The Chops Tax Plan, v. 1.1

Version 1.0 had serious flaws, including nonexistence. Here's my tax plan (drum roll).

For simplicity's sake, let's set the total of federal government revenues equal to 100 C's. According to the White House website, 100 C's in FY'04 is equal to $1,922,000,000,000 (or 33 billion years worth of allowance from when I was eleven).

Also from the White House, we find that 116 C's are going to be spent by the U.S. this year. We can safely assume state and local revenues and spending to be almost balanced and about 50 C's. 20 C's are spent on defense, and 1.5 on Homeland Security. Another 19.5 C's are spent on other discretionary projects. On the revenue side, 44 C's are from progressive income taxes and 40 C's are from flat payroll taxes. Compare these numbers to the Chops Plan:

The Federal government would retain spending on and control over:
- Debt service
- Department of Defense
- Department of Homeland Security
- Customs, State, Coast Guard, foreign aid, etc
- Internal Revenue Service
- FCC, FDA, FAA, and other regulators of "naturally" national things

All functions that can be carried out locally would be. The key to this plan (which is obviously a lot more than a tax plan) is local control. If you make a decision, you live with the consequences. If you screw the poor, your state will get all slummy and gross. If you screw the rich, they'll move out. Cause and effect will drive rational, as opposed to political, decision-making.

Various Incomes: the Federal government would retain estate and gift taxes, fees, etc.

Customs: customs taxes, quotas and all other barriers to free trade would be abolished.

Payroll taxes: these sneaky taxes would be abolished. The only reason this 15% flat income tax exists is so you don't realize you're paying twice as much as your statement says in income tax, and so half our income tax is actually regressive (because you don't pay payroll taxes on anything above $95,000 or so).

Corporate Income Tax: basically a flat tax of 35%, this would be abolished and states would be left to decide how they wished to replace it, whether by a similar measure, by sales taxes, by property tax, etc.

Income Tax: the income tax and earned income tax credit would continue to be collected and set centrally, but would be immediately split with the states. The income tax would be increased by whatever percentage is necessary in each bracket to cover the abolition of payroll taxes. The EITC, as it is the most successful Federal assistance program (since it basically pays you to work), would be increased and most other forms of welfare abolished at the federal level. States can then decide how much of the EITC they want to give directly to each qualifier. This is not just for simplicity; it's to avoid the dangerous "fall-off" that occurs for up-and-coming families who reach an income of about $20,000 and suddenly find that all their programs are stopping at the same time, decreasing incentive to work. The new EITC structure would ease people off of welfare with more coordination.

Some Key Non-Tax Proposals
The only way this will work is if the government puts some limits on itself. First of all, all states plus the Federal government would have a balanced budget amendment. Second, serious study of social security and medicare would be in order, since those two are on pace to completely bankrupt the country within a half century. An immediate initial measure would be to raise the qualifying age for SocSec by one year every other year for the next 20 years. It's not pretty, it's not popular, but it's necessary. When SocSec was founded, the life expectancy was 63. Now it's 77, and rising. Medicare is a tougher question, which basically comes down to the fact that we can keep people alive for a long time - for a price. I don't see an easy way around this one, but that's a major reason to kick it to the states: they can experiment, and become "laboratories of democracy", as they say.

State governments would continue their current revenue practices to supplement the federal revenue-sharing (which is key; if all revenue were collected by state and not shared, the rich would get richer and the poor poorer). The result would likely be that the Federal government would collect 100 C's of revenue, spend 45, and distribute the other 55 C's to states, which would supplement that with another 50 C's. Spending is thus down significantly - and it's up to states to decide what to cut.

Why is this better? Besides the virtue of local control for its own sake, this would help politicians decide what is really important. Right now, if you're a Senator from South Dakota, you fight for farm subsidies - the bigger the better! However, if you had 0.25 C to work with in South Dakota's own budget, you would probably realize that the farmers were doing alright after all. Right now, every lawmaker fights for every bit of funding that could help his district; we need a system where each state has to decide how to split up its allotted funding. Is education your priority? Health? Public safety? If the money is misallocated, politicians will hear about it a lot quicker; they can't blame some pointyheaded bureaucrat or pointyeared president while picking the voters pockets and then buying their votes with the loot.