Ezra Klein points to one of the best ideas I’ve seen in a long time: taxpayer receipts. He links to this proposal from David Kendall and Jim Kessler of Third Way (pdf), which makes such a strong case for these receipts, it makes me wonder why nobody’s done it yet.
Corn syrup, milk chocolate, sugar, cocoa butter, coconut, almond, soy lecithin … any consumer can read these ingredients and their nutritional value on every package of a 75-cent Almond Joy. What is provided to a taxpayer with a $5,400 tax bill? Nothing. For many Americans, the amount they pay in taxes is larger than any purchase they make during the year, but studies show they know almost nothing about where that money goes to.
This contributes to ridiculous beliefs, like the view that 20% of government spending goes to foreign aid, for example. An electorate unschooled in basic budget facts is a major obstacle to controlling the nation’s deficit, not to mention addressing a host of economic and social problems. We suggest that everyone who files a tax return receive a “taxpayer receipt.” This receipt would tell them to the penny what their taxes paid for based on the amount they paid in federal income taxes and FICA.
Such a receipt would be simple, straightforward and easy to use. For example, the receipt of the median-earner in America would look like this:
I’m a charts guy, so I would like this to come as page 1, and have a pie chart, maybe some other comparison charts, and some basic information about what these programs are, etc. If the receipt were provided online, you could have options to turn it into all sorts of graphs, compare it to people making higher and lower incomes, and so forth.
A lot can be achieved with a little transparency and information. We’d see what programs our money was funding, how much of a percentage of our tax dollars were going to these programs, and could then better make up our own mind about what sort of priorities are important to us. Should we be spending $287.03 on the national debt each year out of our $5,400 in taxes? That’s over 5% of the budget. You could even compare this receipt to last years and see what’s changed. In essence, you take this very abstract concept and make it very tangible and comprehensible.
Even better would be to include the figures of total spending by each of these columns. So you’d see that you spent $229 on the wars in Iraq and Afghanistan, and next to that you’d see how much total was spent, just to get a sense of your contribution to that program or cause.
How hard would it be to implement?
It’s really very easy. The total amount of federal spending is the denominator and the amount of money spent on a particular program is the numerator. The resulting quotient is the percentage of all federal spending that goes to that program. For example, the amount of money spent on Pell Grants in fiscal year 2009 was $19.38 billion, which is divided by total federal spending of $3.518 trillion.
This means that 0.55% of all federal spending went to Pell Grants. Multiply this number by the amount a taxpayer paid in taxes (in this case $5,400) and that means this person contributed $29.75 to Pell Grants.
[…] The mathematical formula to do this is very simple. The Social Security Administration does this every year through the mail to tell people what they can expect from Social Security in the future. This would be far easier. It could also be done online. An IRS website should be available so people could key in the amount they pay in taxes and a receipt pops up showing several dozen recognizable programs and the amount that went to each of them.
So it’s easy, it’s cheap, and it makes sense. Sadly, this is a recipe for disaster in Washington. It is not nearly complex enough, and doesn’t pay out any special interest groups. If something is diabolically complicated, incomprehensible and tends to obfuscate rather than illuminate, it stands a much better chance of passage in Congress than if something is simple and sensible.
