You Should Be Thankful the Tax Man Doesn'?t Take It All?
"You should be thankful the tax man doesn't take it all." Congressman J.C. Watts once opened a G.O.P. press conference on tax reduction by quoting these lyrics from Beatle George Harrison. I don't know. I think the tax man ought to be thankful Americans haven't stormed Washington, D.C., and torn the I.R.S. Building down piece by piece.
In future issues I plan to give you a lot more detail about the key points in this article. For now, let me paint the tax situation with broad brush strokes, so you can get the big picture.
First, the whole idea of a direct personal income tax is against the intent of the original Constitution. The Founding Fathers deliberately did not give Congress the power to tax individuals. In 1913, when the Sixteenth Amendment was ratified, Congress had given itself the power to tax individual incomes. (I call this the Un-Constitutional Constitutional Amendment because it violated the expressed intent of the framers of the Constitution.) In the early 1900's the term "having an income" meant that you were independently wealthy. Today we would call it passive income; money that you don't work for, such as proceeds from a trust. At that time "income" was NOT the salary you got from your job or the profit you made from your business.
If the average American had realized that Congress would eventually twist the language of the 16th Amendment to the place where everyone had to pay Federal taxes, it would never have been ratified. In fact, when the Amendment was being debated in Congress, a Senator said prophetically, "If we pass this Amendment, we may very well see the day when the government could think it could take as much as 10 percent of a person's earnings." He was ridiculed and was almost laughed out of public life.
In any case, Congress then passed Title 26, authorizing a "voluntary" universal income tax, and broadening the meaning of the term "income" to include money received from practically any source. Have you ever noticed that your 1040 form says that you are filing "voluntarily"? Everyone that pays their income tax "voluntarily", please raise your hand. I don't see any hands. We "volunteer" to pay taxes because if we don't, we could "voluntarily" go to prison. Congress had to sneak the first general income tax into being during WWI by telling us that it was temporary, and necessary for the war effort. Anyone who didn't "volunteer" was "unpatriotic," practically a traitor. And besides, it was only a tiny percentage of your income.
Well, the "temporary" tax wasn't so temporary. Once the government has its hand in your wallet, it won't take it out. It reminds me of when Florida built the Sunshine State Parkway. The politicians promised us that the toll booths would come down in a few years, as soon as the costs of building the turnpike were covered. Thirty years later, there are more toll booths than ever, and the cost of using the turnpike has quadrupled.
Likewise, instead of discontinuing the "temporary" tax after the War, the politicians in Congress kept increasing it until the top rate reached 94%! Can you imagine having the government take 94% of your income? John F. Kennedy cut tax rates dramatically and salvaged our economy, but Congress began slipping in increases until eventually the top rate had reached 70%. At that point, Ronald Reagan stepped in and rescued the country by slashing 60% off the top rate, making it 28%.
Second, the Liberal Lie that lowering taxes will mean that the government won't have enough money to function has been proven to be based on faulty (can I say "voodoo"?) economics. Democrat John F. Kennedy proved it by lowering taxes and increasing government revenues. (Actually, Kennedy introduced the massive cut, and Lyndon Johnson pushed it through Congress.)
Republican Ronald Reagan proved it again when he cut taxes by more than half, yet doubled tax revenues while he was in office! "That's impossible!", cry the liberals. But any economist that was not educated in the Moscow Institute of Economic Studies will tell you that tax reductions infuse capital into the economy. This capital is then spent on products purchased from business. The businesses recycle the capital when they expand. Expansion requires more employees. People who were on welfare now have jobs and pay taxes. The expanded businesses make more profits and pay more taxes than before. Thus, the Reagan miracle was no miracle at all. It was simply sound economics.
Third, another Liberal Lie being pushed today states that the only way to reduce the deficit is to increase taxes. I don't know about your house, but in mine if we are short of money we look at TWO avenues of remedy. One is to increase income. The other is to REDUCE EXPENSES. The liberals in Congress are incapable of thinking this way. Here's a simple test to try with a liberal politician. Ask him or her to say the phrase, "REDUCE GOVERNMENT SPENDING." They can't do it. Try as they might, you will find them incapable of uttering those words. The biggest "tax problem" we have today is that government spends money it doesn't have. If citizens do that, we get into big trouble. If the government does it, they just raise taxes.
Finally, history has shown us that any society that taxes its citizens more than a third of their income will fall. The main reason for the demise of the Roman Empire is that the government felt they had the right to take (read "steal") from its citizens anything it wanted. When you add social security deductions to the unconscionable percentage "our" government takes from us, and then add in sales taxes and all the hidden taxes we pay, the average American pays about 43% of their income to some level of government. What hidden taxes? Excise taxes on gasoline and jewelry, for instance, that are levied BEFORE you buy the product, so that you don't see them. Also, import duties are levied on practically any product you buy that was made or assembled overseas. Again, these are added in to the cost of the item, so you don't see them, but they are taxes nonetheless. And then we pay sales tax on the hidden taxes!
