* Repeal the 16th Amendment and eliminate all federal powers of direct taxation, with the the federal government instead to be funded by the 50 state treasuries.
* Under this structure the 50 states would be responsible for collecting all taxes in any manner they deem fit. This would eliminate the IRS and produce 50 competing tax codes that would become more pro-growth as states would compete for businesses and capital. The federal budget and individual state contributions would be decided through the normal federal budgetary legislative process.
* Under this system all tax revenue would flow through state treasuries before flowing to the federal government. This would have numerous positive benefits:
1) It would restore the intent of the 10th amendment. The states created the federal government and gave it limited powers. By reversing the current flow of funding so that the federal government no longer controls the purse strings and with it unconstitutional power the 10th amendment would be restored as only those Federal activities approved by the States would receive funding.
2) Instant federal spending restraints would be imposed on the federal government as every nickel not wasted at the Federal level would be retained in State treasuries. Likewise, all pork and bridge-to-nowhere projects would be eliminated as State legislatures would immediately object to funding out of state pet projects.
3) Federal legislatures would become much more aligned with the interests of their states and not special interest groups.
4) State legislatures would become taxpayer advocates and overseers of the Federal budget, again because every bit of eliminated spending waste could be used in-state for spending or tax reduction.
5) While there is near uniform agreement that the Federal tax code needs to overhauled and spending restraint needs to be imposed it has proved virtually impossible to achieve because of interests vested in the current structure. Since this proposal does not actually call for any specific changes to the tax code nor does it actually call for any specific spending cuts it does not run into any specific objections from vested interests. On the contrary because it bolsters State power and State funding it should be easier to get the support of States.
Over time it is easy to see how this funding approach would create a healthy tension between states and the federal government where power would dissolve back to the States.