Given the opportunity, what many Americans seem to want from Washington right now is an opt-out clause. From the prospect of coming tax increases to pay for a profligate federal government to a mandate to buy health insurance, we can see in approval ratings and the sustained support for the Tea Party movement that policies rolling off of Capitol Hill have been roiling voters who would rather just be left alone.
So it’s interesting that a key idea emerging on the campaign trail is to give individual Americans the power to decide how involved in their daily lives they want the government to be. Every Republican presidential candidate has promised to repeal the health care law passed a few years ago and laid out some form of tax reform that would allow Americans to keep more of their money. But from entitlements to tax rates to the way government itself operates, Gov. Rick Perry has constructed an economic and reform plan around an interesting idea that deserves more attention. We might call this idea “optional government.”
Essentially, his idea is to offer Americans a chance to opt out of current government systems by choosing private savings accounts or a flat tax. Mr. Perry’s unveiling on Nov. 15 of a plan to reform the way the federal government operates expands on this idea of limiting Washington’s power and enabling Americans to opt out of its influence.
First let’s consider the optional flat tax. Its appeal is that it would simplify the federal tax code, a monster so complex that the Internal Revenue Service is unwilling to stand behind its own tax advice. But the flat tax’s stumbling block has been that every complicating provision in the code benefits one special interest or another, so it’s nearly impossible to uproot any specific tax credit, carve-out or special provision.
To get around this obstacle, Steve Forbes years ago proposed creating an optional flat tax, which would allow Americans to opt into a simpler system. Mr. Perry is taking up that torch; under his plan, Americans could choose to pay a flat 20 percent tax rate with deductions for mortgage interest, charitable donations, and state and local taxes, plus a standard deduction of $12,500. Or they could decide to stay in the current system.
This is a simple idea with big implications. First, it demonstrates confidence in the ability of the American people to run their own lives. Allowing them to decide the level of taxation they deem to be appropriate also allows them to gauge how involved they really want the government to be in decisions that affect how they run their businesses and their lives. If millions of Americans opt for the flat tax, we’ll have proof that all of those special provisions have been gumming up the tax code for no good reason; we will know they aren’t actually popular with taxpayers.
The governor seems to think his plan would lead to fundamental reform because, given the chance, a vast number of Americans would vote with their feet and opt for the flat tax. We suspect he is right and his plan, therefore, would be good for the country’s economy because, given the option, a vast number of Americans would choose the system that better allowed them to grow their businesses, invest their capital and create more wealth for this country. In other words, it likely would lead to greater economic growth.
A mass exodus from the current system also would say something about the level of taxation Americans think is fair. One rarely spoken truth about special provisions in the tax code is that they make it possible for lawmakers to impose higher rates. Carve-outs ease the tax burden on some, which essentially carves out political opposition to higher overall rates.
Optional government is also an idea that applies to entitlement programs. We’re often told Americans actually want all the goodies Washington provides. Then we’re told that we have to accept the constraints of a government-run system that accompanies those goodies or else accept that we’ll get virtually nothing back for the taxes we send to Washington.
This always has been a false choice. In the private market, workers can choose how their 401(k) funds are invested. Similarly, younger workers could be allowed to decide how to invest some of their Social Security dollars. The idea of creating private accounts was hotly debated a few years ago and is resurfacing this year as part of Mr. Perry’s economic plan. If millions of Americans are ever allowed to opt for private accounts, we’ll get an idea of how much confidence younger workers really have in a government-run system to provide for them. We’re also likely to see that entitlement reform can boost economic growth because such a reform can direct more capital into the productive economy.
In Medicare, the idea of optional government could have an immediate impact. The prescription drug program created nearly a decade ago already allows seniors to buy private drug coverage. This feature is likely more cost-effective than a government-run system because it empowers individuals to demand better coverage from private providers. This idea could be a way of preserving Medicare because it offers a path for empowering individuals while also cutting back on costs. Several Republicans, including Rep. Paul Ryan, already are talking about Medicare, and although Mr. Perry hasn’t fully fleshed out his ideas, his plan calls for giving seniors “more control to choose the plan that best fits their unique, individual needs.”
As we evaluate our candidates, it’s important to consider not only their performance on the stump, but also the governing trends they would unleash through public policy. In recent years, we’ve seen policies aimed at expanding the federal government’s role in our lives. What we’re being offered on Medicare, taxes, Social Security and the federal government’s own operations would move us in the opposite direction. We’re being offered an option to express confidence in Americans to determine their own destinies.
Brenden Miniter is senior editorial director of the George W. Bush Foundation, and Paulette Miniter is a former journalist.