“The power to tax involves the power to destroy.”
John Marshall
It has become axiomatic for politicians seeking votes from lower and middle class constituencies to preach a “tax the rich” message. It plays on the frustrations and jealousies of individuals who have seen their incomes stagnate and taxes balloon during the past decade while the nation’s richest one percent actually experienced a drop in their tax rates.
During the 1992 campaign, candidate Clinton sold a gullible public his prescription of taxing the country’s wealthiest as the centerpiece of his plan to reduce the budget deficit. Once in office, he has hammered away on that theme, willingly trading legislative “futures” with members of Congress to gain passage of his, otherwise, unpopular tax-and-spend package. Interestingly, even if the government confiscated 100% of the income of America’s wealthiest 1% or 2%, it would barely dent the staggering deficits being contemplated.
Moreover, rather than creating tax fairness, this short-sighted policy is little more than a poorly veiled technique to redistribute the nation’s wealth. It has become an implement of social divisiveness, pitting economic class against economic class, and runs contrary to one of our most fundamental and cherished values … that of equal protection (for all Americans) under the law.
More disturbing, it has provided fertile ground for massive abuses, whereby politicians’ votes on tax rules have been, and continue to be, bought and sold to provide safe havens for special interest groups and in many cases influential individuals. Loopholes through which millions can be sheltered are commonplace.
What’s needed, in addition to politicians with the courage to bring about change, is a dramatic restructuring of the tax code!
Such a system must be:
· Fair – treating all Americans with an even hand, while providing a safety net for the truly needy.
· Simple – requiring perhaps ten, not hundreds, of pages to enunciate.
· Understandable – permitting anyone to easily calculate their taxes without having to hire an accountant or attorney.
· Efficient – enhancing the national interest and ensuring a responsible and balanced federal budget.
Various proposals to replace our current, cumbersome and inherently unfair system have been put forth … many calling for a flat rate tax system.
Such a simplified flat rate tax system would:
· Eliminate all deductions, phasing out even such “emotional” preferential items as deductions for home interest.
· Eliminate interest earned on savings accounts from gross income calculations, as do most other industrialized nations.
· Impose a flat rate tax on the gross incomes of all individuals earning above the national “poverty-level”.
· Provide a safety net for those whose gross incomes fall below an annually adjusted “poverty-level”. Those individuals would receive direct government payments to bring their income up to that base income level … while concurrently eliminating the plethora of inefficient and costly welfare programs and their bloated bureaucracies.
There should be a single exception to the flat rate, for capital gains on investments made in American-owned and American-based businesses. The tax paid on capital gains would be reduced by 1% for each year such investments were held, ultimately resulting in no tax if invested for a sufficiently long period. This exemption would incentivize investors to provide precisely the type of long-term investments so desperately needed by American businesses to create jobs and remain competitive in increasingly contested domestic and foreign markets.
Studies suggest a flat rate tax of between 13% and 16% would net the U.S. Treasury billions more than it currently collects with less bureaucratic overhead. Payroll administration costs for businesses would be cut, total federal taxes for most individuals would drop while compliance would increase.
Flat rate taxes can also facilitate budget balancing and, if they fluctuate to compensate for changes in government spending, will graphically demonstrate to taxpayers the true costs of the programs their elected representatives have enacted!
Predictably, flat rate tax proposals have been ridiculed and unceremoniously rejected out-of-hand by the White House and Congress where lobbying has been intense. Chief among these defenders of the status quo are the social engineers with their own private agendas and the thousands of accountants, attorneys, government bureaucrats and politicians who feed at the trough of the current tax system.
Given a chance, a flat rate tax system can provide fairness, compassion, enable taxpayers to complete their own tax returns, incentivize private sector behavior, provide opportunities for enormous savings within the IRS, drastically cut welfare assistance costs, and enable the government to raise monies needed for its operations. It will ensure all individuals will pay “their fair share”, while not discriminating against some individuals simply because they earn more than others. Finally, it will eradicate the special favors and huge tax breaks now enjoyed by countless special interest groups and politically-connected, influential individuals.
America’s tax system, another symptom of our government run amuck, is perceived as unfair, overly complex and needing a major overhaul. In addressing the problem, Congress and the Administration must ignore the special interests, be open to new and creative ideas and abandon their politics of class warfare.
