Linking Taxation and Spending – A Progressive Imperative

In Budget Politics, California, Politics, Public Policy, Taxes on June 17, 2009 at 10:18 pm

budgety thing

In thinking through my recent post about the California budget mess, and in following the politics of what is now the second full round of budget negotiations this year, one of the frustrating elements of budget politics (at least for progressives) is the lack of connection in the minds of the electorate between taxes (which they generally dislike or can be persuaded to vote against, although as progressives have pointed out, this is not always true) and spending (which they generally like, in pretty much all cases). Even though it’s impossible to increase spending on public priorities, cut taxes, balance the budget, and decrease borrowing at the same time, voters apparently would like to do just that.

The problem for progressives, though, is that this makes it very difficult to raise taxes, even when it’s going towards public policies that are really popular. Which is why I was pleasantly surprised to see the California state legislature ‘s Budget Conference Committee increase the VLF (Vehicle License Fee) to save the state’s  parks from being shuttered. Not only was this good in and of itself – parks are a public good that people should be able to enjoy, closing the parks loses a lot more in tourist revenue than it saves n parks dept salaries and maintenance costs – but it was also a rare case of a tax increase that’s explicitly targeted to a public policy. Henceforth, the debate over increasing the VLF, which was one of the factors that brought down Gray Davis and brought in Arnold Schwarzenegger, is no longer just a debate over whether taxes should be higher or lower, as the Republicans would prefer. Now it’s a question of which is better, $15 less on your VLF or state parks – and that’s a debate we can win.

Targeted taxes and special funds are a very wonky area of public policy that I think is criminally under-emphasized in progressive circles, precisely because these two things do the impossible: they directly link taxes with the programs they finance. Targeted taxes are something that people are generally familiar with – gas taxes generally fund transportation, cigarette and alcohol taxes generally go towards health care – but only on a small scale.  Likewise, we’ve all heard of special funds – budgetary pots of money that are reserved for specific policy purposes  – like the Social Security Trust Fund, I think that one way to solidify progressive taxation would be to sub-divide existing progressive taxation (income, property, inheritance taxes, capital gains, etc.) into separate targeted taxes: a Health Care Tax (made up of 1/xth of current income taxes, 1/xth of capital gains taxes, etc.), an Education Tax, a Public Transit Tax, and so on. Each of these would go into a Health Care Fund, an Education Fund, and so on.

In a purely technical sense, this is just accounting gimmickry, since the state’s General Fund and its different budget areas essentially do the same thing. But in a political sense, this has the important effect of dis-aggregating general taxes which fund the abstract entity known as the government, and making our policy priorities visible and concrete, forcing people to think about the ends of public finance. Now instead of railing against taxes that are too high and wasteful spending in the abstract, which conservatives love to do because it allows them to mobilize people’s dislike of taxes without running afoul of people’s approval of specific government spending, conservatives would be forced to argue for cutting specific taxes that fund specific programs. Now instead of having to defend the abstract principle of government and the take-your-medicine argument for the necessity of taxes, progressives can go out and say “we want to expand health care coverage, lower college tuition, and put solar panels on every house in California – so go out and vote for an increase in the Health Care Tax, the Education Tax, and the Environment Tax.”

In a sense, what this would do is to take the chaotic process of ballot-box-budgeting, where priorities are set randomly, without a view to the overall picture, and bring it into the legislature in a way in which public priorities can be debated, voted on, then presented to the voters. This would also allow the legislature to explain in a absolutely straightforward way what they did and why, and sell the budget as a progressive document to the electorate.

The image above is an example of how this could change the politics of budgeting – it comes from a 2002 Washington State Budget, and even though the idea for it came from a group of Third Wayist policy advocates who I dislike, I think the idea can be repurposed for genuinely progressive ends. Because what this does well is to break down the health care budget into what it actually covers, and shows the implications for increasing and decreasing spending – and there, progressives can use the public’s support of social policy ends to our advantage – by showing that budget cuts (and therefore, tax cuts) would mean cutting off X number of people, or shuttering programs A, B, and C, or cutting back on quality of services. And here again is a debate we can win.

– Steven Attewell

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  1. […] Linking Taxation and Spending – A Progressive Imperative […]

  2. […] democratic. You take a look at any major poll,and you can find signs that the electorate think that you can have a free lunch,, or are willing to toss away or defend civil liberties depending on the phrasing of a question. We […]

  3. I agree 100%.

    The worst invention in US government history was the “federal budget” (blame Warren G. Harding). Prior to that there were a *lot* of earmarked taxes. After that, there was some sort of weird trend away from them…. but all major legislation still required earmarked taxes.

    • Thanks!

      Just a note: earmarked taxes and funds doesn’t actually eliminate the Federal budget per se. It’s just a different way of conceptualizing the same reality that hopefully encourages different ways of political thing.

  4. […] first strategic step is to link taxation and spending – because anti-tax rhetoric only works as long as it can exploit the Government/Program […]

  5. […] for visibility to demystify how the state works. I’ve written before about the idea of  linking taxation to spending as a way to break down what I call the “Government/Program Blindspot” – by […]

  6. […] The rather comfortable million-vote margin by which prop 25 passes would make me rather optimistic about the possibility for the passage of a majority-vote revenue proposal. However the failure of every revenue increase – prop 19, 21, and 23 – are daunting evidence to the contrary. Granted that the outcome might be different in a presidential electorate (younger, more minority and working class voters, higher turnout generally), but I think this shows how difficult it will be to thread the needle of the “Program/Government Blindspot” and the prevalence of austerity thinking, even if we link taxation to spending. […]

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