Darth Reardon wrote:
I just can’t wrap my head around the combination of 3 and 4. Three says you can’t discount your total federal tax liability by more than 50%. Four says you can’t discount your total federal tax liability by more than 100% (which is of course true already by way of three). Perhaps “total federal tax liability” doesn’t include junk like credit for buying a hybrid, while I think it means total after everything.
You have it there. By “total tax liability,” I’m referring to the total tax (line 46 on the 2008 form 1040, or line 28 on 2008 form 1040A), before any credits. The Credit I am proposing could be no more than half of that amount. And no matter how many Hybrid cars, solar panels, child care tax credits, etc. you claim, this Federalism credit won’t decrease your tax below zero or increase the transfer payment you receive.
Darth Reardon wrote:
My first concern with the plan was fairness. If you live in a high tax and spend state and I live in a (mythical) small government state, why should you get to pay less than me at the federal level just because your state is more efficient at wasting your money than mine is at wasting mine?
Thank you, I hadn’t thought about that. You have a valid point. I don’t have an answer for this concern (yet). But I will think about it.
Darth Reardon wrote:
Then I think about what states will do. They will raise taxes while telling us that it’s okay, because those raises will be offset by giving less to the fed, the only difference being that your tax dollars will stay closer to home.
Sounds great, and I suspect that’s what you’re going for, more of your total tax payments kept locally and away from the critters in DC (I’m not really sure that’s what you’re after, as another poster pointed out the article starts talking about unfunded mandates, then addresses taxation, I’m guessing there is a missing “leap” in between).
You have hit on precisely the aim of this proposal. Keep the money closer to home. As for whether States (and localities) will raise taxes, I suspect they will, but mainly to fund services that are probably better delivered at the state or local level.
The voters will have to keep a close eye on their local and state governments, as always, to watch for waste and abuse. But with the dollars closer to home, the waste, fraud and abuse should be more visible and easier to fight.
Post #8 goes into a bit more detail about the effect of this on unfunded mandates. Basically, unfunded mandates reduce federal tax revenues as they increase state and local taxes. This results in a financial disincentive for unfunded mandates that is not in the system we have today. I still favor legislative or constitutional prohibitions on unfunded mandates, but this measure does give some indirect relief.
Darth Reardon wrote:
However, in a couple years when this is repealed, our state taxes won’t be reduced, and we’ll have new state programs and agencies which do the same things as the existing (you don’t think the fed unfunded anything just because it was getting less money coming in?) federal programs and agencies.
I think the end result would just be encouraging states to take up a bigger role in government (note that this does not imply taking anything away from the fed, the pie gets bigger). It’s not like the federal government is going to stop spending as much as it can get away with. If I send them $1 less next year, they’ll just borrow $1.25 in my name (unless I hurry up and die) in its place.
It is my belief that part of our problem today with an overgrown federal government is that we allowed the state governments to become weak. This created a vacuum and an opportunity for the usurpers in DC.
While it doesn’t directly reduce federal spending, in theory, if the states and localities start paying for their own projects locally, there will be less demand for federal grant programs, and real reductions could follow. There is some anecdotal evidence to support this. Back in the Clinton era, there was a program called Community Oriented Policing Services (COPS). The goal was to put 100,000 new police officers on the streets. But cities were skeptical, especially when they read the fine print on the grants. They had to commit to the positions for many years (7 or 10? I don’t remember exactly), but the federal grant to pay the officers’ salaries was only for a couple years (again I don’t remember the exact number it started at, 1 to 3 maybe?). The result was, almost no takers for the “free money” from the feds. It seemed like every year they were tweaking the program to make it more attractive. Ultimately, I think they got around 50,000 officers on the street (and allowed some of the funds to be used for administrative and “desk jobs”). I’m posting this from (probably faulty) memory, so don’t take the figures as absolute facts. But the principle is valid and matched the observed behavior. “Free money” with too many restrictions isn’t so popular with local governments.
If this federalism credit I'm proposing was the law, I think many cities and states would not be so interested in federal grants from many programs. Why jump through all the hoops and beg for “funds.” You have the cover to tax locally, keep the money out of Washington DC altogether, and retain more control, like not having to pay Davis Bacon wages because there are federal dollars in the project.
And, assuming that a Congress was conservative enough to actually pass this measure, they would probably be conservative enough to trim things back with the decrease in demand.
As always, much relies on the voters. This won’t pass in the current Congress. But getting it in the hopper and watching the cosponsor list might give us some clues as to which critters are truly “smaller government” supporters. If/when it passes, it won’t be repealed unless the voters go back to sleep and allow another gang of socialists to have the keys to the capitol.
Thanks again for your feedback.
| From the desk of cc2k: |
That’s interesting, thanks. I think I may have let my experience of living in a strong federal environment bias me into overlooking the greed (money/power/control) at the state level. Kind of funny that I would do that, since I’m the guy who believes that the county flag should be flown on top, then the state flag, then the union (I wouldn’t actually do that today, I’m just describing the world I’d prefer to live in). I’m gonna have to go think on that one for awhile. Thanks.
Kind of reminds me of a thought experiment I did awhile back (I didn’t care for the results). If every single state government did not accept the “stimulus” package, would the federal government try to take them all on? IMO, when the states are unanimous, that IS the federal government’s position, as the fed is nothing more than the union of the states. My opinion has nothing to do with reality, just what I think should be.
BTW, in your last sentence, you misspelled “until” as “unless”.
I have read every thing submitted so far. What I like about the plan is that it puts us in a transitional position for Congress to eventually take away their Constitutional mandate to coin money and regulate its value. Which brings up of course the degree of control the Federal Reserve has over the Congress...but that is another subject.
The other thing I like about the plan is that it encourages economic growth. Though I am not going to sit here and type what is juicing my head right now, that too, can be saved for another discussion. Suffice to say, deducting sales from federal liability will spur a spending spree in the beginning.
Lastly, I think the concerns for greed at home should be balanced with the idea that as the money itself may stay more local, WE are as local as the money. There is little distance from the PEOPLE to the Statehouse, if you dig my meaning.