When consumers make purchases, they choose what goods and services they want to spend their hard earned money on. Paying taxes is like purchasing government goods and services. Yet taxpayers are told what goods and services they will be purchasing with their tax dollars instead of having any choice in the matter. Even if a good or service provided by government is of no value to a certain taxpayer, he or she must pay for it regardless.
But what if taxpayers could choose how their tax dollars are spent?
David Boaz, executive vice president of the Cato Institute, explored this idea in an April 15, 2015 article in the Washington Post, titled “We Should Get To Decide How The Government Spends Our Taxes.” Republished below is Mr. Boaz’s article:


In his 1992 Republican National Convention speech, President George H. W. Bush proposed letting taxpayers commit up to 10 percent of their payment to reducing the national debt. The proposal never went anywhere, but it points to a good idea: Taxpayers should be able to designate how their tax dollars are spent. Already, we allow for this in very limited ways. A check-off at the top of the 1040 form invites every taxpayer to direct $3 of their federal tax to the Presidential Election Campaign Fund (only 6 percent of taxpayers do). In Virginia, my VAC invites me to contribute additional funds to more than 100 organizations ranging from the Democratic and Republican parties to the U.S. Olympic Committee, the Virginia Arts Foundation, and many local school and library funds.

Why not take this one step further? Why shouldn’t taxpayers make direct decisions about how much money they want to spend on other government programs, like paying off the national debt, the war in Iraq or the National Endowment for the Arts? This would force the federal government to focus time and resources on projects citizens actually want, not just efforts that appeal to special interests.

To do this, we’d have to expand the concept of the campaign financing checkoff to all government programs. With this reform, the real expression of popular democracy would take place not every four years but every April 15. A new final page of the 1040 form would be created, called 1040-D (for democracy). At the top, the taxpayer would write in his total tax as determined by the 1040 form. Following would be a list of government programs, along with the percentage of the federal budget devoted to each (as proposed by Congress and the president). The taxpayer would then multiply that percentage by his total tax to determine the “amount requested” in order to meet the government’s total spending request. (Computerization of tax returns has made this step simple.) The taxpayer would then consider that request and enter the amount he was willing to pay for that program in the final column–the amount requested by the government, or more, or less, down to zero.

A taxpayer who thinks that $600 billion is too much to spend on military in the post-Cold War era could choose to allocate less to that function than the government requested. A taxpayer who thinks that Congress has been underfunding Head Start and the arts could allocate double the requested amount for those programs.

There would be quite a bit of debate, of course, over how to list programs in the 1040-D program. Spending interests would want to use broad categories–national defense, health, education, job training. Opponents of spending would prefer to narrow the categories so taxpayers can see what they’re really buying– defense of Japan and Korea, war in Iraq, farm subsidies, mass-transit “demonstration” projects in West Virginia, and so on. Libertarians and the arts establishment might agree on listing just “arts,” while the religious right might lobby to have the category broken into “fine arts,” “pork-barrel arts,” and “obscene art.” Language would be an issue – “corporate welfare” or “loans for small businesses”?

Real budget democracy, of course, means not just that the taxpayers can decide where their money will go but also that they can decide how much of their money the government is entitled to. Thus the last line on the 1040-D form must be “Tax refund.” The form would indicate that none of the taxpayer’s duly calculated tax should be refunded to him; but under budget democracy the taxpayer would have the right to allocate less than the amount requested for some or all programs in order to claim a refund (beyond whatever excess withholding is already due him).

Entitlements would be the biggest problem. About 60 percent of the federal budget now goes to entitlement programs. Medicare and Medicaid make up more than 20 percent of spending, and most of that comes from general revenues. Should taxpayers be able to withhold their hard-earned dollars from such programs? In a free society, they should. So how do we handle a shortage of funding? Congress could change the spending parameters to fit what the taxpayers are willing to supply. The budget democracy process could also include a provision allowing Congress by a two-thirds vote to override the taxpayers and insist on larger payments to pay for entitlements or other services deemed essential.

Then, instead of trying to decide which candidate might be telling the truth about his commitment to fiscal responsibility, the taxpayers could take matters into their own hands, finally being able to say effectively, “You’re spending too much. We’re cutting your budget.”

The Washington Post
Cato Institute