Should the Rich Decide for the Poor? : Tax checkoff: People would benefit as taxpayers but lose as program beneficiaries.

In recent speeches, President Bush has revived his suggestion--first made at the Republican convention--that taxpayers should be able to dedicate a portion of their payments to deficit reduction by checking a box on their tax returns. As a practical matter that idea will go nowhere. Making a mark on the piece of paper will have no effect on the deficit unless it forces a cut of expenditures, as the President himself explained. But he has not described any workable method for translating the mark on the piece of paper into an expenditure reduction, nor will he be able to do so. And if he could present such a method, Congress would not approve it.

But even though the checkoff is not going to happen, the President’s continued reference to it prompts some interesting observations about the general notion of “equal” cuts in taxes and expenditures. A good starting point is to ask who would gain and who would lose in such a proposition. The losers are unclear because no clue is given about which expenditures would be cut. The winners are unclear because under the checkoff proposal no one would seem to have his taxes cut or benefits increased.

The implication of all such proposals about spending cuts are that the losers would be bureaucrats, members of Congress and “special interests.” The winners would be, by implication, “the people.” But if large amounts of money are involved, the losses could not be confined to this narrow group. Any large expenditure cuts would have to affect large numbers of beneficiaries of government programs, especially the recipients of Medicare and Medicaid, farmers and veterans. (Everyone agrees that Social Security is off limits, in deference to my favorite special interest, the American Assn. of Retired Persons.)

Although the checkoff plan would not cut any taxes immediately, beneficiaries would be taxpayers in the future. The object is to reduce the deficit, which means holding down the federal debt, which means holding down the future interest costs that taxpayers will have to pay.

In general, people would benefit from the checkoff plan to the extent that they are taxpayers and lose to the extent that they are beneficiaries of government programs. That has many implications, but the most important is that the rich would gain and the poor would lose. The taxes the rich pay are largely relative to the benefits they receive from government. The benefits the poor receive are largely relative to the taxes they pay. This effect on the poor could be avoided if the the programs of most benefit to the poor were exempted from cuts--Medicaid, food stamps, Head Start, welfare and unemployment compensation, for example--but there has been no hint of that in the proposal. There are many people in the middle of the income distribution for whom the plan would be a wash--about equal gain on the tax side and loss on the benefit side.

Now, it may be, although I don’t believe it, that the extent to which government redistributes income from the rich to the poor should be reduced. The American people have a right to make that choice and a mechanism for doing so. The mechanism is the democratic political process, which in the end comes down to voting, one citizen getting one vote.

The checkoff is also a kind of voting on the question of whether benefits to the poor should be cut, but the voting system is peculiar. Poor people, who pay no income tax, get no vote. Only affirmative votes count. If a certain 20% of the taxpayers vote to cut expenditures and 80% do not, expenditures will be cut. Voting rights are proportional to tax liability. The votes of those who have high incomes and therefore high tax liabilities count for more than the votes of those with lower incomes. All in all, this is a system for allowing the rich to decide on the benefits of the poor.

I know that it is no longer politically correct or politically effective to talk about rich and poor. It sounds kind of Marxist, and anyway the poor are too few to be politically important in a national campaign. Clinton-Gore divide the population into rich and middle class. Bush-Quayle divide the population into good and bad. But there are rich and poor in America, and different policies affect them differently, and this difference should be taken to into account in making policy decisions. The great defect of the checkoff proposal as government, and its possible merit as politics, is that it obscures these facts.