Oct. 31, 2017

A Better Way to Fund Government

The term "Tax reform” is being thrown around a lot these days in Washington DC, and, regrettably, it’s more for political posturing than real economic benefit to America. Some of our politicians sound so sincere when they speak of “fairness” and “simplifying the tax code”. They speak of stimulating the economy and creating more jobs through lowering rates and making fewer levels of taxation. They claim they want to improve the lives of the people they serve. The sad truth is that very few of our Representatives in Washington really want significant change in the status quo. While seeming to support tax reform and lower rates; they are secretly resisting any sort of substantive tax reform. Why? Because they enjoy great benefit from the system as it is. For them, the tax code has become a lucrative tool for gaming the lobbyists and big businesses to extract large donations for their campaign chests (and maybe Swiss bank accounts?) This is not only unpatriotic and unethical; I’m sure it is sometimes even criminal in nature.

For the last thirty years the majority of our Congressmen and Senators have given lip service to tax reform while giving preference to their own selfish interests. They have shown little genuine resolve to do what would be best for the economy and for the American people. It’s high time someone began calling attention to the scandalous, dirty little fact that has prevented Congress from enacting any meaningful tax reform. It would be nice if some truly patriotic Congressman or Senator would step up and tell the truth about why tax “reform” is such a touchy subject on Capitol Hill. If the proposals we are hearing are actually allowed to become law, it would definitely be a big improvement over the status quo, without question. However, it is interesting to note that not one Congressman or Senator has dared to speak of the most effective method for “draining the swamp” and jump-starting the economy through a major revolution in the way we fund government. Even though they all know there is a much better alternative to funding government than taxing income, they aren’t willing to give up their little “cash cow”—the 70 thousand word tax code-- to embrace the better method. Any levy that is based on taxing income--such as a "flat tax" will NOT get us to the level of prosperity we could have in America for many reasons, chief of which is that it still taxes income and penalizes productivity. So how better to fund government, you ask?

Of all the ideas and proposals to receive Congressional review in recent years, the principles embodied in HR-25 and SR-25 (known as The Fair Tax bill) offer the greatest potential for accomplishing the goals of tax reform: improving the economy, and creating jobs. I have been studying the “Fair Tax” proposal for at least the last ten years, and I am convinced that a National Retail Sales Tax is exactly what America needs to solve our economic woes and begin the long overdue process of “draining the swamp”! These bills are literally pregnant with potential to improve our country in so many ways. I cannot recommend them exactly as written because of what I view as fatal flaws in them.
However, the general concept of converting to a consumption based tax system instead of taxing income portends many very real advantages and chances for improvement in our economy and the creation of wealth and prosperity in America. Not a single objection to it has ever been cited that could not be easily debunked by those most familiar with it.

If all income becomes free of taxation, it’s like giving everyone a raise. Folks would keep all they earn, regardless of source. Imagine; no deductions taken out of earnings before you get your check—(except, of course for Union dues for workers in “union shops” and, perhaps an amount for insurance for those with participating arrangements for healthcare). As a result, everybody would have more money to spend, invest, save, give to charities, pay off debt, grow a business, hire more workers, send their kids to college and even gamble, if that’s something they want to do. Abolishing the income tax would end worrying about keeping receipts, or reporting income, finding deductions or paying someone to do your taxes and scrambling to meet an April 16th deadline to file without extensions or penalties. No more hiding income and trembling in fear of the gestapo-like IRS, perhaps losing your house or having your assets seized or wages garnished to satisfy a tax liability the IRS insists you owe. And, for those who inherit something, no more having to sell your proceeds to pay the government. All income would be yours to do with as you wish, regardless of the source. Would that not be a tremendous stimulus to the American economy? Talk about growth and prosperity;
untaxing income would unleash an economic boom like no-one has ever seen before.

Never mind those intransigent politicians who lie and make up negative statistics about 'The Fair Tax'. They are selfish, unscrupulous rats who do not really care about what is best for America, and have buried HR-25 in committee for more than ten years. They only care about what they gain from the status quo. Even the CBO, which is allegedly bi-partisan, can’t be trusted to tell the truth about the effects of switching to a NRST. After all, they consist of members of Congress. The same is true of a ‘blue ribbon ’President’s Commission on Taxation’, which under President Bush came out with a dozen reasons to recommend against the “Fair Tax” or anything like it that would abolish taxing income. They were working for the members of Congress and against the people to protect that precious institution so lucrative to its members, the existing tax code.

Opponents of major changes in taxation of income always cite two main objections to turn the public against such an idea; firstly, they create class conflict by claiming any attempt to adjust tax rates is nothing more than a sinister ploy of ‘the richest people in America’ to increase their wealth at the expense of the poor and middle class. This is, of course a major twisting of the facts in just about every case. But, it does create a big enough cloud of confusion to stop progress of the legislation being proposed. Then, they often protest that tax cuts under consideration would be ‘regressive’, unfair to the poor folks while providing a greater break for the wealthy. This is one of the most common objections cited by opponents of the “Fair Tax”. All negative maneuvering we see today is designed to protect the status quo, and retain their positions of power and potential for ‘support’ from lobbyists, who’ve created more millionaires in Congress than were ever honestly grown in ‘silicon valley’.

As for ‘draining the swamp’, it is the tax code and the attending activity between lobbyists and members of Congress that creates and perpetuates an environment of corruption. Changing to a ‘consumption’ tax would end all that once and for all by practically eliminating the justification for lobbyists. If done wisely and logically, a consumption tax based on the principles built into “the Fair Tax” would not only have an immediate, positive impact on the economy, it would pull the plug on the swamp of corruption that has plagued Washington for decades. Think of it…a booming economy and less corruption in Washington. What patriotic American could be against that?

I urge you to write your representatives and ask them to closely examine HR-25, eliminate the most obvious flaws and modify it to make it realistic. A provision to phase in the new consumption tax, incrementally over about five years, while phasing out taxes on certain incomes and abolishing others completely, would be extremely important to maintain sufficient funding of government while unleashing the benefits of untaxed income. Once passed, it would end concerns about the Social Security and Medicare systems running out of money or forever bankrupting the nation. All this current scrambling to protect favored exemptions and deductions would become unnecessary. The tax code would never again become a political football.

One last thing: the “regressive” complaint is totally bogus. Those whose incomes are below the poverty level would be shielded from sales taxes by their “prebate” check which would bring their incomes up to the poverty level, actually increasing their income. Everyone else would also get checks to erase the sales taxes they paid on the first amount earned up to the poverty level. Thus, everybody wins.