How many layers of government do you need to spend your money?

Posted by Marc Hodak on May 5, 2009 under Collectivist instinct, Invisible trade-offs | 2 Comments to Read

The American Republic will endure, until politicians realize they can bribe the people with their own money.

– Alexis de Toqueville

We have seen how effective it is for people running for office to promise goodies to “the people” while pretending that it would be paid for by other people.  This fakery works perfectly well with one layer of democracy.  How much better can this corrupting mechanism work when you add a second layer of democracy?

Well, for the first time, the biggest source of state tax revenue is…federal tax dollars.  Here is how it works:  After the state has taxed your sales, income, and property, and spent that money on police, schools, and medicaid fraud, they still have a huge gap to fill.  The federal government, financed largely by your income taxes, steps in to fill it.  Yes, the tax dollars that you sent to Washington, D.C. gets rerouted via some incomprehensibly complicated, and very costly bureaucratic maze to your state capital, to be spent on whatever your (relatively) local politicians say is good for you.

It’s one thing to accept your local politicians telling you that you can’t figure out for yourself what your money should be spent on, that you can’t be expected to act as responsibly or charitably as your assemblyman or senator.  It’s quite another thing for the federal government to say, in essence, that your state is not taxing and spending enough of your money, and so they (the feds) will tax you more and give your state more to spend.

Of course, the federal government is in fact shifting tax dollars from one state to another.  The responsible (and largely Republican) citizens of Montana and Texas are paying for the profligacy of (largely Democratic) California and New York.  Because that is the new American Way!