For some reason I am pondering the idea of transfer payments from federal to local governments this evening.
It strikes me that a relatively higher federal tax rate compared with state and local rates, and the transferring the money to local governments based on specific programs gives both a clear problem and a clear benefit.
The benefit is because of a problem that is suffered both on the state and especially at the local level in this country. Poorer areas collect less taxes on a local level, and thus in the interest of equity (and all that goes with it) federal transfers provide an important source of funding for less wealthy areas of the country.
On the other hand the idea of federal transfers bothers me in the sense that it allows the federal government to only fund programs that fit with the current administration's view of what are "useful" programs.
Thus I can easily make the case that we as a nation would be better off with a system of much higher domestic tax rates and much lower federal taxs. That is much smaller federal government and much larger local. It is very rare that I agree with a traditionally conservative view point (smaller federal government) however I think smaller federal government may be useful in this country on that condition of much larger power and amounts of money in the hands of local administrations. I am holding aside the issue of coruption of local governments which is certianly a problem....but a bigger problem than federal coruption?
Certainly I know what is best for me better than my neighbour does, and does not the same hold for localized government?
The role of the federal government regarding equality would then become generic transfer payments based upon regional income instead of funding specific programs?
More on this later. I just wanted to write some thoughts down tonight before I forgot them in the sea of life.