I, too, think this will be like the immediate aftermath of 9/11, when we were going to have a war on money laundering. Sounded great until the bankers and investment guys showed up on Capitol Hill, to mention that pretty much any restrictions on money laundering, would shut them down. As the current fiscal crisis shows, we will suborn those felonies, before, during and after they are shown to not be in our best interest.

Sure this is a sane proposal. Anyone that studies the code before making a decision knows it doesn't support sound business models, and should. Like those Senate hearings, I think the fly in the ointment is that the flakey way of doing things is pretty much the only way things get done.

Chuck, this is an excellent post. I could not agree more that any new government program should be subject to review and certification of reasonable costs. At best they should be self-sustaining, at worst revenue/cost nuetral.

Chuck, could you give us a list of current state programs funded in this manner and how they are doing financially?

You're getting close but stop short. Why not implement the more fundamental reform: the idea that a Legislature should not pass tax/economic policies that work in opposition to other tax/economic policies?

The bottom line is that we drive the economy like a kid who spins the wheels on the family car by jamming his feet onto the accelerator and brake at the same time: we claim to want jobs, savings, and investments, and we spend public money to (supposedly) promote those things, and then we tax the crap out of jobs, savings, and investments. Much of what the Legislature does in attempting to operate in the tax and economic realm is wasted because it simply gets swallowed up in the larger context of a tax system that creates exactly the opposite results to those desired.

Legislators and administrations love to spend time tinkering around the margins with these tax credit schemes for the reasons you point out but, even more fundamentally, because they give the political folks the power to create grateful constituencies using public dollars to win private favor from the favored group.

See this Gristmill article for just the latest example of how this all works in the "green fuels" area (with good links to substantiate the arguments):

http://gristmill.grist.org/story/2009/3/20/112129/344

The political class in Oregon fell in love with "biofuels" and decided that, rather than think through a consistent and coherent policy on transportation, land use, and greenhouse gases, it was just a hell of a lot easier to raid the general fund to subsidize corporate agribusiness with tax credits for "green" fuels, and to pay for busyness (gallons) rather than actual renewable energy or greenhouse gas reductions (which would have killed the program). So now, instead of progress towards a greener future, we have a powerful constituency that enjoys favored tax status operating on top of the fundamentally unsustainable oil-driven system that is slowly but surely bankrupting the state.

And to the rescue comes the idea that we'll keep pouring more roads and building monstrous megabridges (spending to induce and reward driving) and then, at the same time, start taxing people by the mile driven (for responding to the incentives we create, in other words) and start dealing with greenhouse gases um, .... somehow ....

Democrats are just as bad as Republicans in this arena. Neither group wants to reduce their ability to reward their friends and create grateful beneficiaries of their largess -- they just have different groups of friends.

"But recently, proponents of new programs started pitching a new form of tax credit-financed schemes that sidestep the normal budget prioritization and accountability process. These schemes pay for public programs by handing tax breaks to those who opt to fund them. Their donations go to special state accounts and contributors get reimbursed through a tax credit.

If structured properly, tax credits can be an efficient mechanism for achieving important public policy goals. For example, they can effectively target help to low-income working families with children. But the new breed of tax-credits-for-donations scheme is a different animal."

How does this intersect with the various efforts to review/ sunset all tax expenditures because there are so many of them these days?

Robbing Peter to Pay Paul, is the corner stone of Progressive Democrat politics!

You continuously raise taxes and fees on Peter, then re-distribute this money to Paul, effectively buying power and votes. Few, if any, tax hikes or fees are opposed by Progressives - it's all about wealth redistribution, government control and oversight.

@ Steve Maurer:

http://urbantools.org/

If you'd put down your talking points long enough to read the comment, you'd see that I didn't say boo about the level of taxation; my objection is to taxing the wrong things (the things we claim to want the economy to have more of) while we fail to tax the things we want to discourage.

This puts us one a gerbil wheel of taxing and spending at cross-purposes: we spend money to try to undo the effects of our unwise tax policies, which requires more tax revenue, which ends up with a race where we're spending money to undo the effects of our other spending.

http://urbantools.org/

The way to break the cycle is to stop taxing economic goods -- jobs (wages), savings, and investments -- and start taxing economic bads (pollution, use of nonrenewable resources) and land, which is the only factor of wealth that is not diminished or discouraged by a tax.

Further, unlike a building or a painting or a piece of software, the person owning land did nothing to create it; instead, society's laws simply give this person -- the "owner" -- the exclusive right to profit from the value of the land, most of which is actually created by others, including government. (That is, the reason an acre in downtown Portland is worth so much more than an acre in the middle of nowhere has to do with the proximity and value to all those other people).

The original post proposes tinkering around the edges of a fundamentally unsound system that the rich have succeeded in making totally invisible (and, therefore, unchallengeable).

The average American is constantly told that they need to think in terms of a "three-legged stool" of taxation (income, sales, and property) to fund the activities of government. The rich are glad to have people constantly fighting over the question of how much we should tax income or what the sales tax should be, because that means that people never ask why we're taxing income and sales at all, when so many of our programs are supposedly aimed at giving people the means to earn an income and to promote economic transactions (sales).

It's true that a properly designed tax system that didn't work against our other spending would probably result in lower overall tax rates, because it is expensive to spend money to pour gasoline on the fire you're trying to put out at the same time. But that's not the point. The analogy that best describes the issue is this: put a 200 lb. weight on the back of a horse and the horse carries it easily; tie that same weight to the horse's leg and the horse is unable to move.

That's our tax system: a weight in the wrong place.

Most hilarious BlueOregon post title ever. Where is the progressive agenda without robbing Peter to pay Paul?

It's only bad when one bureaucrat steals citizens' money from another!

@ Steve Maurer: "I disagree with the assertion that 'land ... is the only factor of wealth that is not diminished or discouraged by a tax.' I assure you that I write a several thousand dollar property tax check on my home every single year."

And you have just as much land when you are done every year -- your holdings are not diminished at all.

Taxing money changing hands (through wages and sales) and you get less money changing hands.  Tax land every year and there is exactly as much land to be taxed in the next year.

You mention Prop 13 and other "property tax revolts" -- that's been my point all along.  The rich hate property taxes, particular land value taxes, with a passion because they are difficult to avoid and hard to finagle.  The suckers in California who voted for Prop 13 (and the people in Oregon who voted for Measure 5) were setting themselves up for the financial rollercoasters that we suffer from, where the states lurch from crisis to crisis, with each one leading to more lasting damage to services.  Meanwhile, the richer you are, the more you are enjoying the increases in property values that way outpace the amount that property taxes can rise.

As for "the assertion that somehow taxation would be significantly reduced if we only taxed the right sorts of things," I didn't make that assertion. What I said was that an intelligently designed tax system "would probably result in lower overall tax rates" because we wouldn't have to fund things to undo the consequences of our tax system and we'd stop having to pay to maintain an intrusive labor intensive income tax.

For example, assume we get rid of the income tax and replace it with a land-value tax plus a tax on energy use that is set according to the fuel mix (how much carbon or other wastes emitting, whether the fuel is renewable or not, etc.) Presto, you not only eliminate the dead-weight social cost of tax avoidance, auditing, etc. but you also push people to prefer nonpolluting and renewable energy; this reduces health expenditures. The fuel taxes flow through into the prices of consumer goods -- everybody (including people whose income is in illegal activities) pays the taxes in proportion to their consumption but with no administrative overhead.