Tax the revolving door: Column

• When President Obama ran for president in 2008%2C he promised to %22close the revolving door.%22
• The problem with ethics rules for this sort of thing is that they tend to be ignored or distorted.
• I propose putting a 50%25 surtax on the post-government earnings of government officials.

Senator Elizabeth Warren (D-MA) is upset with what she calls the "Wall Street shuffle," in which government regulators and Wall Street executives exchange places. She's right to be upset, but the problem goes beyond Wall Street.

In truth, we see the "revolving door" in almost all industries and sectors of government, and it's a corrupting influence on both government and industry. So, for example, ObamaCare architect Liz Fowler left government for a high-paying Big Pharma job, while top Obama Administration officials are looking for high-paying K street lobbying jobs. How high-paying? "Salaries for former Obama cabinet officials could start at $1 million while former assistants and special assistants can make more than $500,000 and $300,000, respectively." Likewise, in 2011, a few months after approving a controversial merger involving Comcast, Republican-appointed Federal Communications Commission member Meredith Attwell Baker left to take a high-paying job at . . . Comcast.

It's easy to see why companies want to hire people like this. First of all, the architects of complicated regulatory schemes are often the only ones who understand them. But more significantly, when you're the architect of a regulatory scheme, it's handy for companies if it's already in your mind that you might get a lucrative job from them later -- or not. That may not cause you to make the scheme less complicated (heck, complicated regulatory schemes are good for companies big enough to hire lots of lobbyists and lawyers, because they make it harder for upstart competitors to enter the field), but it just might affect the kind of complicated scheme you produce.

When President Obama ran for president in 2008, he promised to "close the revolving door" and clean up both ends of Pennsylvania Avenue, but that hasn't happened. Which isn't to say that it shouldn't happen now. But I don't think the usual ethics-rules approach is enough.

The problem with ethics rules for this sort of thing is that they tend to be ignored, or distorted. So I say, let's involve the most effective behavior-control machinery in America: The Internal Revenue Code.

In short, I propose putting a 50% surtax -- or maybe it should be 75%, I'm open to discussion -- on the post-government earnings of government officials. So if you work at a cabinet level job and make $196,700 a year, and you leave for a job that pays a million a year, you'll pay 50% of the difference -- just over $400,000 -- to the Treasury right off the top. So as not to be greedy, we'll limit it to your first five years of post-government earnings; after that, you'll just pay whatever standard income tax applies.

This seems fair. After all, when it comes to your value as an ex-government official, it really is a case of "you didn't build that." Your value to a future employer comes from having held a taxpayer-funded position and from having wielded taxpayer-conferred power. Why shouldn't the taxpayers get a cut?

More significantly, it is a principle of economics that when you tax something, you get less of it. So if we're worried about revolving-door government, we should tax it, so as to get less of it. And since the revolving door generates bad effects for society, taxation would be an appropriate way of discouraging it. It's what's called a Pigouvian tax, named after economist Arthur Pigou. This justification has been applied to everything from tobacco taxes to a proposed carbon tax, but it seems at least as applicable here. When the post-government-employment goodies are less good, they'll pose less of a temptation.

Alternatively, the approach could be rooted in Will Rogers' advice: As Rogers observed: "We have taxed other industries out of business, it might work here." I doubt we can put political corruption out of business, but this should make it at least a bit rarer.

One problem with this approach, of course, is that government officials don't like to support taxes or regulations that apply to . . . government officials. But such opposition hasn't stopped the No Budget, No Pay proposal from advancing in Congress, and given the public's widespread sense that Washington insiders are stuffing their pockets at taxpayer expense, it seems as if the same sentiments that propelled that proposal might work for this one.

At the very least, a proposed bill -- perhaps Sen. Warren could join with Rep. Paul Ryan (R-WI) as the sponsor of the House version in a demonstration of bipartisan opposition to revolving-door government -- would get people talking about the underlying problem. Because, as Obama noted in 2008, revolving-door government is bad for America

Glenn Harlan Reynolds is a professor of law at the University of Tennessee. He blogs atInstaPundit.com.

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