Choice

                                                                                 

Sometimes it seems there are contradictions in American life. For example, a woman is free to choose to have an abortion, but her government, through its control of her taxes, can choose for her whether to support policies which favor, or oppose abortion itself. Although tax money is used at varied rates, for many charitable purposes, from the provision of the necessities of life for the poor to the support of the Arts, those choices are outside her control, and people or organizations she may favor might be overlooked while her “contributions” to the public weal are used for purposes to which she objects. Indeed, some politicians object to a wide variety of taxes, declaring that individuals should be given the opportunity to manage their own money. They are assumed to know better than the government how to use it.

Well, yes and no. I've noted in the past that there are certain governmental responsibilities for which taxation is specifically permitted, like defense and the repayment of debts.ⁱ The debt, however, keeps getting larger, while there are perennial disputes about the budget for the military. Nonetheless, our government keeps initiating new programs to dispense the funds that it will demand of taxpayers and which will enlarge the debt. What follows is a proposal aimed at revising the system of taxation for one set of programs: those that are, in the usual sense, considered charities – supporting people and causes not listed in the Constitution and, historically, paid for by the families of those in need, by individual people, and by charitable organizations. As I've stated before, similar mechanisms might be considered for other governmental expenses as well if they are for programs considered valid and useful. What follows are my opinions, and you may not agree. I suspect that very few will agree. They entail major changes in our society, and will certainly have major repercussions – both anticipated and unanticipated. But so does the way we now do business.

In “Foundations For Charity”ⁱⁱ I raised seven questions to consider when discussing reformⁱⁱⁱ and for the first, regarding our global responsibilities, at this time I'll choose to limit the benefits to our own citizens, although a future discussion of the issue would be reasonable. It's just too complicated for the first go 'round.^iv Questions two through six – who should decide what needs to provide, whom to support, and what should be given – will be covered together, although the last question – what are the obligations of those who receive aid – will also play a part in that discussion. As I mentioned last week,^v the UCDC, by the substitution for money of a universal credit/debit card and account (originally described in “The Route Of All Evil” on April 21, 2013), will make the process easier and fairer, leaving less opportunity for fraud and failure to pay justified taxes.

Let me state at the outset that I believe a society like ours has the obligation to provide some help to the needy, whether or not they make any contribution to that society (as I believe they should). Part of that obligation reflects the humanity of our citizens; part exists because we have already taken it on and can't eliminate it entirely. So some limited taxation is unavoidable.  (From my perspective, those who receive aid from their fellow citizens also have an obligation – to those providing assistance.) It seems to me that independent committees (ICs)^vi can and should be chosen outside the usual political process to make decisions regarding the minimum needs of our citizens (and other qualified individuals) in terms of services (such as housing and medical care) and tangible products (food, clothing, and the like), those who qualify for the benefits,^vii and the value of the different parts of the package.^viii

The payment to each individual or family should be based on the demographics of the family, whether and how many members are employed,^ix assets, and location.^x A block grant^xi would be credited to each recipient's UCDC, and a suggested allocation of those funds allocated to him. Significant deviations from that suggestion would trigger an automatic audit and, if considered necessary, the issuance of certificates redeemable for necessary services and products instead of UCDC credit. In those cases where the suggested allocation is insufficient to provide the service (for example, there may be no housing available for the amount suggested), the required service should be provided through a government program. In the case of the example given, employing those receiving government assistance to build low-cost housing would mean the availability of more jobs and more housing.

But these guidelines don't deal with the issue of the individual who doesn't want to support the entitlements program. To the extent that the benefits exceed the minimum need (and the charity provided by private organizations should be factored into tax calculations) that should be his right. Those who do, however, should be rewarded for their generosity. While many will give via the IRS minimum,^xii additional donations should be deducted from the the donor's tax, according to a diminishing schedule.^xiii And for those who give through their taxes, if they are not satisfied with the government's own priorities, the option should be given to specify the services or organizations they wish to support.

