The basic point, which I agree with wholeheartedly, is that everyone should have “skin in the game” when it comes to income taxes. This is the only way to 1) be fair and 2) to alert people to the fact that the government is burning through our grandkids’ income.
Americans understand instinctively what a recent report from the Tax Foundation said: “Aside from the revenue impact of not having 58 million Americans pay income taxes, economists worry about the social and political effects of having so many people disconnected from the cost of government — a phenomenon known as fiscal illusion. The concern is that when people perceive the cost of government to be cheaper than it really is, they will demand ever more government benefits because they either don’t feel the cost directly or believe that others will be paying those costs. Indeed,when one takes into account those who do not file, about half of all households pay no federal income tax, making the situation particularly worrisome in a majority-rule democracy.”
One response, of course, is that people who don’t pay income tax still pay other taxes, like Social Security payroll taxes, Medicare, and various federal excise taxes. That’s true, of course, but it misses the point. The point isn’t whether people are “freeloaders” who don’t pay any taxes. It’s whether people have “skin in the game.” If you take me to an expensive restaurant for dinner but let me put money in the parking meter out front, that doesn’t provide me any incentive not to order the lobster. Splitting the check, on the other hand, will cause me to think twice. It’s like health insurance, where experience shows that even a small co-pay makes a difference in what people spend.
posted 10 / 3 / 2012