Flentje: Align taxation with spending

In a recent newspaper column and an appearance on the KAKE Television public affairs program This Week in Kansas, H. Edward Flentje of Wichita State University said that we should seek to align government spending with taxation.

Presently we have systems where one level of government — say the federal government — collects taxes, and then sends the money back to local governments. Often this is in the form of grants, which local governments must apply for. If successful, the local units must then spend the money in certain ways. Flentje says that this system of money government moving from one level of government to another is the root of “cynicism, distrust, and outright anger at government.”

Citing Alice Rivlin, Flentje listed a number of programs that the federal government should stop funding. Local government, instead, should take over these programs.

Flentze mentioned Sedgwick County Commissioner Richard Ranzau, who is not voting for federal grants, one of the ways in which tax money is sent from one level of government to another. Ranzau says he votes against these grants for several reasons. The money is borrowed, he says, and we shouldn’t pass on the cost of current government operations to future generations. Second, accepting grants makes us dependent on federal spending, which, since grants come with strings attached, gives the federal government more control over local governmental bodies. And third, Ranzau sees no constitutional basis or justification for many of these programs.

While taxing and spending locally is preferred to remote taxation and spending, I would add that many of the programs suggested to be left to local government, particularly education, economic development, and job training, are best left to non-governmental, that is, market solutions.

Align spending with taxing

By H. Edward Flentje, Professor at the Hugo Wall School of Urban and Public Affairs at Wichita State University

“Spending is more responsible when the government that spends is the government that must finance that spending.” As an advisor to the late Robert F. Bennett, during his term as Kansas governor, 1975-79, I heard those words spoken often by him.

At the time Governor Bennett was being besieged from two sides. On the one hand he faced a barrage from low-level federal bureaucrats dangling dollars with strings designed to tell him what state government should do and how to do it.

On the other hand, Kansas local officials were demanding that the governor and state lawmakers send a larger portion of state taxes to local coffers.

More recently, the political philosophy underlying Bennett’s words has led to the demise of much revenue sharing and hundreds of categorical grants across the country. Kansas lawmakers eliminated two sizeable revenue sharing programs aiding cities and counties in the aftermath of 9/11, as other states are doing in the current downturn.

Still, in the current year, roughly $1 trillion in taxpayer funds will move from one level of government to another, and often from a second to a third level of government, through countless state and national programs. Huge administrative structures and arcane formulas remain in place to carry out these transfers between governments. Most deficit spending and budget battles today at all levels of government are tied to these transfers.

This behemoth has become incomprehensible to the public breeding cynicism, distrust, and outright anger at government — national, state, and local government.

One of the clearest and most consistent voices on how to tame this beast is Alice Rivlin, founding director of the Congressional Budget Office, co-author of a recent bi-partisan deficit reduction plan, and long-time advisor to Democrats and Republicans, most recently Paul Ryan, who last week released House Republicans’ budget plan.

As lawmakers struggle with unsustainable finances, they would be wise to revisit Rivlin’s radical suggestions of nearly twenty years ago on dividing more clearly the jobs of national and state governments, in her words:

Devolution. The federal government should eliminate most of its programs in education, housing, highways, social services, economic development, and job training.

The productivity agenda. The states should take charge of the primary public investment needed to increase productivity and raise incomes, especially to improve education and skill training and modernize infrastructure.”

Rivlin’s proposed reordering of state and national spending is reminiscent of Bennett’s prescription that spending should be aligned with taxing. Her “productivity agenda” also parallels rhetorically at least Governor Brownback’s “growth agenda” for Kansas. To carry out her plan would call for state and local officials to address their broadened obligations and the revenue requirements associated with removal of federal funding in education, skill training, and infrastructure.

Public disenchantment is challenging as never before the century-long practice of taxing (or borrowing) at one level of government and sending those revenues for another level of government to spend. Aligning spending with taxing offers a guide as national, state, and local lawmakers work to place their respective jurisdictions on a sustainable financial course. This realignment will not happen overnight, but one can hope it will not take another century to complete.

Read more at Voice for Liberty in Wichit