Herewith, a modest proposal: abolish all federal taxes and substitute fees for state membership in the Union. $7 billion annually for each representative in Congress plus $7 billion for each Senator would cover current Federal spending. Each state would have to come up with this sum annually, raised in any way they see fit.
- Smaller states would pay more per capita since they have more Senators per capita. That seems only fair.
- Where would states get the money? Same places the Feds get it: taxation and borrowing. The states would have to pay close attention to their credit ratings to keep borrowing costs low. That would of course require that they exercise fiscal prudence.
- States would have to compete among themselves to find revenue sources that minimize the damage done to the private economy.
- Citizens would have greater influence over their state politicians than they have over the Feds.
- Crony capitalists, rent-seekers and their ilk would be slowed down by the need to devote more attention to 50 state governments and less to the central government.
- What about deadbeat states? They would lose their votes in Congress until they paid up. Conversely, wealthy states might be allowed to purchase extra seats in Congress.
- Might this scheme encourage secession? Yes! Got a problem with that?
- Wouldn’t this be a heavy burden on state taxpayers? Decidedly. With about 235,000 households per Congressman, that works out to $30,000 per household per year. But who’s bearing that burden now? Santa Claus?
The Federal debt is a thornier issue. Should it be paid off by the states? A drastic remedy would be to hand over securities to the states for payment as they come due. About $7.5 trillion per year would be required (counting gross debt rather than debt in the hands of the public). This would roughly triple the state taxpayer burden—admittedly a non-starter. Repudiation would be another remedy. Mandatory rollover would be another. No good solutions here.