Two of the basic issues I see with our current taxation and spending arrangements are:
- Taxpayers don’t really think of their tax as being their money, taken from them by government for the benefit of all, and
- Taxpayers have only the most indirect influence on where their tax dollars get spent.
A third might be that government generally does a pretty crappy job of allocating funds to the right place, too.
I believe this proposal goes some way to addressing those issues.
I propose that personal income taxpayers be randomly allocated to 1 of 5 cohorts and each year a different cohort gets to, from a limited range of contested options, decide where say just 2% of their own annual personal income tax will be spent for each of the next 5 years.
In big, round numbers, individual taxpayers contribute about $234 billion in personal income tax payments every year and the Federal government spends about $500 billion every year. This means each cohort pays shy of $50 billion in personal income tax; their 2% means they would control $1 billion in expenditure pa. Once the fund is fully up and running with all 5 cohorts it will involve about $5 billion pa, or 1% of annual government expenditure. Not a huge shift in spending by any means, but one that could be scaled up over time.
When taxpayers are finalising their tax return they will be offered a range of a dozen or so alternatives they can choose from to decide where their 2% of their personal tax payments will go for the next 5 years.
I propose the first 3 options are:
- Don’t actually spend it on anything – use it to pay down government debt
- Let the government decide – put it back into consolidated revenue
- Let the other taxpayers decide – allocate it in the same proportions as the rest of that cohort chooses
The other options would change from year to year, but all would be things the government is prepared to spend money on anyway. They would be discrete programmes or initiatives, able to be expanded or contracted in line with changing funding levels and most importantly of all, are genuinely politically contested (on both sides of the ideological divide) as this sends a powerful signal to the government and the rest of the community about what taxpayers really think is important.
My suggested proposals include:
Renewal Energy programmes
Climate Change mitigation
Building new prisons
Australia Day celebrations
Arts Council grants
Block grants to Universities and CRCs
Fast rail to wherever is currently being proposed
Funnily enough, I struggled to think of many big spending programmes that weren’t essentially lefty in nature, who’d have thought!
So as not to impact the overall budget bottom line, any programme or initiative included on the list will have its own funding cut by an appropriate amount (let’s assume 10 initiatives @ $100 million each). Each initiative would still exist no matter what happens, but it risks losing the whole $100 million if no one chooses to fund them, alternatively they could end up receiving a whole lot more if that is the way taxpayers vote with their wallets.
It is crucial for its political legitimacy and longevity that it be approached in an even-handed manner, the bureaucrats will still be in control of the actual spending afterall, it’s only where it’s directed to that changes.
In time it might be possible to incorporate proposals not currently being funded, like
Building coal fired power stations
Building electric car charging stations
I don’t believe it makes sense to incorporate ongoing funding programmes like Newstart, Medicare or private school funding – no government is going to risk having to reduce welfare payments or renegotiate complex funding agreements.
Putting some limited level of control back in the hands of taxpayers will improve engagement in government decision making. I can also see a pissed off bureaucracy (who knows what they’d try in order to get back in control) and a boon for advertising agencies spruiking one initiative over another. A little healthy competition for money never hurt anyone after all!