Out of Touch on Taxes
While citizens from Alabama to Oregon to Florida are shooting down state level tax hikes, some federal level politicians are showing just how out of touch they are with the American people by proposing higher taxes. Democratic candidates for president are arguing over how much to raise taxes and several Democratic senators have submitted a bill to increase the top income tax rate. In addition to missing the anti-tax message the American people are sending loud and clear, such proposals are bad for the economy and completely miss what needs to be done to the complicated and wasteful U.S. tax system—which is to make it simple and flat.
Presidential candidates John Kerry, Joe Lieberman, Dennis Kucinich and Carol Moseley Braun have all said they would increase taxes on “the rich.” Specifically, Sen. Kerry, along with Sens. Corzine and Feinstein, co-signed a bill recently submitted by Sen. Joe Biden, to raise the top income tax rate in order to fund the $87 billion budget request for activities in Iraq. Candidates Dick Gephardt, Howard Dean, and Al Sharpton agreed that the first step toward repairing the economy would be to repeal the recent tax cuts.
These arguments hold up about as well as a Gray Davis term in office. Tax increases on the rich, in the form of an increase to the top income tax rate, do not just tax the rich. They also raise taxes on small businesses across the country. Almost all small businesses, because they are not corporations, pay income tax rates rather than corporate tax rates. Small businesses are the engines that keep the economy running. They are responsible for three-quarters of new jobs and employ over half the private workforce. Increasing their taxes would speed up the economy like a sand racetrack would speed up the Indianapolis 500.
That Sens. Kerry, Corzine, and Feinstein would all sponsor a bill to raise taxes should be no surprise. They all get an “F” on the National Taxpayers Union’s rating of Congress, which grades Senators based on their votes on bills that affect spending, debt, and regulatory burdens on taxpayers. Being some of the biggest spenders in Congress, it is no surprise they would want more for them and less for us, the taxpayers.
If President Bush does get $87 billion to rebuild Iraq, it will have to come from somewhere, but more taxes are surely not the answer. While these senators are at the congressional trough looking for pork spending for their states, they should check out the Pig Book from Citizens Against Government Waste, which outlines $22.5 billion in projects that waste taxpayers money. If they find silly programs like the $1 million effort to restore brown tree snakes in Hawaii too difficult to cut, they should go after corporate welfare. The Cato Institute found that the 2003 budget contained $86 billion in corporate welfare for 2003—just enough to cover the costs in Iraq.
If cutting corporate welfare also proves too painful for politicians constantly in need of contributions to fund their campaigns, then they might go after the tax system itself. The current tax system has gone so far beyond the realm of complicated that it is now somewhere near the border of the land of make believe. Surely the politicians in Washington are joking when they say we are supposed to understand and comply with the 45,000 pages of federal tax code. But the sad reality is, they aren’t.
The tax code is so complicated that is costs Americans an estimated $183 billion a year and 6.1 billion hours just to follow the rules and fill out tax forms. This enormous drain our economy would be the easiest burden to remove—were it not for politics. The details of a flat tax have already been laid out. Citizens for a Sound Economy has even set up a Flat Tax Calculator which shows just how easy it would be to file taxes under such a system. What the calculator doesn’t show is the fact that tax scams like those of Enron and Ariana Huffington would be less likely to occur if we had a flat tax instead of 45,000 pages of loopholes, and that the $200 billion of tax revenue lost annually due to noncompliance would be drastically reduced.
In Congress, Reps. Jim DeMint (R-S.C.) and Ralph Hall (D-T.X.), along with 50 co-sponsors, have brought tax code reform back on the agenda by introducing the Tax Reform Action Commission (TRAC) Act. This bill would set up a commission to examine the problems with the current tax system and issue a plan for reform. If this commission is interested in breaking the rule that commissions never get anything done, they should consider reading “The Flat Tax” by Robert E. Hall and Alvin Rabushka, a detailed outline of what is wrong with the current system and what should replace it.
Not to encourage government waste, but the commission would be doing taxpayers a favor if they just spent their meetings playing golf and submitted Hall and Rabushka’s book itself when called on for a proposal.
