Thursday, April 15, 2010

The Case for Radical Tax Reform

As I sit here (at work, of course) today, I've been monitoring the copious protests over the obscenity that we have allowed to come into existence through a combination of selfishness, apathy, and a failure to see the bullshit in the propaganda:  the United States Tax Code.

Now before I launch into this, let me clarify that this is bigger than just one party or one leader. Because this is a trend that has been going on since the passage of the odious 16th Amendment, the one that allowed the government to punish people for making money.  And it has been highlighted as ridiculous as the taxes have risen, but not as quickly as our debt.  And while spending is the evil that will ultimately destroy us from within, the first step is getting it clear on paper as to how much it cost us when the government bends us over and goes in hard and lube-free.

First, a minute and a half from Heritage that I found just before I began the writing of this post that explains it very simply:

The Tax Code Explained (without all the requisite obscenities)

I really need to ad the obscenity disclaimer, because I can't usually discuss what is wrong with the tax code without a few choice words.  So I'll condense it down to three key problems:  Special Interests, Taxing Behavior, and Lying Bastards (told you).

Special Interests - I generally don't have a problem with the idea of a special interest group.  After all, they run the gamut from corporate interests to labor groups, rabid right-wingers to loony leftists, broad-based movements to single issue groups, think tanks to grassroots.  A special interest is simply a group that advocates for a certain position on any issue, marshaling resources that individuals can't.

Where it goes wrong in the tax code is that most every special interest wants to use the tax code to benefit them, either directly through a non-profit status, give them exemptions or credits for their , or to fund their pet project/cause/fund/etc.  Two examples that jump out right now would be the green tech-pushing groups and the ethanol producers.  But that's just the first that pops up.  Whether it's a welfare-for-votes scheme (government run health care), something that sounds good on the outside but is insidious as shit (No Child Left Behind), or a corporate/union welfare situation (all the bailouts), it comes out of tax coffers.  And then there's the laundry list of deductions and credits and insanity that have some people actually getting money from the government after filling out their taxes (not just refunds).  And it's all for specific groups for votes in the future.

Taxing Behavior - It used to be that if the government wanted to stop an activity, they made it illegal, and turned it into a law enforcement nightmare (Prohibition, the war on drugs).  But the government got enlightened one day and said, "why not just tax their asses?"  And so the soft tyranny of taxing behavior began.  Smoking is bad; tax cigarettes.  People aren't using the nifty mass transit; tax the gas some more.  The poor are eating too much fast food; tax McDonalds.  And so it continues.  And while you can come up with a rationalization why taxing a behavior is a good idea (and the anti-tobacco zealots are ready to scream), it's still the government profiting off of a behavior they have decided is "bad" but not bad enough to ban.  Another example would be the pot legalization movement.  The selling point that seems to be carrying the day in near-bankrupt California?  The politicians can TAX IT!

And it's just as bad with the credits and deductions.  Add solar panels; get a credit.  Squeeze out babies; get a credit.  Enslave yourselves in marriage; get a credit.  Buy a car (preferably from a government-owned company); get a credit.  And in corporate America, EVERY SINGLE DECISION has to go through an examination of the tax implications of doing it.  The government health care mandate, for example, may be something that determines whether it's better to automate, outsource, or go with temps rather than hiring that one person that means you have to start paying for your employees' health care.

Lying Bastards - This one should be self-explanatory.  Every election, we get to hear how each candidate is going to lower your taxes, or how another group will pay their "fair share" or how they're going to close loopholes (while opening others).  It's all a giant Washington shell game.  It ties back into pleasing the special interests that each candidate is trying to handjob into votes.  And it goes back into using taxes to manipulate behavior.  But it's all about obscuring exactly how much everyone pays in taxes, from the embedded costs of corporate taxes, to tax forms that require paying other people to fill them out, unless your taxes are that simple and/or you are that good with filling out online forms.

Either way, understanding how your taxes work to subvert you is an exercise in running shit through a sieve.  Except actual excrement is more pleasant to work with.

What is Radical Tax Reform?

Radical tax reform, in short, is the repeal and replacement of the entire current tax code with an essentially new system.  As I have seen the attempts at "reform" of the tax code fail miserably, mainly due to the reasons I listed above, it has become apparent that a careful, conservative approach at bringing sanity to the tax system will never succeed, because it requires eliminating entire layers of bureaucracy, snubbing all people who were getting a special break in the current code, and relying on politicians to willingly give up an incredible power that they possess and use to their benefit in every election.

