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Hi, I’m Brad Feld, a managing director at the Foundry Group who lives in Boulder, Colorado. I invest in software and Internet companies around the US, run marathons and read a lot.

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I Want To Allocate My Tax Payment

Comments (17)

As April 15th looms again (it seems to come every year), all the same old articles appear about taxes, budgets, deficits, government spending, and the inequities in the universe.  This year, Ben Casnocha sent me a link to an article from the LA Times titled Tax and spend with a twist with a note saying "I think you expressed a similar sentiment awhile back."

Indeed I did.  I dutifully pay my taxes every year, yet I feel helpless when I think about how the government spends my tax receipts (and all the other tax receipts they get – which appears to be about $1.2 trillion this year according to the LA Times article.)  Yeah, I know I can vote (I do) and I can get involved in influencing my little corner of the universe (I try), but I don’t feel like I have any impact on how any of this money gets wasted spent.

A college friend mentioned the idea to me 20+ years ago that everyone should get a line item allocation when they paid their taxes.  His idea was that you’d essentially create your own spending plan for your taxes and the government would have to honor it. 

While I love the "vote my taxes" idea, Adams and Hamilton wouldn’t like this very much since it shifts a lot of power back to the individual. So, how about an intermediate step – a category allocation that the government has to publish in aggregate.  Everyone gets to allocate their taxes across 20 categories when they pay their taxes.  The IRS aggregates all this information anonymously and publishes the macro data.

Step one would be to get this information out there.  Let’s show our politicians how "the country" thinks about how our tax dollars are spent.  Guns?  Butter?  Or maybe education.

Happy day before tax day.

  • Louis Berlan

    I think there might be a quick and easy way of doing this, thanks to the federal system in the US (much harder in other countries). How about creating a website that integrates all the different budgets of the Federal, State and Local governments. Then you just put in your zip code, what you sent to all of them, and it would spit out? Using the percentages (i.e. if the govt spends 10% on military spending, 10% of the money you sent it), it could be very easy to give line items. It could be both very broad based, or item by item.

    Of course this is quite crude and doesn't take into account a lot of nuances, but it could be part of the answer…

    Oh and don't forget to include the deficit, with a line at the end: “amount (per person) that you are putting off to your kids”

  • http://www.respondingtoopportunity.com josh

    While it seems like a decent idea, I wouldn't want to make the tax code anymore difficult. Also, since most people are still apathetic when it comes to voting and politics in general, I am guessing the participation rate in a program like this would be low relative to the size of the population.

    One idea I do like which comes out of Congress is a bill to put a line on our tax forms that allows anyone who feels they do not pay enough in taxes to pay more as a donation to the federal govn't. To paraphrase the Congressman who put the bill together “It would be a great injustice to those wishing to pay more taxes not to be able to do so.” Unfortunately, it probably won't make it to the President's desk.

  • Dave

    It wouldn't be that hard for a media organization to set up a nationally representative survey to find out roughly how this would come out. The thing is, if the categories were simply “policy” oriented, it probably wouldn't come out all that far from what we have today. The list would not contain things like “waste $15 billion on failed defense initiative” or “give $10 billion to corporate farmers for leaving land fallow,” or for that matter “continue to employ the 20% of the government workforce that is doing little or nothing.”

    Most of the “waste” is between the lines; the policy disagreements probably roughly even out among the voting population.

    The other thing that is wrong with this proposal is it acquiesces to the current level of spending.

  • Saul

    how bout giving people a chance to just vote on budget issues with their tax returns? for ex : here are five options for fixing social security a) raise retirement age, b) cut benefits, c) raise taxes, etc. this would make the return more interactive, for sure, and would probably force people to pay more attention to their returns overall. more importantly, it would illustrate that 80% of the fed budget is entitlements and there's really no “voting” on this spending. but we could sure use some creative input on entitlements and how to avoid a future disaster.

