Taxes

Tax cuts: they are very pleasant.

So is cocaine, or so I have heard.

Like cocaine, tax cuts are not healthy, at least not today. Last fiscal year we ran a deficit of over $600 billion. We could cut the defense budget in half, privatize Amtrak, end farm subsidies, end the War on Drugs, and close down the Department of Energy and still have a deficit. The Baby Boomers are starting to retire. We should be running a surplus now.

Tax cuts today are a very, very bad idea.

But tax simplification is an excellent idea!

The tax code today is a disgusting morass of needless categories, corrupt loopholes, and busy-body meddling in personal financial affairs. The government not only takes a hefty chunk of your money, it tells you what to do with what you have left – badly. The tax code allows the federal government to play financial nanny to the middle and upper classes; that is, a chain-smoking alcoholic nanny who lives on junk food and invests in lottery tickets. The government encourages more bad financial decisions than good ones.

The tax code could use a good scrubbing.

A Flat Tax that Liberals Could Love

The phrase “flat tax” sets off alarm bells in the minds of all “conscious” liberals, and for good reason: most flat tax proposals are thinly disguised tax cuts for the rich. And they aren’t very flat.

If we merged all the federal income taxes into one flat federal tax, cleaned up some gaping loopholes, and had a fixed rebate (or dividend) for every adult citizen, we would have a much more progressive tax system than we have today. And it would be simpler than Dick Armey’s Flat Tax proposal, and easier to enforce than the Fair Tax.

For example, if Warren Buffet had to pay the same marginal tax rate as a country lawyer today, his tax rate would nearly triple. With the flat tax to be proposed here, we might merely double Mr. Buffet’s taxes, to bring them in line with the average tax rate of a country lawyer today.

I’ll give the details in future articles. For now let me remind you why liberals should embrace tax simplification: a complicated tax code imposes overhead on businesses. High overhead means greater economies of scale; Big Business beats Mom and Pop. And a complicated tax code also creates loopholes for those rich enough to buy a congresscritter; i.e., the One Percenters.

Conservatism vs. Tax Cuts

Do you want to get rid of inflation? Would you like to see the United States go back to a gold standard? Do you want the United States to still be a superpower decades hence? Then you want a balanced budget. Scratch that; you need a budget surplus now before all the Baby Boomers retire. And given the current conservative wish list for government, this means more revenues are needed than what the federal government collects today. Bummer.

You won’t get the additional tax revenues with tax cuts for the rich. We are well to the left of the Laffer Curve maximum for all but the welfare-receiving classes today. (And if you expect to balance the budget by cutting welfare payments, you can easily get the government back in the business of paying people not to work, marry, or save. This is not conservative.)

If you want to lessen the burdens imposed by the IRS, you are limited to tax simplification. There, I can help. Stay tuned.