22 May

It’s Time for Conservatives to Get Real About Taxes [Reader Post]

                                       

Conservatives, I have a bone to pick with my brethren. It’s over a favorite piece of red meat that politicians like to throw at us, one that we enthusiastically support, and one that will never happen. I am of course, referring to the flat tax. First off, let me be up front about my own views – I favor a flat tax. More specifically, I favor simplifying our tax code. As I’ve pointed out to our leftist friends in this post’s companion piece, tax rates are irrelevant – amounts collected are all that matters. Simplifying our tax code and making it cheaper to pay taxes will naturally result in more companies and individuals choosing to simply pay the tax rather than pay to avoid said taxes. A flat tax would be ideal – and it is never going to happen.

Before getting into the subject, let’s step back and look at a great example of how a drastic change to the law of the land gets passed. I am of course, referring to Obamacare. While conservatives were very well united in their opposition, the left were pretty much united as well in their efforts to allow all Americans to enjoy higher premiums, doctor shortages, and rationing of health care. Their main bone to pick with the law is that it does not go far enough to kill off the private health insurance as quickly as they would have liked, but at the end of the day, to quote the most eloquent voice of the left, it was their "Big F***ing Deal".

Now look at the proposals for a flat tax. Many conservatives will agree that a simple across the board tax rate of something like 20% for all Americans (a number I am arbitrarily throwing out) would be fair. Yes, the family making $50,000 per year is paying the same rate as the guy making $10 million, but at the end of the day the family is paying $20,000 in taxes while the millionaire is paying $2 million. How’s that for fair? Just as conservatives were pretty well united against Obamacare, the left will be against anything that tries to simplify the tax code that might lead to people actually giving up the same percentage of their income. Take away abortion funding, green energy subsidy sinkholes, or cut off funding to various members of the NGO-Nonprofit industrial complex (the only place of employment for many leftists without any useful skills) and there is no way anyone on the left can get behind a fair tax.

Wait a minute, that’s the same problem with conservatives. No, not the same causes – the same principle. Don’t believe me? we’ve already seen it. Early on in his administration President Obama proposed reducing the charitable deduction tax credit, suggesting that the government instead use that money toward helping to fund charities of its choosing (faith based initiatives, anyone?). Study after study has shown that conservatives give more of their time and money to charity than leftists do. And this makes sense. While I believe that leftists care about helping others as much as conservatives do the approaches sum up the two sides’ philosophies – "I am responsible" versus "Someone else should be responsible". Naturally conservatives were none too happy about this potential change to how charities were to be treated.

For most individuals this would not affect their giving too much. Many people give to causes of charities because they want to support them, not for personal financial reasons. Most of the charitable giving patterns for Sister Babe and me won’t be altered if this change were to go into effect. But we’re not the ones that charities are worried about. They are more worried about the larger donations that they get from wealthy individuals and corporations that make up a larger percentage of their operating budgets. As almost anyone can tell you when something gets more expensive you will see less of it. Philanthropists and companies will naturally look at what their best financial strategies are, and if the now more expensive charitable giving is not the best option it won’t happen. No, large charitable donations won’t disappear, but they will decrease. Being that we conservatives are more closely tied to charities in general we’re going to stand up for them, whether by maintaining the tax loopholes if not asking for direct government subsidy.

How about if we hit a little bit closer to home, literally? Conservatives don’t like the idea of doing away with the mortgage interest tax deduction, either. And lest you think that I’m only running an exercise in finger pointing, you can count me into this category. When Sister Babe and I bought our house last year I went through our finances in depth and laid out a few scenarios for what we could afford and how much we wanted to spend and lay down as a down payment. The interest tax deduction was one of the factors that went into the grand equation, and if this deduction were to go away it would hurt us, too. Granted, if someone can make the case for how an overall simplification would either be helpful or moderately painful at best, I’ll be the first in line to support it. But I’m not ready to sacrifice our budget if others are getting to keep their loopholes.

These are only two examples, and ones that are easy to illustrate. For every deduction in our tax code there is a special interest that will fight tooth and nail to preserve it. Sadly, politicians don’t have the will to stand up since it’s a lot easier to show how someone will be directly hurt by a closed loophole than it is to show how we as a society would benefit by simplifying the code. Still don’t believe me? How many presidential candidates walk through Iowa and talk about ending corn subsidies?

And that’s the reality we face. As conservatives we’re supposed to be the adults in the room, the ones who not only are willing to acknowledge that we have a problem, but understand that we have to actually take action to get off of our current path to destruction. If we can’t rely on the conservative base to rally around this cause, what hope is there of rallying enough independents to defeat the lefties on this?

