Let’s Talk Taxes

May 10, 2011 07:22

It will go down hard with many special interest groups, but the real path to fiscal sanity requires dismantling the many federal departments and agencies whose combined unconstitutional existence increases the national debt and erodes constitutional liberties and principles.

By Robert C. Wilson at Center for a Just Society

Like all who read this posting, I grew up in a culture in which the Federal Income Tax (FIT) was “normal,” and the graduated tax concept was accepted as fair. It is generally accepted that one thinks of the culture in which he/she grows up as normal. Sometimes, after extended exposure to differing views we begin to question what we have always accepted without question.

I now believe that the FIT is immoral and unethical (especially the graduated rate brackets). And it should be (and once was) unconstitutional.

Before 1913 (the beginning of the Progressive era) when Congress attempted to pass a FIT, the Supreme Court ruled it unconstitutional. Then the Income Tax Amendment was passed. Ratification came as a surprise to many. And this opened the door to government expansion far beyond its properly understood constitutional limits. It also led to the absurd complexity of modern tax laws and regulations and the huge IRS empire.

Anyone who follows the news from Washington, DC is likely to be drowning in rhetoric about federal income taxes from both liberal and conservative sources. So much talk about taxes in the context of burgeoning deficits makes it sound like some kind of change in the tax code will solve the problem. Reality is that at current and projected federal spending levels, no tax policy by itself can prevent a fiscal train wreck.

Still most would agree that our federal tax regulations are in dire need of reform. I use the term “reform” in a very narrow sense, since much of what is called reform in Washington is better termed “change” and frequently does nothing to improve the situation.

Conservatives say that increasing taxes inhibits economic growth as it lessens the ability of business owners to hire new employees and expand operations – factors that inhibit economic recovery. They say, and not without statistical evidence, that reducing taxes stimulates business growth and increases federal revenues – that budget deficits are not a revenue problem, but a spending problem.

Liberals say that rich people are not paying their fair share of taxes – that all Americans need to be “patriotic, tighten their belts and pay more taxes” as a remedy for deficits. Little reference is made to the rampant growth and cost of government. The idea that the rich are greedy and should be forced to shoulder a bigger tax burden smacks of class warfare.

According to an article in The Washington Times, The Obama Administration projected the number of federal employees will grow to 2,150,000. The IRS 2009 Data Book indicates the number of IRS employees was 93,337 of which 91,082 were full time workers.

Let’s look at some other enlightening statistics.

  • Income taxes account for only about one third of federal revenues. Increases from any income bracket will not eliminate the deficit.
  • 47 percent of Americans pay NO income tax. Isn’t there a “fair share” for a group this large?
  • The bottom 50 percent of U.S. taxpayers pay about 3% of total taxes.
  • The top 25 percent pay 85 percent of FIT.
  • The top 1 percent pay 40 percent of FIT.
  • Confiscating 100 percent of all taxable income from taxpayers earning $250,000 or more per year would furnish only 24 percent of the White House $4 trillion budget.

Unless one chooses to ignore the facts it is clear that:

  • Income taxes are not the answer to our fiscal dilemma.
  • If someone is not paying a fair share of FIT, it is not the folks earning over $250,000.
  • Closing all of the “loopholes” will not cure the deficit. We still have a growing mountain of complex tax code and the salaries of 91,082 full time IRS employees to pay. Arthur B. Laffer, chairman of Laffer Associates and the co-author of Return to Prosperity, said in a recent article, “In a study published last week by the Laffer Center, my colleagues Wayne Winegarden, John Childs and I estimate that these costs (IRS costs) alone are a staggering $431 billion annually. This is a cost markup of 30 cents on every dollar paid in taxes.”

Putting all of this together, the question remains, how can we put our fiscal house in order, i.e. getting the budget balanced and reducing the national debt?

First, it is clear that income taxes will not suffice. Having said this it is still a fact that the system is broken and badly in need of repair. I believe if we keep an income tax that is fair, it should be a flat tax, with a floor income level – no deductions or “loopholes.” The “Fair Tax” trumpeted by Gov. Mike Huckabee – although not my first choice – would be a better alternative than the present tax code. Either of these could eliminate the exorbitant cost of the IRS empire.

Then, and more importantly, we need to reduce the size of government. I recently visited the USA.gov website and found a list of all agencies and departments attached to the federal government. The list included all of our states and protectorates. When I removed these from the list it still totaled more that 400. Certainly all of these agencies can be more efficient in their work, but many are just empires that bureaucrats built which furnish little or no meaningful service to the American people. And many came into existence by legislative action in direct conflict with the constitutionally enumerated powers of the federal government.

It will go down hard with many special interest groups, but the real path to fiscal sanity requires dismantling the many federal departments and agencies whose combined unconstitutional existence increases the national debt and erodes constitutional liberties and principles.

Are there enough elected officials with sufficient principle and courage to see it through? Ask them.

Robert C. Wilson is a veteran of the U.S. Army with a B.S. in mechanical engineering and a M.S. in Business. His writings are posted at www.BFranklinPost.com Please email your comments to forum@centerforajustsociety.org.

The CJS Forum seeks to promote an open exchange of ideas about the relationship between faith, culture, law and public policy. While all the articles are original and written especially for the CJS Forum, they do not necessarily reflect the views of the Center for a Just Society.

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