Dear President Obama + Tax Reformers

Here’s an awesome tax-reform idea that will:

  • Promote fiscal responsibility by requiring budgets be set openly
  • Give Americans a sense of purpose in paying taxes
  • Incentivize Americans to pay taxes early
  • Quiet arguments on taxes
  • Display governmental and fiscal transparency

The scoop:

  1. The federal government finalizes budgets for all of its departments and agencies by November 30.
  2. On December 1, the budgets are published on the website.
  3. Starting January 1, Americans can designate how much (dollar-wise or percentage-wise) of their quarterly or annual taxes they would like to pay toward each pre-set budget.
    • Real-time budget availability is shown on the website
    • Tax returns filed on paper are taken into consideration, though priority is given to electronic returns (for obvious efficiency reasons)
  4. Once a budget has been filled, it is closed — no additional tax revenues can be designated toward that particular budget.
    • This quickly shows what the people ACTUALLY care about. This is important.
    • There’s still a discretionary budget; this is where money is pulled if any of the pre-set budgets end up being way off.
  5. Tax payers choosing NOT to designate their taxes are given the option to “you choose for me,” which evenly splits their taxes across all open budgets OR goes into the discretionary fund.
    • This is used to cap remaining budgets and/or provide more funds to agencies that end up needing it as the year progresses (e.g., to pay for natural disaster recovery).

Why it’s Awesome:

Such a system could encourage people to feel a sense of ownership that they may currently NOT feel.

If I was able to designate, for example, 100 percent of my annual tax burden to the agencies I feel are most deserving, I then would feel LESS disgruntled when I’m asked the next year to pay a greater amount of taxes.

This is how life works anyway — if I want to buy a house today, I’m certain the cost will be less than what it will be in the future.

And that’s OK, because I know I’m buying a house I want versus just throwing money into ANY house, without my choosing.

Please make the tax system more transparent, and give that sense of confidence in government back to the people.

2 thoughts on “Dear President Obama + Tax Reformers

  1. Setting up this kind of system of course introduces an element of “direct democracy” into the political system (as opposed to representative democracy.) In states where this has been done before (such as with California referendums) I think most people would argue that direct democracy has been problematic. However, I think that modern technology could make direct democracy more practical (one of the original reasons it isn’t part of the U.S. constitution) and that the downsides of it could be minimized if the right constraints are introduced (your suggestion might be one way to accomplish this.)

    Certainly your suggestion would cause certain areas to fall short of funding because of the wrong reasons: For instance, almost no person would designate all their tax money towards “paying interest on the debt”, yet those same people would understand that if the government caused treasury bond payments to default as a result it would lead to catastrophic consequences. Therefore, I’m not sure what useful information is gained by this allocation of funding via popular decree.

    Also, I’m not sure how this would make the “tax system more transparent” since this suggestion does not impact how taxes are collected- Though it would certainly make the government budgeting process more transparent. If you want transparency for taxes, perhaps a “flat tax” system would be more efficacious.

    Nonetheless, I think your idea is interesting and having some elements of direct democracy via technology probably will exist to some limited way in the future. At the end of the day though there is the open question as to what solution to “wasteful government” makes the most sense: Is it better to give individuals more control over government expenditures or is it better to shrink the size of the government altogether?

  2. @Conrad – Great points, thanks for the feedback.

    First, paying interest on the debt would happen because not everyone would actually designate their taxes to a specific budget, and any taxes paid after budgets are closed (depends on demand) would go into the discretionary budget. That would then pay interest on the debt, among other really annoying but necessary Things That Must Be Paid.

    I LOVE the flat tax debate — and yep, “Where my money went” is what I meant by transparent more than “How I’m paying taxes.”

    I wonder if your last question is better answered once we’re seeing — from the government, rather than from media — what it costs to run the country.

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