  • Steve Bergstein

    This sounds interesting, Brad, but I'm not convinced that you can run a country this way. I think that the only people who would vote would be the motivated, and probably radical, minority. I think that the issues are too complex to be responded to by Joe/Jane Citizen in the 30 seconds s/he spends thinking about how to respond to a survey.

    A system of republican (note the lower case 'R') democracy makes a lot more sense when decisions need to be made about balancing multiple priorities in a complex environment.

    • http://www.feld.com Brad Feld

      No doubt you are correct. I – however – am getting tired of our republican democracy and am once again leaning toward a representative democracy, which I know won’t ever happen in my lifetime (but one can dream.)

      • Dave

        Do you mean “direct democracy”? “republican democracy” and “representative democracy” are roughly equivalent.

      • Steve Bergstein

        I don't know if this is what you had in mind but I do like the proportional representation of parliamentary governments. I really dislike the way we break our population down into a series of all-or-nothing geography-based jurisdictions, where if you're not a member of the majority who elected some politician, you have no representation.

    • Panda

      I want to second this opinion and go a bit further. I think while each individual ideally has some pet causes that they would like their tax dollars to go to, what everyone really cares about in the end is the total distribution of our aggregate tax dollars. The reason for this would be that assuming that there's some general fund, then earmarking your tax dollars for a specific cause would essentially have no impact, since the money would all be essentially fungible and wouldn't cause any changes to the total distribution.

      Assuming that we then have an individual vote on the overall budgeting process, I think it would be extraordinarily difficult for the average citizen to parse through the thousands of pages compiled for each of these particular causes. In fact, my guess is that most people would barely look at any content at all before making their decisions. Thinking about the whole process like a function or a complicated model, you'd essentially have a garbage in/garbage out type of result.

  • http://blog.offbeatmammal.com OffBeatMammal

    this implies for one moment that the bloated, inefficient machine that apparently runs this country would allow any real accountability to creep into the process.
    I'm perhaps a little more cynical than most (and as a non voting non citizen I'm taxed without representation which I feel is even more unfair) but until we incorporate the princliples of accountability into Government, the Civil Service, Defence spending etc and reform the current tax code (by putting a line through it, rebuilding from scratch on a simple loophole free proposition) a significant percentage of the trillion dollars will not benefit the vast majority of taxpayers and citizens.
    I watch the cost of the war, and Bush spending tax payers dollars to under-write commercial logging of 2000 year old sequoia forests and wonder what the Founding Fathers would have to say – “Begads” would, I suspect, just be the start of it!

  • http://ianmcallister.spaces.live.com/blog Ian McAllister

    Instead, how about allocating your tax refund? I'd like to see a general program that encourages people to either kick back in some of their refund to go towards schools, social services, or other generally underfunded programs. People could also choose or find non-profits to allocate some of their refund to. Connecting the dots between “I've got some extra money.” and “I'd like to donate to a non-profit or help fund education.” might be pretty effective.

    The Web 2.0 space is full of people who could build this tie-in in an effective way, but my guess is the folks who design IRS forms or build TurboTax are not as entrepreneurial and/or have no incentive to try to design and advance this type of program

    • Steve Bergstein

      The thing that ticks me off about the IRS is that they haven't found a way to allow me to submit my tax return electronically (saving the IRS money as well as whatever headaches are caused by miskeying / misreading data) without someone charging me a fee. Why should I spend $15 to get my refund a little faster? It'd have to be an awfully large refund to be worth the expenditure.

      Of course, this isn't at all what Brad or you are talking about.

      • http://www.derekscruggs.com Derek Scruggs

        ISTR a couple years ago that the IRS planned to offer free e-filing, but Intuit/Turbotax and others successfully lobbied congress to stop it.

        The best government money can buy.

    • Steve Bergstein

      I should have posted this previously. I heard part of this Talk of The Nation program addressing eGovernment: http://www.npr.org/templates/story/story.php?stor… It was interesting but didn't address my bitch about the IRS while I was listening.

  • http://tachophobia.com Rick

    You could always write checks directly to your favorite branch/dept of the government.

