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A flat tax rate on all income regardless of source will shift the discussion to spending and end the politics of envy
There is a legend that after being knocked around early in his career, Hall of Famer Bill Russell was advised by storied basketball coach Red Auerbach to throw an elbow in a nationally televised game to send a message to his adversaries.
President Obama has thrown the Republican Party off its game. House Republicans passed the first tax increase in the history of Republican controlled Congresses. Rather than respond with substantial sweeping proposals to cut spending, House Republicans passed a “baby step”, attempting to “force” the Senate to pass its first budget in four years, a measure Democrat Senate leader Chuck Schumer gleefully promised would include further tax increases and new spending proposals. When President Obama declared in his inaugural address that “we do not believe that in this country freedom is reserved for the lucky, or happiness for the few”, he signalled that he continues to view class struggle as the raison d’etre of his administration.
If the Republican Party does not want to be the doormat of President Obama’s second term, they need to throw a metaphorical elbow and stand up to the President. While liberals have suggested President Obama’s mission should be the destruction of the Republican Party, the goal of Republicans should be the elimination of class envy and economic division from our political discourse. Without the ability to fan the flames of class envy and economic division, Democrats will be forced to stoke the embers of a less popular liberal social agenda. By embracing a flat tax regardless of whether Democrats would endorse such a measure, Republicans will signal they no longer wish to play politics by rules set by liberal Democrats.
The economic virtues of the flat tax are well established. Its political virtues are often ignored. The political power of the flat tax is often why Democrats fight it so hard. Political outsider Herman Cain vaulted to the lead in the Republican presidential primary process based on the power of his flat tax proposal. So powerful is the idea that every Republican presidential candidate in 2012 (except the eventual nominee) endorsed a significant flattening of income tax rates and simplifying the tax code. Republican House Budget Chairman Paul Ryan endorses a significant flattening of income tax rates in his Path to Prosperity. While these proposals are a step in the right direction, endorsing a flat income tax rate no matter the source of the income will allow Republicans to claim the mantle of ending the Marxist politics of class envy and economic division.
For years, the mother’s milk of Democrat politics has been to fan the flames of class envy and economic division. In President Obama, Democrats have an ideologue who is more successful at playing this game than any of his predecessors. Americans collecting disability insurance and food stamps are at record levels. Nearly 1 in 6 Americans live in poverty. When Mitt Romney talks about the 47% of Americans who receive government benefits, Americans who receive these benefits worry that Republicans plan to cut their lifeline. Talk of growth and opportunity becomes an abstraction because nearly half of our fellow citizens do not pay our country's bills. With the growth of public debt skyrocketing to unprecedented levels, conservatives appreciate this course is unsustainable.
Despite such stark economic conditions, Republicans face a political problem. With a record number of Americans having left the workforce and relying on public benefits, President Obama has expanded the base of reliably Democrat voters. Since most of these voters do not pay for the benefits they receive, they have little incentive to change the system.
Republicans face an additional political problem. Democrats have successfully mocked Republican proposals to cut taxes in order to spur economic growth by equating them with eating chicken soup when you feel ill. Even if Mitt Romney had endorsed a flat tax proposal similar to the one suggested by his running mate, Democrats would have continued to fan the flames of class envy and economic division because people who earn capital gains and dividends pay taxes at a preferential rate.
Consequently, if Republicans want to stop being characterized as the party of “the rich” and become the party of “the country”, they need to endorse a flat income tax on all income regardless of source so everyone has equal “skin in the game”. Supporters of President Obama were shocked and appalled when their payroll tax withholding rose as a consequence of the recent ‘fiscal cliff’ law. Perhaps they would have been even more outraged had they learned that the tax increase President Obama’s auto-pen signed into law was used to subsidize tax breaks for Hollywood, NASCAR, Goldman Sachs and Puerto Rican rum distillers to name a few. This is one reason why Democrat pollster Pat Caddell suggests 3/4 of Americans believe their country no longer operates by the consent of the governed. Not only would Republicans be rewarded politically for supporting a ‘we are all in this together approach’ to tax policy, but a flat tax rate would help shift the focus of national debate from taxes to spending.
Republican presidential candidates were chastised for their unwillingness to support a 10:1 ratio of spending cuts to tax increases. Yet, Congress passed a law that arguably cut taxes and increased spending by an inverse 1:10 ratio. If everyone actually paid income tax much less at the same rate, voters’ interest in how Congress spends taxpayer money would increase dramatically. The political conversation would shift from income redistribution through a progressive income tax structure, government subsidies and spending programs to how much do we really want to spend and how much do we need to tax everyone to do it.
President Obama will raise a quarter of a trillion dollars in new taxes in 2013. Each of these new taxes affects a different subset of taxpayers. As a result, President Obama has been able to set taxpayers, Americans, against one another. It is an Alinsky-style strategy of divide and conquer. Unfortunately, it has worked! Republicans need to fight back and propose a system for funding our shared obligations that unites Americans and respects our traditions.