A while back, I had a chat with a friend of mine who is to the left of me politically. We were describing various political positions, and she talked about how she did not mind paying taxes so much, as she wrote it off as charity. I, being a polite fellow on occasion, took the opportunity not to make any sarcastic remarks about how this rendered her unfit for a cabinet position in the Obama administration or a left-winger in general, as this would imply that she actually pays taxes.
Anyhow, I got to thinking about it in the back of my mind, and when I read Arnold Kling’s description of government as “a charity run by the Mafia,” I first cursed myself for not thinking up that brilliant metaphor, and second decided to post my idea. It’s similar to Kling’s in that case, but with a slight twist. Instead of paying 15% for FICA (you pay the “employer’s” side as well, folks, even if you aren’t self-employed), some amount in the 10-25% range for income taxes, and sundry other taxes, we could do things a slightly different way and emphasize the “charity” portion of this. The federal government could eliminate all federal taxes, but require that individuals donate 15% of their yearly earnings to a registered charity* of the individual’s choice. In addition, each government agency will have its own charity fund, which you could reach at DonateTo.Gov. That way, you can earmark your dollars (in a good way!) for particular agencies. For example, conservatives love funding the military and building really cool stuff that blows stuff up. They would be very interested in funding the DOD (and we probably should have it broken down even further, to go to the various services, inter-service cooperation, general administration, etc.). Folks on the left who actually pay taxes would probably want to fund, say, the EPA. Libertarians would be likely to donate the full extent (or almost the full extent) to private charities, thereby depriving government agencies of funds they normally would have received. Not so many people would fund the Department of Energy. There would also be a general fund if you don’t care where your tax dollars go. If a bureau can’t get the funding to sustain itself, one of three things would happen: it suspends operations until it can receive the necessary funding, it becomes subsumed under a bureau that can afford to take it on, or it folds as the public proves that they don’t want this government agency around.
Also, instead of paying FICA and Medicare/Medicaid taxes, we would spin off Social Security and Medicare and make them private entities. Medicaid would be a yearly block grant that individuals could fund, like a scholarship. If you want to get into the Social Security program, you would pay your dues like you do today. If not, you would have to get your own social insurance, but we would have a competitive market in it. Same goes for Medicare. I’d be fine with a government requirement that you have catastrophic health and social insurance, so long as the government does not screw around with the markets which would develop in those areas.
The major flaw with my wacky idea here is the “how to get there from here?” problem. Because Social Security, Medicare, and Medicaid have gigantic unfunded liabilities even with a generation of individuals who will pay in but won’t ever get anything out of it, removing pretty much the entire productive base from that program would bankrupt it almost immediately. Each of these would require major structural changes in order to survive in any form. However, the idea of the Department of Agriculture holding a bake sale in order to remain in business (the business being corporate welfare***) and my getting to fund the Foundation for Economic Education or ASHA India or one of the thousands of other quality charities and non-profit organizations instead of wasting my money on corporate handouts in our pay-for-play system would be more than worth it.
* – We would make sure that the charities are registered in order to minimize the number of scams, like the Penguatroll Preservation Fund, dedicated to preserving the endangered Penguatroll’s way of life**.
** – This way of life involves sitting around on the couch, eating foodstuffs out of a foil bag, and playing video games. Occasionally, it waddles out into the sunlight to catch fish…err…go to class or work. Naturally, with the PPF, we would aim to have the Penguatroll no longer need to work to live, limiting its exposure to harmful solar rays.
*** – This is slightly unfair. They also do welfare for farmers, which reminds me of a joke. How do you starve a farmer? Weld his mailbox shut.