"OK, we understand the problem," you say. "What's the solution?" Well the solution is NOT more tinkering with the tax code. It's already three or four feet high, and NO ONE understands it. That includes tax preparers, tax accountants, tax attorneys, and the I.R.S. itself. Tests done by citizen groups have demonstrated that OVER 50% of callers to the I.R.S. information number asking simple questions get wrong answers! The current tax system is so flawed that a large percentage of the taxes collected go to administrating the convoluted system instead of being used for the benefit of the country.
America is angry with all this! A poll conducted in 2001 by the New York Times and CBS News found that almost 60% of Americans think our tax system is unfair. Its very complexity allows thousands of opportunities for cheating. Poor and middle class Americans often pay a higher percentage of their income in taxes than the wealthy, because they can't afford the attorneys to take advantage of the loopholes the wealthy Congressmen have built into the system for themselves. Under my plan it would be almost impossible to cheat, and there would be no loopholes, so everyone would pay his or her fair share.
My plan involves a flat tax, but not the flat INCOME tax Steve Forbes has often proposed. Many economists say the U.S. needs a consumption tax that would reward savings and free us from the tremendous cost and time consumed by filling out forms. A national SALES tax would accomplish all that. It would also STOP PUNISHING people for working hard and increasing their income. And for all those who want to "get" wealthy people, the wealthy would pay the most, because they spend the most.
Basic fairness is something our tax system has always lacked. In Socialist countries, it is considered "fair" for the rich to pay a higher percentage of their income than the "poor." At what point did we, a free, democratic nation adopt the Communist/Socialist notion that redistribution of wealth was somehow "fair"? When we did start taking our ideas of fairness from Marx, Lenin and Stalin? Whether you like it or not, you need to know that these gentlemen would totally approve of our current tax system. The worst thing about it is that it is so unfair to the poor. They are discouraged from learning more to earn more, because the more they earn, the more the government takes.
A sales tax would encourage people to save, because they only get taxed when they spend. And it is FAIR. Everyone pays the same percentage. When you go to the store to buy a hammer, does the clerk ask for your annual income to determine the tax you will pay? Of course not. It is irrelevant. It should be just as irrelevant when we pay federal taxes. Our personal privacy is violated every time the government pokes its nose into how much money we make. A tax on spending would end that invasion of privacy.
Almost everyone benefits. The 90% of I.R.S. employees who would be laid off could regain their self-esteem by getting jobs that BENEFIT society. They would no longer be required to harass honest citizens who are trying to get by on the crumbs the government allows them to keep. All taxpayers would benefit by not having to spend hours filling out unintelligible forms, or paying someone hundreds of dollars to complete them. Savings would increase, allowing more people to buy homes, because the extra money in banks would help lower mortgage rates. More parents could stay home with their children, because two salaries would no longer be required to support a household.
Most important, we could all rest better, knowing that everyone was paying their fair share for the first time in the sordid history of the Infernal Revenue Service. The loopholes would be gone, the death tax would be gone, and the terribly unfair marriage penalty would be gone. The only exemptions my plan would allow would be for food, clothing, and charitable contributions.
About the only people who would NOT benefit from a flat federal sales tax are the politicians. My plan calls for a tax of 10%, far less than the vast majority of Americans pay today. That would be more than enough to pay for constitutional, necessary government services. It would NOT pay for all the "pork" the politicians love to pass around to ensure their re-elections. (One small example: There are dozens of totally unnecessary military bases in the country today, according to the Pentagon. The legislators in whose districts the bases are located refuse to allow them to be closed, because it would cost them votes. Meanwhile, ALL Americans pay for useless, outdated bases.) If the politicians wanted more money to pay for unnecessary and unconstitutional programs, they would have to hold a bake sale.
There is only one word I can use to properly describe our current tax system- "INSANE". We need to restore sanity to taxation. As long as we allow special interests to have special deductions, and let the government engineer social policy using the tax code, we will never have a fair tax system. What I have proposed is a system that cuts costs, forces government to reduce spending, lowers the tax burden on all Americans, and is fair. I call that SANE.
Dr. Tom Barrett has been an ordained minister for 30 years. He has written for local and national publications for most of his life, and has authored several non-fiction books. He has been interviewed on many TV and radio programs, and speaks at seminars nationwide. Tom is the editor and publisher of Conservative Truth, an email newsletter read by over fifty thousand weekly which focuses on moral and political issues from a Biblical viewpoint.