Skin in the game

Radley Balko wrote a post recently offering up some policy ideas basically geared toward getting as many peoples’ skin in the tax-and-spend game as possible. Other than payroll taxes, most people on the bottom of the income ladder don’t pay taxes, and so government is funded by fewer and fewer taxpayers.

So here’s my idea: Let’s make the Medicare and Social Security taxes more progressive. (While we’re at it, let’s subject both programs to means testing.) But in exchange, we also scrap the Earned Income Tax Credit in favor a negative income tax. Built into this would be a mechanism ensuring that when government spending goes up, everyone pays for it—it’s just that people in lower tax brackets would “pay” by getting a smaller reverse income tax payout. The idea is to be sure everyone has to sacrifice a bit of discretionary income when a politician proposes some big new government program, so everyone can decide whether the benefit from the new program is worth its cost.

Charles Davis responded by pointing out that the government is largely in service of the rich, not the poor:

As a libertarian, Balko bases his tax-the-poor stance not on a concern over the government’s ability to fund programs he’d like to do away with, of course, but out of a fear that because many poor Americans do not pay federal income taxes, “we’ll soon have a majority of people who pay no tax voting for more and more government services they benefit from, but don’t have to pay for.” Implicit in this is the apparent belief that the dramatic rise in government spending and the national debt over the past few decades is explained by poor people voting into office politicians who keep giving them more and more of other peoples’ money – and voting out those who don’t; in other words, the standard conservative narrative of the parasitic, layabout masses bleeding dry the productive, wealth-producing John Galts.

That narrative, however, is what political scientists colloquially refer to as “fucking bullshit.” Contrary to what conservatives love to allege and big government-loving liberals would love to believe, the majority of what the state collects every April 15 goes not to poor, drug-addicted welfare mothers, but to blowing up poor mothers and their children on the other side of the globe with bombs purchased from very wealthy military contractors. While the bulk of state spending is indeed on Medicare and Social Security – the bread to go along with the circus of publicly financed stadiums – those programs are funded, as Balko acknowledges, by direct, regressive taxes that, yes, even poor people pay.

My gut reaction to Radley’s post was similar, maybe because I’ve been thinking a lot lately about how government screws over the poor. On second read, however, I’m pretty sure that my gut reaction was wrong, and that Charles is also wrong – at least to a degree – about what Radley is trying to do here. For one thing, making payroll taxes progressive and capping them for the rich is actually a really good, really progressive idea (and helps save money on entitlement spending).

Of course, Charles isn’t wrong that the state serves the elite first and foremost, and that too much taxpayer money is funneled straight to the Pentagon. I think what Radley is trying to do, however, is simply make more people aware of that fact.

A negative income tax that fluctuates when government spending increases and decreases gives many more people skin in the game. And not just so that they’re helping pay for the game – they’re not, after all, if they’re getting money back in the form of a negative income tax – but rather so that they can be aware of the consequences of government action. If you’re getting $3,000 back from the government each year and then we embark on massive spending increases, maybe launch a couple new wars or whatever, and now suddenly you’re only getting $1500 back – well I’d notice. And noticing is half the point of representative democracy, because then you can get pissed off about it.

One argument for increased labor participation and higher union density is that it leads to more people actively involved in politics. Being home owners also does this. Any time you can get people invested in the economy and the governance of the nation you up the ante on their democratic participation.

So while I agree completely with the thrust of Davis’s argument, I think he’s missing Balko’s point. I can’t blame him. I missed it at first, too. On further reflection, however, I think it’s a pretty damn good idea, though I’d prefer we abolished payroll taxes and replaced them with a carbon tax instead.