Taxes

What Should a Taxpayer Receipt Tell Taxpayers About How Their Money Is Being Spent?

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A few weeks ago, I noted a proposal by the group Third Way to give taxpayers a receipt showing how their taxes were being spent. I argued—and still believe—that the idea has some potential to focus taxpayer attention on the high cost of entitlements and defense spending. But as I noted at the time, compiling a receipt in a way that would be clear and meaningful to the average taxpayer would require some simplification. And the simplification process would almost certainly prove contentious.

The folks at OMB Watch have put together a helpful primer on both previous state-level efforts to provide such information to taxpayers and the thorny interpretive questions that would have to be resolved in order to do so. As is almost always the case, effective implementation is the most difficult part of any program:

Another challenge would be trying to summarize the complex federal budget in an accessible yet comprehensive way. Although the Third Way brief asserts that preparing a taxpayer receipt would be "really very easy," many subjective decisions would be involved. Deciding how to describe and categorize federal spending could be challenging. For example, the Taxpayer Right-to-Know Act mandates nine broad categories and 19 sub-categories, while independent calculators by What We Pay For and Kareem Shaya use entirely different categories.

Should the receipt list agencies (e.g. Department of Defense) or particular activities (e.g. war in Afghanistan)? Listing the budget per agency would be simple but not necessarily informative. For instance, besides knowing the overall budget for the Department of Education, many taxpayers might wish to know how much spending goes to K-12 education, early childhood education, or postsecondary education. Government activities as seen by the taxpayer do not necessarily correlate to budget lines, and many activities cross agencies (such as educational programs conducted by the National Science Foundation). Because the way that spending activities are described can influence taxpayers' opinions, if a receipt were widely viewed, the descriptions could be manipulated for political purposes.

Another difficulty is how to provide appropriate context to spending information while keeping that information accessible. For instance, rather than merely learning the dollar figure for last year's spending, taxpayers might wish to know how the number compares to recent years or historical trends. In addition, spending does not exist in a vacuum but is meant to address needs or produce outcomes; however, information on merit or performance of the activities is outside the scope of Third Way's proposal.

Right. It's not just how much money is being spent that matters, but how effectively it's being used. Still, given how little most taxpayers know about how their money is being spent (surveys show that many taxpayers believe we spend more on foreign aid than entitlements), simply providing them better information about how their dollars are being distributed across various spending categories would be a good start.

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  1. And, of course, the whole thing is a fraud if it doesn’t show how much was borrowed.

    1. “Borrowed.” How quaint.

  2. Wouldn’t a picture of me holding burning money and of my children holding burning money be sufficient?

  3. Let’s start with a “simple” accrual basis balance sheet. Tremendous negative equity, anyone?

  4. compiling a receipt in a way that would be clear and meaningful to the average taxpayer would require some simplification.

    “This message serves as your receipt. We really have very little idea where your money goes, but thank you anyway for your contribution. And, on a personal note, I appreciate that you are helping pay my salary.”

  5. An honest breakdown would look like this:

    Dear Taxpayer,
    The following shows where your tax dollars were spent.

    100% Paying interest owed for borrowing money* from the FED and others sources.
    —-

    Now that was easy to understand, wasn’t it?

  6. Lies.

    Oh, you said “should”, not “will”. Sorry.

  7. Seems the ‘by department’ approach might be simplest..if you want to know what that department does, there’s teh interwebz. The educational aspect might be in seeing just how much money goes to departments that people don’t think about much…like energy or interior.

  8. After reading all these concerns, and the different difficulties involved with the accounting… perhaps the first receipt sent to taxpayers shouldn’t be a receipt at all.

    Perhaps the first receipt should include a budget that would estimate how much it would cost to determine what the receipt is in the first place. This budget SHOULD NOT include the amount of money sent to print it… but simply the amount of money that it would cost to actually figure out the numbers.