In recognition of the American principle that we are all equal, a flat tax seems reasonable. And in view of the fact that we are all receiving the same services, it is logical that the payment per person should be flat – not a percentage of income. Just as “bulk discounts” are unfair to those who don't require them, “bulk tax increments” are unfair to those with higher incomes. And other services should be supported by those who use them – whether they are rescue services from those who take on unwise risks like smoking or yachting, or “normal” services like those for drivers who use public roads or those sending their children to school – public or private. It may take a rise in “risk taxes” (like those on tobacco or gasoline) or UCDC payments for specific services brought on by an individual, but (like education) it is not the responsibility of everyone else. Taxation is fair, legal, and necessary, and the allocation of taxes can be used to promote public policy. That public policy, however, should not simply be a way to take from the rich and give to the poor. Even Robin Hood, for most of the time since the legends about him have been retold, did not do so.^xiv

Will people cheat? Of course they will. But the removal of cash and the substitution of a credit account system will lessen the likelihood of this happening. Bartering will be hard to monitor as will the direction of credit payments through “dummy” entities, but we must not make the mistake of maintaining the current system until we have decided on a perfect one. That will never happen and we'll continue with the dysfunctional one we have now.

You can't choose whether or not you pay for what you get, but you can choose what you want.

Next episode: “A Chip Off The Whole Block” – Silicon and you.

i      Article 1, Section 8.

ii     May 12, 2013.

iii    The specific reforms relate to what entitlements should be paid for by taxation, and how should the needed taxes be assessed.

iv    It's easy, and, perhaps, justified, to suggest that our obligations don't end at our borders. After all we're a rich country, but it's a sure way to end the discussion before it begins.

v     “You Pay For What You Get”

vi     Choosing the membership of “independent” committees will be the most difficult aspect of such a program. No one is unbiased it will be necessary to rely on the good will of committee members to make the initial decisions and a computer to go further. Perhaps the membership would include the Chief Justice of the Supreme Court and two other Justices chosen by the Court, knowledgeable people from designated charitable organizations, and experts from several designated fields like medicine, nutrition, economics and the like. The membership would be selected by peers with all views, and members would have to be insulated from political pressure later on – perhaps by making lobbying and other prejudicial contact with them a punishable offense with harsh penalties. A single, long term would lessen the pressure exerted on them.

vii    This would allow differential payments based on marital status, family size, ownership of a home, health insurance, and similar criteria.

viii   Ideally the funds would be given as a block through the UDCD and the recipient would choose how to distribute it, using his account to do so.

ix     A significantly higher payment should be made to those considered needy but employed, and related to the number of hours employed weekly. They've earned it. It (the higher payment) should not be taxed but the income itself will be. If jobs are unavailable, the government should employ those seeking work as was the case with the New Deal. If child care is required it should be provided free to those employed. All these factors should be monitor-able by the UCDC system, and changes in payments made automatically.

x      The cost of living in different parts of the country varies.

xi     Limited in time and amount. The credit account can monitor total income and its sources, as well as indicating who receives the money paid out. If cash is eliminated from the market, it should be possible to limit the number of people “gaming” the system. (The Big Brother question has been discussed in the past.)

xii    Whether individuals or organizations.

xiii   Such a schedule will prevent taxpayers from listing donations up to the total tax bill, believing that it will cost them no more to do so. Perhaps after the mandatory governmental deduction, charitable deductions of up to 20% of taxable income should receive full credit and there should be a diminishing tax thereafter until, for example, 30%. Larger contributions are laudable and should be encouraged, but if all taxpayers devote their entire tax bill to charity there will be no money for other permitted uses. Even so, large donations, such as those between 30 and 40% of gross income, should have a greater than equivalent deduction to encourage the private provision of services (like those for arts programs and sports in schools, concert halls, museums and the like). Organizations like churches that provide assistance to individuals (soup kitchens, housing, etc.) should receive dollar for dollar deductions from taxes – which they should pay. Not everyone supports religion and believes the government should do so as well.

(Remember -- actual numbers would be decided based on desired outcomes, and not be imaginary like mine.)

xiv    According to Wikipedia, “Although not part of his original character, since the beginning of the 19th century, [Robin Hood] has become known for 'robbing from the rich and giving to the poor.'" Although legends about him date back at least to the 14^th century, he was simply an outlaw before that.