- The Washington Times - Thursday, August 2, 2001

Republicans 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. CNN's Web site chat room is filled with wild and innovative ideas for blowing $300 for anyone who is interested.

Economists are busily debating 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 point is that these checks are a deserved and appreciated down payment on the Bush tax cut.

The popularity of these rebate checks got me to thinking. Why not send out an automatic tax rebate check every year that Uncle Sam runs 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 spending appetites each year.

In other words, the promise of tax rebate checks could be the ultimate check and balance against the stampede of federal expenditures.

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 more generous. If Congress raced through its own appropriations speed bumps, the surplus checks would be correspondingly smaller.

My suspicion is that the prototypical soccer mom, who may not 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 or for summer camp tuition, won't be coming this year because it was intercepted by the profligate spenders in Congress who found other uses for the money.

Herein lies the ingeniousness of the automatic annual rebate plan.

For the first time in decades, fiscal conservatives would actually have a tool to gin up political support for trimming frivolous spending whenever and wherever possible. Voters would be given a financial incentive to keep the government's budget under a microscope and to repel spending for grants to the Pillsbury Dough Boy, obscene art exhibits, or the Bud Shuster moving sidewalk in Pennsylvania. 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 less dollars available for a big rebate check every July.

Under this plan voters would think anew about supporting absurd new entitlement programs, such as the Kennedy plan for prescription drug benefits for seniors. Young voters who want the rebate check to help payoff their student loans would be butting heads with seniors who want yet another multi-billion-dollar taxpayer hand-out for free Viagra pills. If voters were aware that Congress' prescription drug benefit plan 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.

Congressional budget hawks like Sen. Phil Gramm, Texas Republican, would have a field day with this new automatic tax rebate plan. Mr. Gramm could announce, "Gee, I'd like to support this $50 billion plan to replenish the IMF, but I can't because it would mean that Texans would only get half the rebate check they're expecting in '02."

As the attached chart shows, federal appropriations have risen more than 25 percent over the past four years. My forecast for this year is a 7 percent to 9 percent growth in appropriations leading to our first $2 trillion annual budget.

This comes on the heels of last year's 10 percent spending rampage.

Economist Larry Kudlow calls this phenomenon the "curse of the budget surplus" because there's no longer a rationale to spend tax dollars frugally. But the Automatic Tax Rebate plan turns a curse into a taxpayer blessing. Surpluses mean bonus tax rebate checks in the mail. What's obvious from recent spending trends on Capitol Hill is that any plan that can create a political constituency for smaller government, would make a lot of economic sense these days.

The Automatic Tax Rebate plan would also heighten the political appeal of slashing tax rates and ultimately reforming the federal IRS tax code.

The experience of states like Colorado that have similar automatic rebate plans is that state legislators will cut taxes if they realize they can't spend surplus dollars on ribbon cutting ceremonies back home. Where's the joy in collecting tax dollars in the first place if you're effectively prohibited from spending them?

Finally, there is economic justice imbedded in this plan. Tax surpluses belong to the people, not the politicians. I believe it was H.L. Mencken who once called the federal spending process an advanced auction on stolen money. Under this rebate plan voters would be reminded that the federal dollars that Congress lavishes on us with such generosity is simply money stolen from us in the first place.

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