D.C. Mayor Adrian Fenty plans to divert $50 million from a dedicated Ballpark Revenue Fund to the general fund. So instead of paying off Nationals Park stadium debt, the money would help D.C. maintain spending without new taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. es.
Dedicated funds are not really dedicated, it seems, at least not in the short term. The Social Security Trust Fund serves as a typical example. Workers pay a tax over their lifetimes and receive an implicit entitlement. But the Social Security Administration makes clear: “Like all federal entitlement programs, Congress can change the rules regarding eligibility—and it has done so many times over the years.” This can happen because of Helvering v. Davis, which said Social Security “taxes are to be paid into the Treasury like any other internal revenue generally, and are not earmarked in any way.”
So should taxes be kept in dedicated funds? While protecting funds may help approximate a user feeA user fee is a charge imposed by the government for the primary purpose of covering the cost of providing a service, directly raising funds from the people who benefit from the particular public good or service being provided. A user fee is not a tax, though some taxes may be labeled as user fees or closely resemble them. , it could also lead to wasteful spending. For example, an appropriately set tax on cars could exactly pay for the road damage they cause. If the road tax is set too high then roads may be unnecessarily repaved just to spend down the dedicated fund.
Despite any theory of dedicated funds, the D.C. story shows the difficulty in making tax dollars less fungible. D.C. businesses that thought their annual gross receipts taxA gross receipts tax is a tax applied to a company’s gross sales, without deductions for a firm’s business expenses, like costs of goods sold and compensation. Unlike a sales tax, a gross receipts tax is assessed on businesses and apply to business-to-business transactions in addition to final consumer purchases, leading to tax pyramiding. es would stay in the ballpark fund are finding this out the hard way.Share