One of the more problematic (not because it's accurate, but because it sounds credible) charges often brought against Libertarians by big-government advocates is that we have no concern for the poor, especially the working poor, and that we're more committed to preserving the right of some Plutocrat CEO to buy his ninth Mercedes than to help poor people get health insurance. I've already talked about the health insurance aspect, and while that certainly isn't a perfect, it's a start.
But what about the issue of helping the American poor?
Here's a first thought: let's make sure they get to keep all the money they make before we do anything else.
Dollar for dollar, wouldn't it be one hell of a lot cheaper to let them keep their own money than to tax them and return it minus the administrative overhead of the government? Yes, I realize that with the EITC a lot of the working poor don't actually pay income tax, but they do pay hundreds if not thousands of dollars in other taxes: gas taxes, sales taxes, FICA taxes, liquor taxes, cigarette taxes, phone fees, transfer taxes for automobiles.... The list goes on....
But how would you do this in practice?
Given modern information-processing technology it's not a difficult task to contemplate.
Just give everybody below 200% of the Federal Poverty Level a Tax Rebate Account number. As each tax payment is made--whether it's $0.23 per gallon of gas taxes or sales taxes, a credit is automatically posted to the Tax Rebate Account. Once a month the rebate total is direct-deposited in the individual's bank account. The Tax Rebate Account would be a Federal account, but it would simply debit the appropriate State if the rebate came from a State or Local tax. It would be up to the State to collect its money back from the locality.
If you tied this to the health care plan I proposed earlier and allowed medical receipts as tax credits, those also could be rebated on a monthly basis.
At a guess (I'm still trying to find some credible figures) the income bump to working poor families and individuals by at least 25-30%. That means that a family of four with a 40K income would effectively have the spending power equivalent to 50-55K.
The up side:
1) Minimal bureaucracy.
2) People get cash back on a monthly basis to use as they see fit.
3) The program can be incrementally phased out as income climbs.
The down side (from the statist perspective):
1) People get cash back on a monthly basis to use as they see fit. [One of the tenets of the welfare state is that poor people cannot be trusted to make their own decisions.]
2) The program will lower tax revenues. [Of course it's cheaper than various transfer programs, but you'd be amazed how many people will come out of the woodwork to tell you that we can't possibly survive if poor people don't pay gas taxes, even it causes the welfare state to wither and spend less money. Besides, statist liberals always want tax cuts targeted toward the middle class and working poor--here it is.]
3) The program will almost certainly generated a black or grey market as people with the Rebate Cars are approached by others who don't qualify to buy gas, cigarettes, etc. etc. [So what? The actual cost of such a black market would be the lost tax revenue to the government, but on the other hand it would allow people with more money to voluntarily transfer money to the working poor. If the government suffers an additional revenue loss, just consider it the equivalent of administrative overhead.]
Of course there would be a long list of reasons why we couldn't possibly undertake a program like this, but they would all boil down to this: "We can't afford it" and "We can't trust the poor to be responsible with just handing them cash"--even if it's their cash.
But what about the issue of helping the American poor?
Here's a first thought: let's make sure they get to keep all the money they make before we do anything else.
Dollar for dollar, wouldn't it be one hell of a lot cheaper to let them keep their own money than to tax them and return it minus the administrative overhead of the government? Yes, I realize that with the EITC a lot of the working poor don't actually pay income tax, but they do pay hundreds if not thousands of dollars in other taxes: gas taxes, sales taxes, FICA taxes, liquor taxes, cigarette taxes, phone fees, transfer taxes for automobiles.... The list goes on....
But how would you do this in practice?
Given modern information-processing technology it's not a difficult task to contemplate.
Just give everybody below 200% of the Federal Poverty Level a Tax Rebate Account number. As each tax payment is made--whether it's $0.23 per gallon of gas taxes or sales taxes, a credit is automatically posted to the Tax Rebate Account. Once a month the rebate total is direct-deposited in the individual's bank account. The Tax Rebate Account would be a Federal account, but it would simply debit the appropriate State if the rebate came from a State or Local tax. It would be up to the State to collect its money back from the locality.
