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Representation without taxation.

"For or imposing taxes on us without our consent...." With these eight words, Thomas Jefferson made tax protest an integral part of the Declaration of Independence. He was responding to King George III, who levied taxes on the colonists, but denied them Parliamentary representation. This injustice--taxation without representation--was a flagrant violation of the sacred compact between government and governed. What would restrain the state from levying taxes on a people without voice or power? This thorn was worthy of being included in Jefferson's list of those American grievances which "impel [us] to the separation."

Two hundred and twenty-one years later, taxation without representation has become the opposite perversion: representation without taxation. By granting a growing number of Americans the power to elect, lobby, and otherwise influence the Federal government without paying for the resulting policies, Congress unwittingly has created a new class of citizen.

Observers long have noted with dismay that citizenship responsibilities have been among the casualties of the modern welfare state. By using the Federal tax code as a tool to stimulate demand and redistribute income, taxation no longer is recognized as an inseparable aspect of citizenship, the acceptance of which permits all citizens, rich and poor alike, to participate as equals in the debate over the proper role and size of government.

The marriage of taxes paid to benefits received made it possible for the citizen to choose the appropriate role and scope of his government. Yet, what happens when some potential American voters are "assigned" a zero share of the tax burden? Much like a consumer whose demands become unlimited when goods are "free," the citizen's demand for "public goods" knows no bounds when severed from the obligation to contribute toward their costs. The economic reality is clear. Rational decision-making only can take place when the individual weighs expected benefits against expected costs. Decisions made in the absence of cost distort resource allocation and reduce the welfare of others.

How many such people are there? Published Internal Revenue Service data from its annual sample of personal income tax returns and the Census Bureau's Current Population Report series on consumer income provide the answer. In 1993, almost 30% of all adult earners paid no Federal income tax. Between 1975 and 1993, the ratio of earners age 18 and older to the population rose from 85.7% to 95%, but the number of these earners paying no Federal income tax more than doubled, from 26,186,000 to 54,124,000. The number of adults paying no Federal income tax increased seven times faster than the ratio of earners to population. This reality contradicts the theory that government activities reflect a shrewd, self-interest-based calculus by the governed, whereby each citizen weighs the potential costs and benefits of his or her public-sector choices. Not all earners who pay no tax vote, but those who do have a disproportionate impact on government spending.

In 1929, before the era of compassionate government, Washington spent $23.82 for every man, woman, and child in the U.S. An equivalent inflation-adjusted expenditure today would be $401.65. Actual Federal spending in 1996 was $6,412 per person--16 times more than necessary to keep up with inflation! Moreover, purchases of goods and services, which accounted for 69% of all Federal spending in 1929, amounted to 27% in 1996. Today, almost 76 cents of every dollar the Federal government spends goes to re-engineer society, alter marketplace outcomes, or service the national debt, not to provide traditional public services. To some extent, these are logical consequences of abandoning the principle of citizens as voters and taxpayers.

The growth in the relative size of Federal spending adds fuel to the current budget battle. Americans view the upward trend in Federal spending as symptomatic of a more ominous threat to personal liberties--Washington's expanding reach and pervasive influence. In the past two years, proposals to amend the Constitution in a desperate effort to force a balanced budget on Washington attest to the growing consensus on the issue.

Conservatives point to the failure of the Gramm-Rudman-Hollings bill to ratchet down budget deficits as proof that the Congressional inertia which perpetuates deficit spending only can be broken by a constitutional amendment. By taking this position, conservatives make a heroic assumption that deficits will be trimmed by spending restraint. Some liberals oppose the amendment because they fear it would end expansionary fiscal policy and sharply restrict the government's ability to help segments of the population through income transfers. Others support the amendment in the hopes it would spread a cloak of constitutional protection over continued spending by mandating tax increases.

A constitutional amendment very well may prove unpleasant for everyone. More importantly, it is incapable of stemming the tide of expanding Federal influence because fiscal integrity can not be secured by rules so long as a large and growing segment of the population is authorized to seek bigger and better economic benefits from the Federal trough without having to bear even a small cost.

The power of economic incentives and self-interest provide a far less dramatic, but potentially more effective, mechanism for restoring fiscal integrity. If all working adults paid some income tax by writing a check to the Internal Revenue Service each month, Americans would be forced to confront continuously the true costs of their public choices as they enjoy the benefits. Such scrutiny inevitably would reshape and downsize government without tinkering with the Constitution.

Dr. Kane, Associate economics Editor of USA Today, is professor of economics, The University of Texas at Tyler.
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Title Annotation:federal spending
Author:Kane, Tim D.
Publication:USA Today (Magazine)
Date:May 1, 1997
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