Will earmarks for taxpayers improve enthusiasm and compliance?

Earmarks in Congress prompted a grassroots movement to stamp them out called Porkbusters, one that scored a surprising but incomplete success, and produced a few unintended consequences. Still, as taxpayer revolts go, it served as a remarkable repudiation of pork-barrel politics and the corruption it both produces and sustains. Now, though, a study suggests that allowing taxpayers to earmark at least a portion of their taxes would increase enthusiasm and engagement, rather than apathy and complaints usually arising from this time of the year:

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First we have to look closely at why we really hate taxes. “Some of it is just [that] it’s people taking your money away, and we don’t like that,” says Michael Norton of Harvard Business School. “But we really focus on is this idea that they’re taking your money away and you don’t know what it’s being used for.”

Norton, working with Cait Poynor Lamberton of the University of Pittsburgh and Jan-Emmanuel De Neve of University College London, conducted experiments that found allowing taxpayers to have a say in where their money goes helps improve tax compliance rates.

“We thought maybe if we let people feel like they had a voice in where their taxes went — that they could choose a little bit where they were going to go — maybe they wouldn’t hate it so much,” Norton explains. “Some people really like to support the military and other people don’t. If you were allowed to decide at least where some of your tax money went, it would really change your feeling about whether that was good.”

The results were similar whether taxpayers had control of only 10 percent of their tax dollars or 100 percent. “We’re just excited that anybody is letting us say anything about where our taxes go,” Norton says. “The researchers found that test subjects were less likely to exploit a questionable loophole in their taxes when given more agency in where the money was going.”

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This sounds great … in theory. In reality, the federal government alone is so huge that it would take months just to figure out what all of the components are, let alone whether their programs and grants should be funded. Filing taxes are complicated enough now. Can anyone imagine what it would be like if we had to parse our way through an entire database of government programs to divvy up our taxes each year? It would take the entire time between January 1 and April 15th.

The 10% option supposedly responds to that, by allowing Congress to allocate the other 90% in their normal process. This, though, would be akin to using state lotteries to supposedly boost education funding. In reality, it allows legislatures to redirect resources elsewhere in the budget, making that revenue in effect simply another general-fund resource. Supposedly the repudiation of taxpayer earmarking patterns would produce negative political effects for incumbents, but (a) that again depends on taxpayers becoming budget experts, and (b) rarely happens even when the repudiation of voter intent is a lot less complicated — say, by blocking human-trafficking bills to protect potential revenue sources for abortionists.

Taxpayer alienation and frustration, and the compliance issues both exacerbate, are real issues. Playing games at tax time won’t make that any better, I argue in my column for The Week. We need to fix the actual problem which creates that, which is a vastly overgrown bureaucracy, though federalism and subsidiarity:

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People don’t see a connection between their taxes and responsive government because such a connection no longer exists. The federal government has grown so large and intrusive that most people feel helpless to change its direction or policies, even if they are politically engaged. It won’t matter if we have a small say in directing our tax dollars. The massive, voracious dinosaur that is our federal government will still lumber on whatever path it chooses, regardless of what we peons demand.

Tweaking the rules of how we pay the government is not enough. We need to aggressively reform government. And we need to do it through federalism and subsidiarity.

Federalism establishes sovereignty in the states for most government functions except national defense, diplomacy, and interstate commerce. The Supreme Court decision in Wickard v. Filburn distorted the definition of the latter, and became one of the predicates for the massive expansion of federal government that followed. Reversing Wickard would likely take a constitutional amendment to narrow the definition of “interstate commerce,” and to curtail federal jurisdiction in favor of state and local government that would be closer to the taxpayer, and therefore more accountable.

Subsidiarity, which suggests that things are best handled by the smallest, most localized authority possible, follows from a restoration of federalism. Subsidiarity would handle as much as possible at the local level.

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Most of all, accountability follows from a restoration of federalism and subsidiarity. Taxpayer “earmarks” are a game, a gimmick, but federalism and subsidiarity put the funds closest to the taxpayers so they know how their funds get spent. Less of it gets wasted by having it filtered down through multiple layers of government. If we want to fix the loss of self-government, the obvious solution is to restore it rather than play games with tax returns — which is the kind of thinking that got us here in the first place.

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Victor Joecks 12:30 PM | December 14, 2024
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