Are you listening, Herman Cain? You’re exactly the kind of guy who can articulate a realistic tax reform approach to economically illiterate journalists and reach the American people. 9-9-9 sounds good in theory, but in reality it has no chance of happening. And this is coming from someone who was one of Herman’s Cainaanites back when he was in the race. While I didn’t think that 9-9-9 should have been his answer to most of the questions posed to him, I am grateful for the fact that he got the GOP primary debate questions pointed toward a subject as critical as our tax code as opposed to "boxers or briefs?" pabulum. The flat tax can be useful as an extreme position for bargaining from, just as the left used the single payer health care system during that debate. Obama was able to pretend he was a moderate by passing a law that would only gently strangle private health insurance to death rather than the immediate decapitation his base wanted.

All hope isn’t lost, though. Our tax code is going to have to be simplified in the next decade or two because it has to. We’ll either do it because we have the maturity to make painful decisions or because painful consequences will force us to. Who knows? Maybe watching what happens to Europe might even wake our leftist friends up! I’m not counting on it, but if we’re going to wake them up we have to ensure that our objectives are grounded in reality.

This entry was posted in Conservatism, Economy, Taxes. Bookmark the permalink. Tuesday, May 22nd, 2012 at 12:00 pm
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18 Responses to It’s Time for Conservatives to Get Real About Taxes [Reader Post]

  1. Ivan says: 1

    Conservatism is dead, sad to say.

    Modern “conservatism”, as practiced by Republicans, is about huge government spending programs and expanding the breadth and scope of government.

    Thus, essentially, “conservatives” morphed into liberals.

    Sure, you have some good people working at the state level, like Martinez in New Mexico or Walker in Wisconsin, but at the federal level you can forget it.

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  2. Alpha says: 2

    The 20% flat tax would deem the 50K family paying 10K in tax instead of the 20k cited. I don’t appose the flat tax.

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  3. Georg Felis says: 3

    I am dead set against a flat tax, and here’s why:

    Under most plans I’ve seen, the lower income people get their tax payments rebated back to them. So every month, every poor and lower class person gets a check from Uncle Sugar. Unless of course they actually work and improve themselves and raise their income…at which point the checks slow down or stop.

    I can think of no other tax plan better designed to suppress the progression of people through the income brackets up to self-sufficiency . And every few years, the call for “Mo” will ring out around Washington. Mo Money, Mo Health Care, Mo Welfare, and every time the votes will be there for Mo, because all the lower income taxpayers will never see a tiny fragment of the cost they are incurring, only the benefit.

    Bread and Circuses until the Empire falls.

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  4. I hope you’re right about having to eventually simplify the tax code, but I fear it may never happen.

    At any rate, I support the FairTax as opposed to a flat tax. Technically it’s more complicated than a flat tax so it would be even harder to pass but I believe it offers the most advantages to everyone involved, including the government which will reap the reward for the true stimulus package a FairTax would be.

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  5. Brother Bob says: 5

    @Ivan – great observation. Commenter John Galt had a great take where he referred to “Leftist conservatives” who were married to the ideology of corporate cronyism.

    @Alpha – thanks for the correction. I’ll have to fix that on my site tomorrow.

    @George Felis: Absolutely right. If you want to see a truly scary tax proposal check out my figures on what it would take to balance our federal budget.

    @Jason A. Clark: Can you post a good link to a fair tax proposal? Believe it or not I haven’t read too much on that subject.

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  6. Aqua says: 6

    @Brother Bob:
    Really? The Fair Tax has even been proposed in congress. It has a pretty big following and its own website. It was started by a book written by Neal Boortz. Good stuff:
    http://www.fairtax.org

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  7. @Brother Bob: The best place to begin your research on the FairTax is probably the FairTax.org website. They have a nice FAQ page that gives some good questions and answers.

    Maybe the best way to learn about it would be the FairTax Book: Saying Goodbye to the Income Tax and the IRS by Neal Boortz and John Linder and its follow-up FairTax: The Truth: Answering the Critics by the same authors. I’ve read both of these books multiple times and they never fail to excite me as to the possibilities of the FairTax.

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  8. johngalt says: 8

    @Brother Bob:

    I love the idea of the Fairtax. Not only is it much simpler than the current tax code, it is nearly as ‘fair’ as a tax code can be. Mr. Felis’ fears are not realized with the Fairtax, as it’s “giveback” portion is applied equally across the board.

    And, the best thing about the Fairtax is that corporations, businesses and individuals are only paying tax on the end-use of a product, service, or thing. What does this mean? It means that a business will pay virtually no taxes to conduct business. And one beneficial effect of this is to level the playing field dramatically within a chosen area. No more “tax-breaks”, on the national level, for companies, which leads to less corporate influence for lobbying for those bennies. The left wants corporate influence out of politics, and this is an excellent way to make it happen.

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  9. bbartlog says: 9

    The so-called FairTax is just an attempt to introduce a new taxation structure to the US (similar to the European VAT) so that the Feds can collect even more money. Some of the people pushing it are well-meaning, but in my opinion they’re idealistic dupes who deliberately ignore the historical expansion of new taxes.

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  10. @bbartlog: If you studied the FairTax at all you wouldn’t make this claim. I’m guessing you haven’t really read up on the concept. I encourage you to do so.

