have settled upon through the last two hundred thirty three years of national fiscal policy. These general categories (such as education, defense, transportation, energy, homeland security, the military, the National Science Foundation, etc.) can be seen to represent values of American society which require monetary expenditure for America to function as we feel it should - which is fine. We have developed these categories for a good reason - observed public needs stemming from our historical experience as a society.

What if, though, you the individual citizen could actually choose the breakdown of how your income tax dollars are spent by allocating those dollars into one, two, or any number of these categories? If I disapproved of a foreign war for example, I may decide not to contribute to defense spending for that year and instead contribute my share of taxes to homeland security and infrastructure. Maybe your job requires you to spend most hours on the road and you decide to contribute your entire tax share toward highway maintenance. If I get reports of homelessness and unemployment numbers or crime increasing across the country, I might be more obliged to spend money on social programs, education, law enforcement or even federal prisons - or not if I didn't agree with those expenditures on principle.

This would not require the individual U.S. citizen to pay a smaller amount in taxes - [the current tax structure has its major problems, but is a different problem requiring a different solution I think]. What it does mean, is that the individual has the power to choose what their hard earned money is spent on. If the government sees that there is not enough funding for a particular military project, they must lobby the public to spend more of its money toward that budget category. I'll say that again.. The government must lobby the public for capital expenditures. What a concept. If elected officials see a great need for spending on education or social programs (for example if the homeless or prison populations are growing too quickly) then elected officials must garner support to convince the public of the need to spend more in those areas. Elected public officials would have to sell us the public on the need for a particular expenditure: no closed doors, no interest groups, and no quid pro quo.

There would also be exceptions of course, such as in the case of a declared national emergency a provision might be included that the government has the power to channel funding to a certain underfunded category to prevent immediate harm to the populace - but this would represent the exception, not the rule.

Elected leaders shouldn't be entrusted to spend the public's money wisely; they should be entrusted to wisely inform the public how best to spend its own money.

Selective tax capital might also begin to change the fundamental responsibility of the elected official. Instead of channeling public funds as they see fit, elected officials would now have the critical role of observing and informing the public (openly and honestly) of trends and problems (immediate or looming) so the public can make informed decisions about how to direct their selective tax capital. Imagine how much information on any given topic the public would receive if an elected official is trying to raise funds for a particular public work. In fact, there may even be a danger of information overload so we would likely need some buffer between the official and their ability to spread the message quickly and efficiently - in steps technology. Never did we live in a time where it was easier to disseminate information throughout a public body with new communication tools such as social media and the Internet. Technologies such as these would only benefit the public in this situation and give us the ability to both receive information and filter it properly to prevent information overload.

Imagine a country where not a single citizen can say, "I don't agree with how my tax dollars are being spent."

Blame. Blame is always a slippery topic and can cause normally rational people to exhibit awkward, outlandish, and even illegal behavior - especially in tough economic times. Our current system is structured to give us an easy target when something goes wrong. An elected official directs funds to a program or public work, the program or work fails, and we all get to publicly chastise the official or even chase them out of office if we're angry enough about it. Selective tax capital would no longer give the public this easy luxury. If we are to directly choose where our money is spent (assuming a funded project is managed and executed properly) we only have ourselves to blame if it goes wrong. But isn't this the way it should be? We like to think that if an elected official has funded a failed program, we had elected that official and thus we the public are at fault - but it rarely works this way. Both because it's too easy to place blame on an individual over a group and because the people that didn't vote for that individual get to say, "Hey, I didn't vote for them so I'm not at fault." The selective tax capital system would empower individual fiscal responsibility and allow us the individual public to take credit for both the successes and for the failures of any public project.

Individual Empowerment = Individual Responsibility

The idea of individual/personal responsibility is an important point that cannot be overlooked here. Many studies have shown that when employees in a workplace can see the direct positive effect they have on a company or project, they tend to get an increased sense of satisfaction which, in turn, encourages them to exert more effort in doing well. They take 'individual/ personal responsibility' for the situation. I believe this mentality would inject a healthy dose of the individual citizen's sense of responsibility among U.S. citizens and give them the ability to witness their direct hand in helping to shape the country as they see fit. We might even further utilize technology to help individuals see how their specific contributions to a given category are working to help America. "That public park they just built up the street.. I paid $70 to help make that possible," feels a lot better than saying, "I elected that person into office and they built this park for us." This comes down to about experiencing ownership.

Reduction of Corruption

With no insulated central resource determining capital allocation, we reduce the risk that politics, quid pro quo, or political/personal favors will influence how public money is being spent. If one person or a small group of insiders were to attempt to influence the direction of capital expenditure they would have to go about convincing thousands or millions of people to direct funds as opposed to a select few. This self corrects as it only allows the ideas the populace is willing to invest in to succeed. If we need a model of how this mass communication can be accomplished, we need only look to modern day media technology.

This system may also help discourage citizens from hiding money to avoid tax payments. I'm of no illusion that this practice will end anytime soon, but I have to believe that some reasonably large percentage of the people that do this find the rationalization readily at hand. It's simple - the less control people have over their money, the less trustful they are it is being spent to their liking and the less likely they willingly participate in such a system. It’s time to remove this disincentive to public contribution.

It's not "Public Money" it's "The Public's Money"

Public money - what an awful idea. It's like a common tab when a large group of friends goes out to eat at a restaurant. Sure it's an efficient way to pay the overall bill, but if you are one of the people who accurately figure your share and end up standing around the bill throwing extra dollars down to "fill the gap" you realize there is a flaw in this system. Restaurants are well aware that diners will order more food if there is a common tab for the group and take full advantage of this by discouraging individual bills. Why does this happen? Maybe there is an idea that extra cost will be absorbed by the group; maybe it’s a way to better bond with people, or maybe it has some mathematical explanation about shared risk. Regardless of its causes, we know this occurs and we know it occurs independent of scale - such as with often seen wasteful pork barrel spending.

I think it's time to stop from ordering the extra appetizer just because we believe 'the table' will somehow absorb the costs. Paying individual tabs may be slightly less convenient, but if it saves us money, allows us to feel good about the money we spent, and we still get to dine together and enjoy each other's company, maybe it's worth a thought.