    I bet the TSA would be very happy to take some extra $$ from one of their favorite travelers. I don't think it would be tax deductable, however.

  • andrew callen

    Take out the middle-man!

  • Mike

    I want to write a tax program where you type in what can be proved(K1, 1099, etc..), then you type in the amount of refund you want back. The software does everything in between(reciepts, birth certificates, doctor notes, insurance claims, investment writeoffs, etc)

    Wanna invest? Ill bet it makes 400 million in year 1, but we have to get out in year . ;>)

    Seriously, I want to see a study where 5 teams of IRS agents and experts interpert the same paperwork from the same small/medium company and independently create a tax return.

  • Louis Berlan

    I think there might be a quick and easy way of doing this, thanks to the federal system in the US (much harder in other countries). How about creating a website that integrates all the different budgets of the Federal, State and Local governments. Then you just put in your zip code, what you sent to all of them, and it would spit out? Using the percentages (i.e. if the govt spends 10% on military spending, 10% of the money you sent it), it could be very easy to give line items. It could be both very broad based, or item by item.

    Of course this is quite crude and doesn't take into account a lot of nuances, but it could be part of the answer…

    Oh and don't forget to include the deficit, with a line at the end: "amount (per person) that you are putting off to your kids"

  • http://intensedebate.com/people/offbeatmamm4340 offbeatmamm4340

    this implies for one moment that the bloated, inefficient machine that apparently runs this country would allow any real accountability to creep into the process.
    I'm perhaps a little more cynical than most (and as a non voting non citizen I'm taxed without representation which I feel is even more unfair) but until we incorporate the princliples of accountability into Government, the Civil Service, Defence spending etc and reform the current tax code (by putting a line through it, rebuilding from scratch on a simple loophole free proposition) a significant percentage of the trillion dollars will not benefit the vast majority of taxpayers and citizens.
    I watch the cost of the war, and Bush spending tax payers dollars to under-write commercial logging of 2000 year old sequoia forests and wonder what the Founding Fathers would have to say – "Begads" would, I suspect, just be the start of it!

  • Ian McAllister

    Instead, how about allocating your tax refund? I'd like to see a general program that encourages people to either kick back in some of their refund to go towards schools, social services, or other generally underfunded programs. People could also choose or find non-profits to allocate some of their refund to. Connecting the dots between "I've got some extra money." and "I'd like to donate to a non-profit or help fund education." might be pretty effective.

    The Web 2.0 space is full of people who could build this tie-in in an effective way, but my guess is the folks who design IRS forms or build TurboTax are not as entrepreneurial and/or have no incentive to try to design and advance this type of program

  • Rick

    You could always write checks directly to your favorite branch/dept of the government.

    I bet the TSA would be very happy to take some extra $$ from one of their favorite travelers. I don't think it would be tax deductable, however.

  • http://intensedebate.com/people/bfeld bfeld

    No doubt you are correct. I – however – am getting tired of our republican democracy and am once again leaning toward a representative democracy, which I know won’t ever happen in my lifetime (but one can dream.)

  • Dave

    Do you mean "direct democracy"? "republican democracy" and "representative democracy" are roughly equivalent.

  • Dave

    It wouldn't be that hard for a media organization to set up a nationally representative survey to find out roughly how this would come out. The thing is, if the categories were simply "policy" oriented, it probably wouldn't come out all that far from what we have today. The list would not contain things like "waste $15 billion on failed defense initiative" or "give $10 billion to corporate farmers for leaving land fallow," or for that matter "continue to employ the 20% of the government workforce that is doing little or nothing."

    Most of the "waste" is between the lines; the policy disagreements probably roughly even out among the voting population.

    The other thing that is wrong with this proposal is it acquiesces to the current level of spending.

