Instapundit Glenn Reynolds writes at USA Today about why it's a good idea to have everyone pay at least some income tax. After noting that yes, everyone gets hit with payroll taxes, there's this:
The point isn't whether people are "freeloaders" who don't pay any taxes. It's whether people have "skin in the game." If you take me to an expensive restaurant for dinner but let me put money in the parking meter out front, that doesn't provide me any incentive not to order the lobster. Splitting the check, on the other hand, will cause me to think twice. It's like health insurance, where experience shows that even a small co-pay makes a difference in what people spend….
I'd like to see a system where everyone pays some minimum amount of tax — enough to notice, say 2%-5% of gross income. And that amount should go up noticeably when the federal government spends more, and go down noticeably when it spends less.
In a given year, that might only affect some individuals by a few hundred dollars, but as anyone who has followed local-government property tax fights knows, people can get pretty exercised over a few hundred dollars when they know it's coming out of their pocket and not someone else's.
We're going to have to get federal spending and borrowing under control. Making over spending painful to the electorate is a good way to start. And a lot of Americans seem to get that. Politicians, take note.
I think the general logic here is strong, especially the part about taxes increases when spending increases. Former Reagan budget director David Stockman stresses this point in his writings as well: That we need to choose how much government we want and then pay for it in the moment we want it (or as close to it as possible). Here's a section from our 2011 interview with him:
You're kidding yourself if you think cutting taxes today is really cutting taxes. We're simply deferring massive tax increases into the future, unfairly and immorally putting huge debt burdens on future generations, and that is just wrong….
I think you would really have to sit down and make some very large and honest cuts….
Then, what is the welfare state that we're going to keep? And if that's 20 percent or 24 percent of GDP, then what is the optimum tax system that will raise 20 percent or 24 percent? And therefore, if we need to lower income taxes—which I believed at the time, and still do for incentive purposes, or because of bracket creep—then what alternative revenue mechanism, such as the value-added tax or some other consumption-oriented tax, do we need to put in place to fund the government we've concluded we need?
