Williams G. Shipman proposes an interesting idea for changing the political balance of power between states and the federal government. (The Washington Times headline writer leaves much to be desired.)
If America wishes to change this trajectory, it needs new and bold thinking. Here is one candidate: Repeal the 16th Amendment to the Constitution (ratified Feb. 3, 1913) which gives Congress the power to lay and collect taxes, and replace it with an amendment that requires each state to remit to the federal government a certain percent of its tax revenue. This would change the game. Here's why:Let's assume that each state would have to transfer one-third (it could be a different ratio) of its tax-and-fee revenue to the federal government. The federal government would have to constrain its spending, for it would not control its source of revenue. New programs would be severely limited because there would be no authority to finance them. This dynamic would force the creation of new programs by the states because they would still have the authority to tax. The federal government could still issue debt, but given the discipline of markets, this would be self-limiting because the government would not be able to tax in order to pay principal and interest when due. New entitlements would be limited for the same reason. Federal spending ultimately would be limited to the necessities of government. Other spending and programs would now be the states' purview. But here, too, the dynamic would change.
Under the assumption that one-third of state revenue goes to Washington, each state would have to raise taxes equal to 150 percent of any program's cost. This premium would compete in the open market, which could provide the same service for one-third less. States would find it difficult to persuade their residents to pay such a premium. This would be true even if our country had only one state. But with 50 states, each would be constrained not only by the price premium but by the competition from the other 49 states. More goods and services would be provided by the market because the costs would be less. State governments would be priced out because of the one-third transfer, and the federal government would be constrained because it would have no taxing authority, even though it would have tax revenue. Goods and services would be provided by markets through the free decisions of producers and consumers, and at a fraction of government costs.
I like the idea, but I'm not sure it would be more effective than simply repealing the 17th Amendment which enabled the direct election of Senators. If state legislatures were once again empowered to select Senators, the federal government would immediately become more local and more responsive to the needs of the states.
Maybe we could do both?
