A Modest Proposal for Fiscal Reform

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.

Comments:

  • 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.

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4 thoughts on “A Modest Proposal for Fiscal Reform

  1. In essence wouldn’t this be a return to the old Articles of Confederation? If so, how do view your proposal as dealing with what were viewed as deficiencies in the articles?

  2. The supposed deficiencies of the Articles were mostly in the eyes of the power elite of the time, who wanted a strong central government with powers to tax, meddle, etc. They got their wish and we got the Constitution. The “limited powers” that document set up gradually became what we have now.

Please keep it civil

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