You can’t have a receipt for your taxes — not one within any realm of reasonable accuracy.
I’ll be an honest recovering political hack. In my 20s, I used to want to run for Congress. Now that I’ve been exposed to Members of Congress, I’m convinced that Congress is where people who are idealists that also happen to be sociopaths go in order to function in society. The thought of going to work everyday with those folks is completely unappealing. But one thing that was going to be core to my congressional campaign was putting a bill out that gives people a receipt for their taxes. So I was really excited to see NPR’s story on a tax receipts.
This is an idea that I’ve loved for years. I started bringing it up at Sunlight quite a bit— we even mentioned it a few times. The idea is appealing and it makes sense. We cannot argue about whether our government is spending too much or too little money on things if we don’t know what our money is being spent on. But unfortunately, you can’t get a decent receipt that explains just how much money you spent on what. Here’s why:
See— The Government doesn’t get all of its money from your taxes. Government has multiple sources of income.It gets about 75-80% of its money from your income taxes. It gets another 5-10% from things like corporate taxes. Government earns revenue from things like fines, earned revenue and even interest on money that goes between bank accounts that the government has. Take a look at the GAO’s financial report of the United States Government. That’s the best source of data on this stuff.
Your relationship with the IRS isn’t like your relationship with Home Depot. At Home Depot, you walk in, pick up a power drill, go to the cashier and hand that cashier money for that power drill. The receipt is an acknowledgement that the power drill is now your property. With the Government, you write government a check. Government takes your money and puts it alongside the money that it gets from your uncle who just sold stock and your cousin who bought a pack of cigarettes and your mother who just bought plane tickets. Government then spends the money as it sees fit (or rather, as it has budgeted).
The Third Way is the democrat-centrist political think tank that prompted this NPR story. Here’s their paper on the subject. It’s worth a quick read, if anything, to understand that this is pretty vapid. They start out by saying:
We suggest providing each taxpayer with a receipt that shows them exactly how their money is spent to the penny.
Then demonstrate an example and then finally explain their methodology:
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 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.
Here’s a hint— when people say “It’s really very easy” when it comes to figuring out how the United States Federal Government spends money, they’re at best pandering and at worst idiots.
The problem is that 0.55% of all federal spending doesn’t come 100% from one’s personal income taxes. So you can’t tell to the penny how their money is spent. What’s more, it’s sort of baffling that the Third Way neglected even try to factor this in by changing that 0.55% down to something relative to the personal income tax share of all federal spending. Add in the Recovery Act — also not accounted for in the Third Way’s methodology — that appropriated 16.5 billion dollars to Pell Grants and Federal Work Study, and you can see that this number is completely meaningless. Confound that with accounting, budgeting and a fiscal year that ends in September and a tax deadline in April, and it’s not accurate at all to estimate that this year’s money was spent on this year’s projects.
In the end, this is because our dollars are not packets. And while your paper hamilton has a nice serial number on it, once you take that $10 and put it in the bank, that serial number doesn’t belong to your $10 anymore. Your relationship with the IRS is more like a bond or equity based relationship than a retail one. If you buy stock in Home Depot from Home Depot, Home Depot likely cannot tell you what it spent the money it received from your sale of stock. Indeed most funded startups would have a hard time telling investors what their money was spent on to the penny. Because you can’t track government spending with any level of reasonable precision, you cannot track where your money goes.
That being said, the message is real, and the message is real smart. I commend the Third Way for talking about it and hopefully raising some ears. Knowing what our money is being spent on is important as is knowing what our share is. The concept of giving people the ability to see what their money is being spent on is crucial if we want to have reasonable discussions about how our Government operates.
A better way to look at this is to shine light on the retail elements of a citizen’s experience with government. Knowing how much various governments spend on your commute to work, or how much government is subsidizing you and your neighbor’s healthcare is a good thing. At Sunlight, James Turk built the Recovery.gov Layer on Layar, allowing people to see recovery spending in context. That’s a novel step forward too.
I think if it were common knowledge, for instance, that it costs nearly four million dollars for a mile of new two lane road (or $700+ a foot), then we’d be putting a lot more thought into how we use our roads. And if folks knew that a stop light costs between 80,000 to 100,000 install, we’d probably have some serious free market innovation around stop lights. That change in the definition in the retail experience ought to be what our eye is on if we want to build smarter government.