This past weekend, I was part of a panel discussion on Chris Hayes’s new television program on MSNBC. Chris, a friend, is an editor-at-large at The Nation, and I think it’s fair to say that he sees the program as an opportunity to advance some of the ideas he’s believed in for some time. I was joined on the panel by three accomplished women, all of whom would identify as left-of-center. Suffice it to say, I was not exactly in my element, but I’m always happy to reach out to other audiences.
One of my co-panelists, an unusually intelligent person, observed more than once that the left has to be careful not to make the case for higher taxes on the rich seem punitive. Rather, the case for higher taxes must be rooted in the idea of fairness, i.e., that all participants in our society must pay their fair share in taxes.
I found this idea intriguing, as it reminded me of attention blindness, a subject we’ve discussed in this space. Different people are inclined to pay attention to different things, e.g., some are inclined to view public policy debates through the lens of fairness while others are more inclined to view them through the lens of, say, whether or not public institutions are achieving their stated goals in a cost-effective manner. That is why I find it helpful to have conversations with people who pay attention to different things — it reminds me of what I’m missing, even if it doesn’t always lead me to change my mind.
Basically, a lot of people want rich people to pay higher taxes because they think it’s unfair for them to pay the taxes that they are paying at present. My concern is that tax dollars aren’t generally being spent very well, and that giving public institutions that aren’t spending money in a sensible way more money to spend isn’t the wisest course of action.
So how might we reconcile these considerations? I recognize that not everyone shares both of these views, but let’s at least make an attempt to reconcile them as an intellectual exercise.
Here’s my thought: instead of paying increased taxes to the federal government, what if we had rich people pay money into something called the “Shared Growth and Prosperity Box.” The money that flows into this box would then help entrepreneurs start and grow job-creating businesses, at least some of which would help reduce the need for social welfare spending and spark economy-wide increases in productivity. This money would do other things as well, e.g., it would help enable young families to purchase homes and other assets.
In a sense, this Shared Growth and Prosperity Box would serve as a “lockbox.” While it would help us achieve a common purpose — making our country more prosperous, creating new employment opportunities, facilitating upward mobility, etc. — it would do so without assigning more resources to public institutions that haven’t demonstrated much in the way of organizational discipline in recent years. The reasoning is very similar to Al Gore’s call for a Social Security “lockbox” during the 2000 presidential election.
This proposal does raise the question of how this Shared Growth and Prosperity Box will be structured. One straightforward way is to allow all money that flows into the Shared Growth and Prosperity Box to flow into all kinds of financial vehicles. This decentralization does entail some risk. Some of these financial vehicles will prove more stable than others, and some people will lose their shirts. Overall, this approach will most likely yield better results than a centralized strategy.
But wait a second. Why should rich people care about what happens to the money they dump into the Shared Growth and Prosperity Box? Well, you give them some skin in the game. At some point down the road, they can realize the profits from the various ventures their contributions to the Shared Growth and Prosperity Box have yielded over time. Once they actually spend those profits, however, they have to pay taxes on them. This will encourage the rich to make wise choices about where the money goes, and it will also guarantee that they don’t escape the taxman.
As you may have surmised, this Shared Growth and Prosperity Box can be understood as “savings and investment.” I’m suggesting that we shouldn’t tax savings and investment. Rather, we should tax spending. Indeed, it makes sense to tax spending at a higher rate than we currently tax spending. But I’d also suggest that we want more money in the Shared Growth and Prosperity Box than we do in public institutions that haven’t yet demonstrated that they can be trusted with the money.
The system I’m describing is a stylized version of a progressive consumption tax, and I’d argue that this system better meets objections to the current tax code on fairness grounds than do the president’s various proposals.