If you tied this to the health care plan I proposed earlier and allowed medical receipts as tax credits, those also could be rebated on a monthly basis.
At a guess (I'm still trying to find some credible figures) the income bump to working poor families and individuals by at least 25-30%. That means that a family of four with a 40K income would effectively have the spending power equivalent to 50-55K.
The up side:
1) Minimal bureaucracy.
2) People get cash back on a monthly basis to use as they see fit.
3) The program can be incrementally phased out as income climbs.
The down side (from the statist perspective):
1) People get cash back on a monthly basis to use as they see fit. [One of the tenets of the welfare state is that poor people cannot be trusted to make their own decisions.]
2) The program will lower tax revenues. [Of course it's cheaper than various transfer programs, but you'd be amazed how many people will come out of the woodwork to tell you that we can't possibly survive if poor people don't pay gas taxes, even it causes the welfare state to wither and spend less money. Besides, statist liberals always want tax cuts targeted toward the middle class and working poor--here it is.]
3) The program will almost certainly generated a black or grey market as people with the Rebate Cars are approached by others who don't qualify to buy gas, cigarettes, etc. etc. [So what? The actual cost of such a black market would be the lost tax revenue to the government, but on the other hand it would allow people with more money to voluntarily transfer money to the working poor. If the government suffers an additional revenue loss, just consider it the equivalent of administrative overhead.]
Of course there would be a long list of reasons why we couldn't possibly undertake a program like this, but they would all boil down to this: "We can't afford it" and "We can't trust the poor to be responsible with just handing them cash"--even if it's their cash.
Comments
The people are fed up with complicated tax schemes. It's much easier to deny the payment of tax in the first place than to do the whole 'tax then rebate' thing. That's why the consumption tax isn't popular. If you create a function for taxes to be taken, and a promise to rebate them, people think somewhere along the line a politician will simply remove the rebate, and the tax remains in place.
Heck, and the psychology of it is nuts. People now think that getting a tax refund is somehow free money from Uncle Sam.
I'd be more in favor of a simple tax system, and remove all the little taxes from everyone's life.
As for Libertarians and the poor, I think if you let the people have their own money, they'd be willing to donate more to charity, especially if big bad Uncle Sam stopped with the federal funding. Sure, there will always be heartless, greedy people, but the true heart of this country still exists, and would be willing to make up the difference. Whether it be from private donations, or corporations looking for publicity, someone will pull through, even if there is a tax incentive for it.
What I am suggesting is something like that for the poor, who should be paying no taxes. Every time they pay for gas, or pay their phone bill, the tax portion of the cost is credited back to them.
There is no other way under the current system "to remove all the little taxes from everyone's life."
The plan requires every bit as much monitoring of citizens and invasion of privacy, if not more, than we have now.
Getting a check from the government works, psychologically, to convince people that government gives them things instead of takes them away. Even if it's their own money.
I know better and I still react to tax returns that way.
Not that letting people keep their money is a bad idea. It's an excellent idea.
Invasion of privacy: the government already has most of this information on you anyway, and if you choose NOT to report it you can choose to pay the tax. I am suggesting that we take the information that the government in most cases already collects (or which private enterprise already collects through data mining) and use it to return people's money to them.
The government as sugar daddy objection: to an extent this is legitimate and cannot be avoided; however, there is an inherent difference in receiving a rebate check each month for tax money I actually forked out of my own pocket and applying for food stamps. In one case I am applying for a govt. benefit; in the other case I am recovering what the government took from me.
My whole point is that we need to address the genuine working poor by finding some sort of mechanism to first let them keep all the money that they do make (in as near real-time fashion as possible); if anybody else has a better mechanism I'm all for it.