The Perfect Check
Why not a tax rebate every July?

Mr. Moore is president of the Club for Growth
July 24, 2001 8:40 a.m.

epublicans have struck political pay-dirt with the tax-rebate checks that are now being delivered to the mailboxes of American taxpayers. For weeks now tax-cut skeptics have been ridiculing these tax rebates as financially irrelevant to most families, but I've yet to meet anyone who isn't eagerly awaiting their $300 to $600 check from the IRS. At parties, on talk radio, and in casual telephone conversations, all anyone wants to talk about is how they're going to spend their windfall.

Economists around are fretting over what the financial impact of these checks will be. But it's really irrelevant what people do with the money — whether they use it to pay down credit-card debt or to buy a new car stereo system — it's their money, they should do with it what they please. The checks are a deserved and appreciated downpayment on the Bush tax cut.

This got me to thinking. Why not a send out an automatic tax-rebate check every year that we have a tax surplus? The size of the rebate check could be made conditional on how much of the surplus was not frittered away by congressional appropriators and their voracious appetites each year.

In other words, these tax-rebate checks could be the ultimate check and balance against the stampede of federal spending. At the start of each fiscal year, Congress should determine the size of the expected non-Social Security tax surplus. Congress should then announce how large the expected surplus tax rebate would be for the typical taxpaying family. Under this new law, discretionary federal spending should be permitted to grow no faster than the rate of inflation (CPI growth) each year. If economic growth came in faster than expected, federal revenues would be higher and the rebate checks would be larger. If Congress raced through its own appropriations speed bumps, then the surplus checks would be smaller.

And people like my wife, a prototypical soccer mom who doesn't care a whit about politics, would be hopping mad that the rebate check she was counting on from the IRS to help pay the plumber's bill, won't be coming this year because it was intercepted by the rascals in Congress who spent the money.

That's what's so ingenious about the automatic annual rebate plan. For the first time in decades, fiscal conservatives would actually have a political tool to increase support for trimming frivolous spending whenever and wherever possible. Voters would now have a direct incentive to keep the government's budget under a microscope and to repel spending for grants to the Pillsbury Dough Boy. Every dollar saved would be an additional dollar to be passed back to income taxpayers in the form of a bigger rebate check. Election-year pork-barreling would lose its "free lunch" appeal because the marble-plated parking garages and the snow-pea research funds would translate into funding available for a big rebate check every July.

Who knows, if the plan works as I think it might, pretty soon we wouldn't have any federal government at all, save for a few billion dollars for a strategic defense initiative, the Supreme Court, and independent counselors to investigate sex crimes on Capitol Hill.

Under this plan voters would think twice about rubber-stamping absurd new entitlement programs, such as the prescription-drug benefits for seniors. Young voters who want the rebate check to help pay off their student loans would be butting heads with seniors who want yet another multibillion-dollar taxpayer handout for free Viagra pills. If voters were aware that the Senate prescription-drug benefit for seniors, with its gargantuan $300 billion price tag, might mean some $100 a year off their tax-rebate check, worker enthusiasm for this new freebie entitlement might start to wane.

can just imagine the fun that people like Phil Gramm might have with this new automatic tax-rebate plan. Gramm could announce, "gee I'd like to support this $50 billion IMF bailout plan, but I can't because it would mean that Texans would only get half the rebate check they're expecting in '02." Emergency funding projects would also be examined more carefully to determine whether, for example, a few bad weeks of weather in Nebraska warrants a bigger bailout of the farmers and a lower rebate for the rest of us.

Given that my forecast for this year is a 7% to 9% growth in appropriations, coming on the heels of last year's 10 percent spending surge, any plan that could create a political constituency for smaller government, would make a lot of economic sense these days.

The Automatic Tax Rebate plan would also increase the political likelihood of real tax reform in the next five years. If congressmen realized they couldn't spend surplus tax dollars on ribbon cutting ceremonies back home, then the case for creating a brand new spanking clean tax system that is economically growth-enhancing, equitable, and radically simplified would become far more persuasive to Congressional members. Why collect tax dollars in the first place if you're prohibited from spending them?

I believe it was Mencken who once called the federal spending process an advanced auction on stolen money. Under this rebate plan voters would start to realize that that the government funding that Congress lavishes on us with such generosity was simply money stolen from us in the first place.