Because unlike spending programs, which could theoretically be starved and killed depending on the ferocity of the people in power (ask NASA), the tax code simply shifts to accommodate those in power.  And there are very few statesmen left in Washington that could really push through a solution that would last.

So our tax system is unfixable.  And if you can't fix it, then the only option is to tear it completely down, and come up with a radically different solution.


I can't think of a single reason we should keep our current system (although if you like pain, you can make the case for continuing the soft tyranny).  And what I'd like is to see what radical ideas are out there.  Requirements for the plan to be radical include:

  • Wholesale replacement of the existing tax code.
  • Repeal or modification of the 16th amendment to limit the government's control over the new tax code.
  • Significant attrition or elimination of the IRS.
  • Elimination of the ability of the federal government to target taxes to a narrow group.
Obviously (FairTax haters, prepare to roll them eyes), the solution I advocate is the FairTax, a national retail sales tax designed to replace all existing taxes with a single rate, untax the bare necessities of life, eliminate the ability of politicians to [pit class against class, and eliminate all embedded taxes and the IRS, and through companion legislation, repeal the 16th Amendment. 

But I want to hear the other ideas for radical tax reform (because otherwise, we're just going to retread the arguments against FairTax and not get anywhere).   So let's get the ideas on the table, because we can't rely on the political class to willingly let go of the reigns until they know that the only way they get to stay in power is to give up the power to manipulate us.


Beth said...

People on the right are not allowed to be radical Patrick.

GB said...

I have a radical idea for tax reform: the U.S. Government learns to live within its fiscal means, foreign policy-wise and domestically, so that it no longer needs to raid the tax coffers of the American public for various expenditures that it otherwise would have been able to afford. Easier said than done I know, but apologies to Ron Paul, the IRS isn't going anywhere. We need to fix our current fragile system before we consider radical policies.

I'm no tax expert and therefore cannot comment on what a feasible tax reform solution would be. But I gotta say, it bothers me how anti-tax people become rabid when a President tries to push socially-progressive domestic initiatives, but when it comes to foreign policy, which include death, destruction and the spending of even larger amounts of tax dollars, these same protesters are silent. Sorry, but "you can use my tax dollars to bomb Iraq but just don't let me see you spending them on the poor" sounds just a little hypocritical to me...

I talk about this and other issues on my blog Young Politics. Check it out, I'd love to continue the discussion.

RN said...

Millions of Americans are sick and tired of hearing the liberal bullshit and hatred spewed and directed at conservatives who are as patriotic as any liberal ever was or will be.

Have a great life filled with the hated only Socialists and Marxist can understand and produce.

Patrick M said...

Beth: At this point, the conservative/libertarian point of view IS the radical one in this country.

GB: I have a radical idea for tax reform: the U.S. Government learns to live within its fiscal means, foreign policy-wise and domestically, so that it no longer needs to raid the tax coffers of the American public for various expenditures that it otherwise would have been able to afford.

That would be the other half of the fiscal equation. One part of tax reform is to make sure every American really understands how much of their money is going to feed the Washington pig.

We need to fix our current fragile system before we consider radical policies.

How? The reason I lay out the concept of radical tax reform is that every incremental fix gets wiped away by the next Congress or the next administration. And as long as they possess the power to manipulate people through taxes, there is no chance at them doing so in bits and pieced. That's how we got to this point in the first place.

RN: WTF? did you comment on the wrong post or something, or did you really have nothing intelligent to say?

RN said...

RN: WTF? did you comment on the wrong post or something, or did you really have nothing intelligent to say?

Just trying to keep up with your Bull-Shit Patrick.
Did you think that you had a monopoly on spewing Bull-Shit?

Patrick M said...

Rn: I freely acknowledge that I, as well as every other person, produce some bullshit when talking at length. I try not to let it get in the way of factual and rational discussion of issues.

When the sum total of the comment is "Liberals suck, conservatives are patriotic, and Socialists and Marxists produce hate," as well as being a comment that was cut and pasted verbatim on another person's blog, then you prove yourself to be an intellectual midget, and an uncreative motherfucker to boot.