Saturday, July 14

A modest plan for raising fed income tax rates

Over at Ace's place, co-blogger Laura posted about how left/liberal policies were bankrupting cities. But amazingly, leftists/libs seemed unable to comprehend that the reason the cities are bankrupt is liberals' insistence that their historic policies are not to blame in any way. Rather, the problem is that government doesn't tax "the rich" enough.

Many (possibly most) liberal policies inexorably lead to cities spending money they don't have. They typically do this by selling bonds, which is like borrowing from your kids. One common cause of cities running short of cash is to fund pensions and current salaries for retired and active city/county workers.

City councils respond by borrowing ever more money, and raising sales taxes and other fees to ever higher rates. Each increase incrementally causes a small number of taxpayers to give up the fight and go off the above-ground economy. Some of the poorest who have managed to own their home can't pay their ad-valorem taxes and lose their home.

When overtaxed residents complain and vote down tax increases, councils wail pitifully that they'll now have to cut police and fire protection because of the stupid, mean, stingy, greedy voters. What bullshit: There's a ton of--if not outright waste, at least crappy decisions made by cities every day. Stop making those decisions and see how much farther your tax revenue will go!

Example: Why does any city have a taxpayer-funded pension plan? Why not let employees do the 401K thing, with employer matching contributions up to a couple of thou per year? Such "defined contribution" plans beat the hell out of "defined benefit" plans, where people with the same years of service get the same fat pension.

Well of course you know why they don't make the efficient choice: Politicians don't want to fight with the public-employees union, and figure its easier to go along with the union than fight to keep costs down. After all, look how much heat Wisconsin governor Scott Walker got for bucking the unions.

Until a few years ago I would have suggested that taxpayers could use the initiave petition process to force state, city and county governments to switch to less-costly retirement plans. But as Justice John Roberts' recent opinion on the constitutionality of Obamacare showed (and before that, the overturning of California's "Prop 8"), we can't depend on the courts to uphold/enforce perfectly constitutional measures, nor to overturn laws that violate the Constitution.

So I see no real hope of bringing government to heel short of armed revolt. And I don't know anyone who wants it to come to that.

But I do have an idea for a proposal for a GOP-introduced bill that would make amusing theater: Have the GOP offer to let Democratic voters set the tax rate for the whole country. But not simply be decree. Instead, for two years any Democrat who had a total federal tax liability of more than $5000 could go public with his/her return, and write a check to Uncle for some higher amount. Then at the end of the second year, all federal tax rates would be raised by the weighted average of the percentage of increase that persons declaring themselves Democrats on their 1040 paid, and would scale up from there by the same increments as today.

Rounded to the nearest whole percent.

So if every Dem who paid more than $5k in fed income tax would have been required to pay an average of, say, 22% of their AGI in tax, but instead voluntarily paid 30% to the feds, all tax brackets would rise by 8%.

Simple and very powerful, eh?

Of course, if a thousand Hollywood stars and elite newspaper reporters and editors paid twice what they had to, and the rest of the hard-working but less-enlightened Democrat voters paid only what they had to, tax brackets would rise by...um...zero.

Zip. Zilch. Nada.

Oh, and just to keep things fair, add the provision that if taxes end up not being raised within, say, ten years, people who overpaid today can apply for a full refund of the amount they overpaid.

Hell, even pay 'em whatever the going interest rate on U.S. borrowings is. The only catch is that the names of everyone who applies for a refund is to be published in the Wall Street Journal and NY Times every week for a month. So we'll all be able to see who among libs is willing to loan the U.S. government money at two percent, or whatever.

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