    I think that number alone would shock many taxpayers (sadly enough). Many people would be shocked that the government doesn’t have those numbers at their finger tips right now. Many people would also be shocked to find out that with all the “inter department spending” on things, exactly how bloated and overly bureaucratic our country really is.

  9. I have a copy of Third Way’s receipt for “third way.” It says the name is 40% Fabian, 30% Red Tory, and 30% Nazi.

    I know it’s kinda paleo to expect a libertarian-type publication not to be pushing shit from an org that has a fucking fascist name and fucking advocates fascism but…Jesus Von Mises.

    1. After visiting their website, I do feel the need to pour bleach inside my computer…

  10. Yes, it would be complicated and subjective to break down federal spending. Therefore the emphasis should really be on how to design the process to make it hard to game. Spending categories that cross agency boundaries would at a minimum be changed so often that year-over-year analysis would be impossible. Keeping the breakdown to high-level agency names might not be very informative, but would at least be hard to monkey with.

    1. re: “Keeping the breakdown to high-level agency names might not be very informative, but would at least be hard to monkey with.”

      Good idea, because otherwise the receipt is going to end up looking something like this:

      Defending our way of life: 44%
      Protecting and educating our children: 25%
      Saving or creating jobs: 17%
      Clean air and water: 12%
      ad nauseum

  11. Just what I need: a three thousand page receipt from the government.

  12. This would be great, but only if it shows the amount you paid in relation to the average.

    Better yet would be to show how much you paid in relation to the average taxpayer in a given bracket. Now that would be an eye opener.

  13. Item 1,172: 3% of your taxes went to pay salaries at the SEC.

    Item 1,173: 50% of Item 1,172 went to porn sites.

    1. They pay for porn? Explains a lot.

      1. They like to IM with masturbating drug addicted women. what’s wrong with that?

  14. The administration’s launch of the IT Dashboard is a good example of connecting the amount being spent on information technology by agencies with performance to identify over-budget and delayed projects.

    I think that blurb is referring to this which, after glancing at a couple of DOE & DOD programs, looks like garbage in garbage out reporting. No variances, anything of importance has been redacted. OMB Watch may think this site is better than nothing but I’d argue it’s worse than nothing for the sole reason that it is probably all lies and bullshit.

  15. Since half the country isn’t paying federal income tax anyway, what the hell is the point? I think the rich already know they’re being soaked, and probably don’t give a shit WHO it’s going to.

  16. Such a “receipt” would be a total waste of time. I get one now from my county, showing how the property taxes were allocated. A couple of nice pie charts. Big deal.

    The only meaningful description of federal expenditures would be via a truly user-friendly website, showing spending in two ways: by department and by purpose. Within each, there would be subcategories and layers of detail, so one could drill down as deeply as desired. Which, of course, they will never do because they don’t *want* us to know how the money is spent. Obfuscation is the name of the game, and will be the end result whether the details are demanded by libertarians or by crypto-fascists.

    1. Also, they don’t have good enough records to provide anywhere near that level of detail, which in itself is really one of the biggest scandals

  17. The only way to get the bourgeoisie to understand the magnitude of federal spending is to eliminate payroll withholding of income and Social Security taxes. Forcing people to write a check (annually or quarterly, take your pick) would focus their minds wonderfully.

    1. God damn you, Milton Friedman.

  18. If the mob collects your trash, in addition to rendering its other ‘services’, you would not be apt to put it all under the heading of a single transaction, and deem the whole setup to be legitimate just because the trash was indeed picked up.

    But you do in the case of government, its services, and its taxes; you may argue a bit about what is included in the bill, but you rarely, if ever, question the legitimacy of the transaction itself.

    It is curious how crystal-clear the primacy of the voluntary component is for many people when it comes to transactions between private parties, while for many of those same people, the concept of a similarly-voluntary system, in the case of the provision of non-essentials within the context of government, somehow remains utterly intractable.

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