Ezra Klein shares a clever idea from the group Third Way: Rather than simply present taxpayers with a faceless bill for some large amount of money each year, why not give them a receipt showing what programs and services their money paid for? One potential problem is that, by necessity, the receipts would have to be simplified in order to be meaningful to the average taxpayer. Those simplifications would have to be closely monitored to ensure that they don’t end up being misleading. However, even a simplified receipt would still give taxpayers a better picture than they have now of how their money is being spent.
So as extremely small-bore reforms go, I think Klein is right that there may be some merit to the proposal. But some of the people who support the idea seem to think that it would highlight all the great services Americans get from the government and make paying taxes less of a pain in the you-know-what.
As Ethan Porter wrote earlier this year in an article rather amusingly titled “Can’t Wait ‘Til Tax Day”:
If done right, a receipt could have powerful and lasting consequences. It would make clear the enormous amount of goods and services provided by the government. It would dispel myths: America is not a nation of welfare queens, dependent on the public teat. The amount spent on safety net programs will, to some people, seem stunningly low.
Would it really help make voters happier about paying their taxes? I'm skeptical. Look at the top three items on Third Way’s mock up, which shows what the receipt would look like for someone making $34,140 and paying $5,400 in federal income taxes. The biggest line item, by far, is Social Security ($1,040.70), followed by Medicare ($625.51) and Medicaid ($385.28). If anything, my guess is that this would focus taxpayers on the high cost of entitlement programs.
Medicaid, for example, strikes me as the obvious loser here. It’s the third largest item, but the program is aimed at the poor, not the middle class, which means that a lot of middle-income workers won’t be quite as sympathetic toward it. Combine that with the program’s dismal record and rapidly rising costs, and a line-item like this would probably create an incentive for reform rather than strengthen public support.
Social Security, on the other hand, is a fairly popular program that, at least in theory, is designed to benefit all Americans eventually. But would young American workers, many of whom start out with salaries in the neighborhood of the one that Third Way shows, really like being informed that they’re paying more than a grand a year into a retirement program that provides measly long-term returns and, without an overhaul, won’t be able to pay for its benefit obligations by the time they hit retirement age? How many of them would see a receipt like this and think they could do better with their own investments? The Medicare bill is smaller, but a receipt like this would highlight to the average 30-something that she’s putting hundreds (or more, as her income rises) each year toward a program that she won’t be able to access for decades (if its current form lasts).
Far from convincing taxpayers that their money is being spent well, I suspect it’s just as likely that many workers, especially those in their 20s and 30s, would see a bill like this and think to themselves, I could be doing something a lot more productive and satisfying with all that cash—saving it, investing it, and otherwise putting the returns toward individual priorities and programs that are designed around personal specifications rather than the government’s.
Combine this with a long-time favorite libertarian tax reform—requiring individuals to actually write out a check to the government—and you might actually end up with a taxpaying public that’s more acutely aware of both how much they’re paying and, more importantly, what they’re getting in return. Would that make them more excited about paying taxes? Somehow I doubt it. But if liberals want to find out, it may not be a completely terrible idea.