Nos Pullum: The Contested Fund

Two of the basic issues I see with our current taxation and spending arrangements are:

  1. Taxpayers don’t really think of their tax as being their money, taken from them by government for the benefit of all, and
  2. 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:

  1. Don’t actually spend it on anything – use it to pay down government debt
  2. Let the government decide – put it back into consolidated revenue
  3. 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
Their ABC
Foreign Aid
Australia Day celebrations
Military hardware
Arts Council grants
Medical research
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 dams
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!

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18 Responses to Nos Pullum: The Contested Fund

  1. Who is this guest author and why haven’t they heard the good news of our lord and saviour, liquid thorium fluoride reactor?

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  2. RobK

    I struggled to think of many big spending programmes that weren’t essentially lefty in nature, who’d have thought!
    That’s the problem.
    It’s the regulatory regime rather than what to do with the spoils that is the problem.
    Some kind of survey at tax time or census time, or both, might better gauge the masses. Perhaps a more direct system such as Switzerland.

  3. billie

    what about a federally run rail network using a standard gauge? (a wide gauge)

    truckies, unions and climate cranks won’t be happy with it, but that’s a good indictor it should be considered (like dams)

  4. Todd Myers

    You forgot the Bradfield Scheme. That is always a favourite for those of the populist right persuasion.

  5. Anthony

    Great post OP.

    This can also be expanded within programs, once the money has been allocated. For example, a researcher gets a grant, they need to donate say 10% to another researcher they don’t collaborate with.

    Another idea is for things like the Arts, taxpayers get a voucher which they can spend on (ABC, opera etc). When this ideas was first proposed (IIRC in Italy?) I thought it was laughable, however, if you add in your options 1-3 to these vouchers, that might make it more palatable.

  6. Hay Stockard

    Kerry Packer was right.

  7. max

    Kerry Packer was right.

    yes:

  8. deplorable

    Kerry Packer was right.

    +1000

    Perhaps it would be a better idea to indicate what taxpayers do NOT want to fund.

  9. billie

    Perhaps it would be a better idea to indicate what taxpayers do NOT want to fund.

    The UN and any spinoff or associated organisation, would be high on my list

    ** give a thought to all those poor dippos who galivant around the world on our tax money, visiting, conferencing, meeting, handing out greants etc, boondoggling the heck out of the world and now all stuck at home

    ha!

  10. Eddystone

    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.

    Well said. Having to send money to the tax office out of their own accounts is one reason small business owners are less likely to vote for big government initiatives.

    Relieving employers of their mandatory role as unpaid tax collectors and devolving that role onto the individual wage earner would be a huge wake up call for the average punter.

  11. The Bradfield Scheme IS a good idea.

    The problem is, right now, it would be illegal for the private sector to build.

  12. RobK

    Relieving employers of their mandatory role as unpaid tax collectors and devolving that role onto the individual wage earner would be a huge wake up call for the average punter.
    I agree.

  13. Terry

    ‘any programme or initiative included…’

    As George Carlin said, ‘An initiative is an idea that isn’t going anywhere…’



    That can be taken two ways I suppose. The first, from the government and bureaucratic perspective, the tendency of “initiatives” to remain long after their usefulness has expired (although usefulness was probably zero or lower) or the second, the general return on “investment” normally seen by the poor taxpayers that are forced to provide funds.

    Perhaps we should leave “initiative” to the private sector, those that are actually good at it, and to help them out, re-deploy a proportion of the public sector to join them. Let’s start at 50% and work our way up from there.

  14. Spurgeon Monkfish III

    I never consented to being taxed at the levels I have been during my working lifetime in the first place – let alone consented to the sort of horseshit my extorted income was then subsequently wasted on.

    There must be massive expenditure cuts at all levels of government in this country post the Kung Flu hysteria.

    Otherwise, we’ll simply be another venezuela – but one cursed with even more useless collectivist imbeciles.

  15. Struth

    Don’t think we need to concern ourselves about this now.
    Pointless.

  16. Terry

    ‘Relieving employers of their mandatory role as unpaid tax collectors and devolving that role onto the individual wage earner would be a huge wake up call for the average punter.’
    +1

    The biggest problem with “Tax” is that it is de-coupled. The whole system is geared, or has been perverted to become geared around re-distribution (a socialist function), rather than sharing the cost of the function of government across the citizenry (a co-operative function).

    So, it is possible for voters to vote in their own best interests (as they should and unavoidably always will) by “voting” to relieve some other section of the citizenry of their hard-earned wealth, to be spent on themselves or their pet causes, or hijacked by political activists and special-interest groups to be “spent” on their behalf.

    We see this in “sin-taxes” (yes, we will charge those dirty smokers more, but they deserve it), company taxes (those evil companies can pay), employment taxes (payroll tax, but hey it’s just those evil employers again) or Envy taxes on “the rich” (welfare for everyone, except those evil “rich” bastards in the top tax bracket – we’ll put a medicare surcharge on them. It’s their fault for having more than me anyway). And sure, that’s far from an exhaustive list.

    There is much that needs to be fixed with Tax, but the very first thing needs to be a flat rate (beyond a tax-free threshold) for individuals and companies. If the public vote for a tax rise, it affects everyone; you cannot vote for someone else to pay while not enduring some of that impost yourself.

    Without that fundamental change in principle, tax collection, in general, is simply theft by one group of citizens from another with government as the cartel providing the muscle to complete the standover scheme.

    A democracy cannot stand on that kind of moral foundation. Sooner or later, any goodwill from the tax donors dries up and they either stop producing or you get civil war.

  17. Archivist

    Taxpayers have only the most indirect influence on where their tax dollars get spent

    In the world of fiat currency, spending and taxation are only loosely related. Governments can print money, they can borrow money, and they have non-tax sources of revenue.

    “Modern monetary theory” holds that governments don’t ever have to run balanced budgets. A consequence of this theory is that the government isn’t spending “tax dollars” as such; that’s an antiquated notion. Instead, they’re spending money, some of which comes from tax, and some of which is created out of thin air.

  18. Rayvic

    “A third might be that government generally does a pretty crappy job of allocating funds to the right place, too.”
    It would be more appropriate to reword to: “that government does a crappy job by allocating funds to the wrong places.” These ‘places’ include:
    . renewable energy projects and climate change mitigation that have no scientific or economic justification;
    . Their ABC, that should be funded by public subscription or privatised;
    . obsolescent technology submarines;
    . Murray Darling Scheme;
    . Snowy 2 scheme

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