November 1, 2011
Bold tax reform is front and center this campaign season. First Herman Cain made waves and poll headway with his 9-9-9 tax plan, which involves national 9-percent taxes on personal and corporate income and a 9-percent national sales tax. Now Rick Perry has followed suit with a 20-percent flat-tax plan, and Newt Gingrich has gone 5 better, with a 15-percent flat proposal. And these ideas certainly haven’t fallen flat: tax reform is immensely popular among the Republican base.
Yet there has been criticism, too – at least of Cain’s plan, the only one around long enough to be criticized. Many are concerned about giving the feds another vehicle – a sales tax – through which to fleece us. Sure, 9-9-9 sounds good, but what is to stop it from becoming 10-10-10, then 11-11-11 and ending up as 30-30-30? Yet, national sales tax or not, this threat looms with any plan; what is to stop Perry’s 20 percent or Gingrich’s 15 from becoming 40? Remember, the one-percent income tax sounded good, too, in 1913, but consider what it has morphed into.
So, yes, this threat exists with any plan.
That is, except one.
The plan I’ve been proposing for years.
Politicians will always A, find ways to raise taxes; and B, invent new, furtive ways of fleecing us (i.e., hidden taxes). Thus, any effective tax proposal will address these two problems. And the following two-pronged plan is the only one that does.
National Referenda on All Tax Proposals
We generally get bogged down arguing about numbers, 9-9-9, 20, 15, etc. Is it too high? Too low? Is it revenue-neutral? But all this misses the point. Once again, this isn’t mainly about numbers because, with ever-rapacious politicians, the numbers aren’t set in stone.
It’s about who will control those numbers.
And who should control this “power to tax” that “is the power to destroy,” as Chief Justice John Marshall put it? Those whose money would be taken – those who could be destroyed – should. This is why I propose national referenda on all tax proposals.
In other words, the politicians could propose any tax increase they wanted. But it would then have to go up for a vote of the people. And if it didn’t pass, the statists would have to find a way to get their votes other than by purchasing them.
As to the formula, I’d prefer that a tax measure have to pass by a two-thirds margin and not just a simple majority, but this could be debated. Also, the language of the law would have to prohibit the sneaky pols from instituting taxes under a different name, such as “surcharges” or “levies.”
Lastly, since the Constitution gives Congress the power to levy taxes, an amendment may be necessary to institute this plan. So be it. If we truly are to be a government of, by and for the people, the power to destroy must be in their hands.
Allow the Federal Government Only One Form of Taxation
This would eliminate the hidden-tax racket. Politicians love hidden taxes – the bacteria of the tax world – because they enable them to raise revenue out of the light of day and avoid incurring the voters’ wrath at election time. Such taxes also hide the true cost of government. After all, how often do people think about taxes on phone bills, airplane tickets or gasoline? Government should be transparent, and this should start with its cost.
Now, why is this necessary if the electorate would have to approve of tax proposals in the first place? For starters, because we need to eliminate the argument, “Well, it’s only five cents on your ________ (fill in the blank)!” Second, this eliminates the targeting of minority population groups with specific taxes, such as the 10-percent federal tax on handguns and the 45-cent-per-shaft one on archery arrows. And it’s a lot harder to pass tax increases if the majority has skin in the game. Third, as obscure taxes proliferate, people will inevitably forget about them, allowing them to attain hidden status over time.
And what should the one form of taxation be? To determine this, let’s consider, as before, what problem confronts us.
If a stranger approached you and asked how much money you made, your answer would likely be, “That’s personal.” Yet strangers – working in government – ask us not only how much we make, but how we make it, what our expenses are and for many other details every year.
And we readily divulge the information.
But does Big Brother really have right to this window into your private financial life?
This is a reason why I’d prefer the one form of taxation to be the federal government’s original way of raising revenue: tariffs on foreign-made goods. A second benefit to this is that it would protect American industry, as domestic manufacturers couldn’t be undersold by overseas companies that can get away with paying slave wages.
Having said this, I’m not married to any particular kind of tax because, just as with the numbers, the type is secondary. The keys are transparency and who controls the purse strings. What matters is having only one form of federal taxation and, most importantly, those referenda on all tax proposals.
Now, another benefit to my plan is that it enables us to more easily deal with a common criticism, one leveled at Cain’s proposal: that it’s not revenue-neutral. After all, since the numbers aren’t set in stone but by the electorate, people can raise the rate if they choose. This leaves the statists to argue against power to the people, to claim, as they no doubt would, that Americans won’t fund the government “sufficiently.”
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Also note that the criticism that a proposal won’t yield enough revenue can be – and will be – leveled at any plan involving fundamental change. After all, as with most things in economics, it’s hard to predict exactly how an overhaul of the tax code will shake out in a complex civilization of 308 million people. But so what? In case the critics haven’t noticed, the current tax system doesn’t raise enough revenue. And is this a surprise with government spending in excess of 40 percent of GDP? Moreover, if we’re going to let fears that poor ol’ Uncle Scam won’t have enough money to waste on the next Solyndra prevent us from making changes, then we’d better be resigned to being like an insect preserved in amber. Fear is then our dogma and the status quo our god.
But then there’s something more significant. Frankly, I don’t care whether Leviathan will have “enough” money – especially since it’s never enough.
I care that the people have enough money.
It is theirs, after all. As for the government, our message should be clear: Budget yourself.
You will make do on what we give you.
And for those who truly are concerned about runaway deficits, there is a solution to that problem, too: couple my tax plan with a balanced-budget amendment (BBA). This not only would enforce fiscal responsibility, it would also help forestall tyranny. Remember, money is the lifeblood of government; the state uses it to fuel its intrusive bureaucracies and enforce its tyrannical laws. Cut the flow and you wither the beast on the vine. For if it can’t raise taxes and can’t run deficits, it will have to crawl back into the constitutional cage it long ago escaped. My tax plan and a BBA would be a one-two punch to big government.
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Are we serious about fiscal responsibility, about constitutionalism, about eliminating waste, about getting the feds out of our lives? The best intentions may lie behind 9-9-9 or 20 or 15, but that won’t matter. They would inevitably become 30-30-30 or 40 or 45. And as the saying goes, “A sign of insanity is doing the same thing over and over again and expecting a different result.” For how long will we continue placing the “power to destroy” in the hands of those who’ve wrought nothing but destruction? It’s time to try something different – like power to the people.
What a radical idea.