  • Saul

    how bout giving people a chance to just vote on budget issues with their tax returns? for ex : here are five options for fixing social security a) raise retirement age, b) cut benefits, c) raise taxes, etc. this would make the return more interactive, for sure, and would probably force people to pay more attention to their returns overall. more importantly, it would illustrate that 80% of the fed budget is entitlements and there's really no "voting" on this spending. but we could sure use some creative input on entitlements and how to avoid a future disaster.

  • http://intensedebate.com/people/jpmorgan jpmorgan

    While it seems like a decent idea, I wouldn't want to make the tax code anymore difficult. Also, since most people are still apathetic when it comes to voting and politics in general, I am guessing the participation rate in a program like this would be low relative to the size of the population.

    One idea I do like which comes out of Congress is a bill to put a line on our tax forms that allows anyone who feels they do not pay enough in taxes to pay more as a donation to the federal govn't. To paraphrase the Congressman who put the bill together "It would be a great injustice to those wishing to pay more taxes not to be able to do so." Unfortunately, it probably won't make it to the President's desk.

  • http://intensedebate.com/people/steve_bergs2127 steve_bergs2127

    This sounds interesting, Brad, but I'm not convinced that you can run a country this way. I think that the only people who would vote would be the motivated, and probably radical, minority. I think that the issues are too complex to be responded to by Joe/Jane Citizen in the 30 seconds s/he spends thinking about how to respond to a survey.

    A system of republican (note the lower case 'R') democracy makes a lot more sense when decisions need to be made about balancing multiple priorities in a complex environment.

  • http://intensedebate.com/people/steve_bergs2127 steve_bergs2127

    I don't know if this is what you had in mind but I do like the proportional representation of parliamentary governments. I really dislike the way we break our population down into a series of all-or-nothing geography-based jurisdictions, where if you're not a member of the majority who elected some politician, you have no representation.

  • andrew callen

    Take out the middle-man!

  • http://intensedebate.com/people/steve_bergs2127 steve_bergs2127

    I should have posted this previously. I heard part of this Talk of The Nation program addressing eGovernment: http://www.npr.org/templates/story/story.php?stor… It was interesting but didn't address my bitch about the IRS while I was listening.

  • http://intensedebate.com/people/steve_bergs2127 steve_bergs2127

    The thing that ticks me off about the IRS is that they haven't found a way to allow me to submit my tax return electronically (saving the IRS money as well as whatever headaches are caused by miskeying / misreading data) without someone charging me a fee. Why should I spend $15 to get my refund a little faster? It'd have to be an awfully large refund to be worth the expenditure.

    Of course, this isn't at all what Brad or you are talking about.

  • http://intensedebate.com/people/derek_scrug1878 derek_scrug1878

    ISTR a couple years ago that the IRS planned to offer free e-filing, but Intuit/Turbotax and others successfully lobbied congress to stop it.

    The best government money can buy.

  • Mike

    I want to write a tax program where you type in what can be proved(K1, 1099, etc..), then you type in the amount of refund you want back. The software does everything in between(reciepts, birth certificates, doctor notes, insurance claims, investment writeoffs, etc)

    Wanna invest? Ill bet it makes 400 million in year 1, but we have to get out in year . ;>)

    Seriously, I want to see a study where 5 teams of IRS agents and experts interpert the same paperwork from the same small/medium company and independently create a tax return.

  • http://intensedebate.com/people/panda10391 panda10391

    I want to second this opinion and go a bit further. I think while each individual ideally has some pet causes that they would like their tax dollars to go to, what everyone really cares about in the end is the total distribution of our aggregate tax dollars. The reason for this would be that assuming that there's some general fund, then earmarking your tax dollars for a specific cause would essentially have no impact, since the money would all be essentially fungible and wouldn't cause any changes to the total distribution.

    Assuming that we then have an individual vote on the overall budgeting process, I think it would be extraordinarily difficult for the average citizen to parse through the thousands of pages compiled for each of these particular causes. In fact, my guess is that most people would barely look at any content at all before making their decisions. Thinking about the whole process like a function or a complicated model, you'd essentially have a garbage in/garbage out type of result.

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