The total elimination of the deductibility of state and local taxes in the Senate Republican tax plan will cost me money, as I live in the high tax state of Illinois. Nevertheless, I strongly favor this proposal. It is rare that a change in tax law can reinforce the basic structure of our Constitution, but this one does.
Our Constitution is premised on government accountability and our federalism on competition among the states. Deductibility of state and local taxes undermines both. Because the deduction tempers the full force of the tax burden that states and localities impose, the accountability of state and local legislators for tax and spending becomes more attenuated. And this lack of responsibility is not ideologically neutral: state officials tax and spend more taxpayers’ money than they would if they could not slough off some of the costs on people who cannot vote them out of office.
Second, federalism is supposed to encourage competition among the states for efficient provision of public goods. But this deduction reduces the keenness of the competition.
Along with Michael Rappaport, I participated in Michael McConnell’s “Big Fix” conference, held at Stanford Law School this past week. “Should We Amend the Constitution?” was the subtitle of the fun event. You can talk me into that, provided law profs don’t get to vote. A dismaying number of amendment proposals aimed to Europeanize the U.S. Constitution (for example, by importing the European and Canadian courts’ “proportionality” tests into our ConLaw, which I had thought could not get any worse). Others sought to make the republic yet more “democratic”—an endeavor that for n reasons, some ably stated by Brother Rappaport, merits firm resistance and, in the event of success, a bulk purchase of OxyContin.
In politics, there are no final victories and no lessons that are learned for good: error, like hope, springs eternal. Moreover, what counts as error for some may be wisdom, or at least temporary advantage, for others. There is no catastrophe, political or economic, from which someone does not benefit.
In modern democracies, promises to tax-and-spend are like sin, a permanent temptation: only that they are worse, in so far as they are an instrument for some to gain and (as they hope) to keep power. And so the pendulum swings, seemingly for ever, between extravagance and retrenchment, the former always being more popular than the latter.
In Britain, Mrs. May has overthrown the legacy of Mrs. Thatcher, though nominally she is of the same political party.
How can we ensure that government officials use their powers in the public interest?
A recent article in the French newspaper Le Monde drew attention to an important difference between the French and the Germans. The French, said the author, think that the government spends other people’s money; the Germans think that the government spends their own money. This, if true, is important because each attitude must affect the politics as well as the economic policy of its respective country.
‘Why can’t a woman be more like a man?’ asked Professor Henry Higgins in My Fair Lady, expecting no proper answer. In another context, that of economics, he might have asked ‘Why can’t one country be like another?’
I thought of Henry Higgins as I read a letter recently in the Financial Times. It was written by an Irish civil servant in praise of German efforts to save their weaker brethren of the European Union.
The expansion of the state and the services it provides, well or badly as the case may be, inevitably changes the relations between citizen and state. Among other effects, it corrodes the idea of privacy and even the very possibility of privacy: for the more the state does for citizens, the wider its locus standi to interfere in their lives. It becomes, in the wonderful phrase of the Marquis de Custine about Nicholas I in his great book, Russia in 1839, eagle and insect: eagle because it soars above society, taking its capacity for an overview as an entitlement to direct everything, and insect because it bores into the smallest crevices of what lies below, though perhaps nowadays vulture and termite might be a better zoological metaphor.
The satisfying aspect of Niall Ferguson’s latest book can be described the same way as the unsatisfying aspect: I wanted more. The Great Degeneration: How Institutions Decay and Economies Die comes in at well under 200 pages of large, widely-spaced type, including notes, and is in every way a highly readable book. It is based on a series of BBC lectures. Ferguson has adhered to the wise speaker’s rule, which is the same as Polonius’—that brevity is the soul of wit. For books, this is not always the best rule. In many ways The Great Degeneration is yet the latest example…