We need a fiduciary approach to income taxation and government spending


For conservatives, the need to reduce taxation and curtail government spending are immutable truths. The national debt will surpass $20.5 trillion within the year. That averages out to $62,621 per person in the United States. When you remove those among us who do not pay taxes, the average skyrockets.

As Congress contemplates the adoption of a budget and a tax reduction bill, it is imperative that serious debt reduction strategies be considered. According to a key principle of Reaganomics, reduction of tax rates should lead to sustainable economic growth which should, in turn, result in more tax revenues despite the reduction in rates.

If we assume this axiom will hold true once again, should we, as a nation, continue to spend like we just won the biggest lottery ever? Or should we tighten the purse strings until our fiscal house is in order, i.e. with a balanced budget and a substantial reduction in the national debt?

The answer lies in the application of the concept of fiduciary duty.  I submit that most of our elected officials have only a vague notion of what it means to be a fiduciary. While they understand that they are elected to represent “the people,” they may not have a solid understanding of the fiduciary principles that service to another entails.

The common law recognized long ago that those who hold authority to act on behalf of others should be held to higher standards of conduct. Corporate officers, directors, lawyers, trustees, agents who hold a power of attorney, guardians, conservators, and others are regarded a s “fiduciaries” who must adhere to the highest standards of care, loyalty and honesty. They are expected to act strictly in furtherance of the goals and welfare of the people they serve, not out of their own self-interest. Civil liability may be imposed on any fiduciary who does not adhere to these heightened standards of conduct.

So why not hold our elected officials to these fiduciary standards? Each official serves in the public trust. At the national level, Congress is in charge of a national budget that is in the vicinity of $4 trillion dollars annually. By virtue of the Sixteenth Amendment to the U.S. Constitution, Congress has been given the power to levy an income tax on the people to pay for all of the services that our national government decides to provide.

With the power to tax comes the fiduciary obligation to exercise the highest care possible to raise and utilize the people’s money (not the government’s money) wisely. An elected fiduciary should not take money from another unless it is absolutely necessary to do so for the common good. Similarly, an elected fiduciary should not spend another’s money without a strong national reason to do so. Application of a twisted form of Descarte’s logic – we tax, therefore we spend – must not apply.

Fundamentally, what constitutes a national reason for taxation and spending must be defined by the enumerated powers of Congress in the U.S. Constitution; merely asserting there is some interstate commerce nexus should not suffice, as anything in this day and age has some tie to national commerce.

Our national debt and our ongoing budget crises are the byproduct of the failure of our elected fiduciaries to adhere to fiduciary principles. Today budgets only get passed when there is enough pork barrel projects to garner a majority vote. National interest succumbs to spreading the “wealth” of government largess around to make the electorate sufficiently happy to return their elected officials to office.

So what should a “good fiduciary” official or citizen do? In short, we should apply the following fiduciary tests for taxation and spending policies:

  1. Is the proposed spending, and the resulting taxation, in keeping with a specifically enumerated power in the U.S. Constitution?
  2. Is there a strong national interest that underlies the spending?
  3. How can Congress achieve the constitutionally-based, nationally oriented goals with the least expense to the taxpayers?
  4. Once the necessary tax levels have been established, how is the tax burden to be fairly distributed among the population?

It takes discipline to adhere to a principles-based approach to government spending and taxation. We expect such discipline in our family budgets and in our business plans. Perhaps it is time to reconsider giving the President the line item veto over budgets and to reconsider a balanced budget amendment to the U.S. Constitution. Until then, we must hold our elected officials accountable in the ballot box and through public opinion if they vote or propose to vote in a manner that jeopardizes the national interest and the fiduciary obligations they owe to all citizens.


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