    It’s not at all similar to the European VAT; to claim it is is a gross mischaracterization of the FairTax. From the FairTax FAQ page:

    What about value-added taxes (VATs), like they have in Europe and Canada? Are they not consumption taxes?

    While VATs are also consumption taxes, and better than income taxes, the FairTax is not a VAT. A VAT works very differently. It taxes every stage of production. It is much more complex and is typically hidden from the retail consumer. Second, in industrialized countries that have a VAT, it coexists with high-rate income tax, payroll, and many other taxes that, in some instances, have led to marginal tax rates as high as 70 percent. Third, all other industrialized countries, except Australia and Japan, have a much larger tax burden than the U.S., which requires higher rates and makes tax administration much more difficult. Lastly, a VAT is a lobbyist’s dream, allowing them to install their loopholes unbeknownst to the purchaser. A retail sales tax, in contrast, is a lobbyist’s nightmare, applied as it is under the bright lights of the retail counter.

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  11. Aqua says: 11

    @bbartlog:
    bbartlog, don’t you support Ron Paul? The fair tax was written by Neal Boortz. Ron Paul is even on record as saying that although he is not a co sponsor of the bill, he would vote for it. The whole idea behind the fair tax is to completely do away with income taxes, not add another tax structure. The IRS would be dissolved. You should take a look at the website.
    For some reason, I thought every conservative and libertarian had heard about this and was pushing it.

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  12. johngalt says: 12

    @Aqua:

    I believe that one of the requirements for adoption of the Fairtax is that the income tax is abolished. Also, the corporate tax structure would also be abolished.

    I was critical of the Fairtax and a skeptic of the idea until I read more about it several years ago.

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  13. bbartlog says: 13

    @Aqua:

    If I thought the income tax and IRS would disappear as a result of the adoption of this tax, I would (weakly) support it, although I believe that its collection might still be rather intrusive. My support would be lukewarm because I don’t have any particular objection to a progressive income tax structure, assuming you’re going to have a federal tax on individuals at all.
    However, the point is that just because Neal Boortz (and sundry other libertarians) think that Congress is going to play fair and pass the bill they have in mind, doesn’t mean they will. They’ll use whatever support is generated for the bill, (re)write it so that the income tax and IRS get phased out over a five-year period while the fair tax get implemented / phased in… and then renege on the income tax part in the name of fiscal prudence. Or something along those lines. One would think that libertarians of all people would understand that just because you have some idea that looks good on paper, that doesn’t mean it will survive contact with government.

    ‘bbartlog, don’t you support Ron Paul? ‘

    Sure, but I don’t agree with him about everything (he’s too soft on immigration among other things). Also, there is a difference between being willing to vote for the bill as currently envisioned by Boortz et al and voting for the bill as it will likely end up.

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  14. @bbartlog: You do have valid points about how Congress normally works, but the bills could be (and may be, I’d have to research it further) to tie the hands of those who wish to change it. For instance they could require certain things be met before the new system goes into effect (such as the abolition of our current system with appropriate benchmarks and whatnot).

    But we can’t just say “well, Congress will never do it right so we may as well forget about it!” The only way anything will get changed is if enough good people demand from their representatives that changes be made. The FairTax is worth fighting for.

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  15. Brother Bob says: 15

    Thanks for the Fair Tax links, guys. After reading I realized that I had looked over Fair Tax plans before and just dismissed them. No, not because I disagree – I like the idea. I just don’t see it happening because the leftists would do to good a job at demagoging the issue and politicians wouldn’t want to give up their opportunities for graft. Or if it did get passed I see a scenario unfolding like bbart’s comment #13.

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  16. Aqua says: 16

    @bbartlog:
    All true. One of the biggest points Boortz makes is that congress will not pass something like this for the very reasons you cited; the main reason being they do not want to give up their power to pick winners and losers. The Fair Tax is supposed to be a grass roots movement to shame congress, let them know that we know this is the reason.
    As for a progressive tax system, the Fair Tax is still pretty progressive. I encourage you to look into it more. It’s worth the read.

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  17. FAITH7 says: 17

    This was an excellent Post. Yes, the current tax code is very convoluted… what is the best ‘change’ if it ‘ever’ happens?… that is the hard part, but a good/needed conversation to have…and you are correct Brother Bob, opposition to change happens when it affects the individual(s) directly especially if there is a negative after taste…

    Too bad we ‘cannot trust’ those who are appointed to ‘head’ Government Agencies – GSA comes to mind….+++?? Too bad we ‘cannot trust’ Politicians who are voted into office [Government] and take an Oath be good stewards of our Country, our Government and our hard earned dollars collected in “Taxes” to be spent “wisely” with restraint, without such dismal ‘waste’ and cronyism….too bad we have Lawyers who write [tax] laws and Lawyers who are paid to ‘go around’ these same laws via loopholes… but then again, and after all, money doesn’t “really” grow on trees.

    Too bad the ‘smaller Government’ meme is so opposed… and free markets, hard work and success are [now] viewed as a sin…

    Too bad we have a lot of [literally stupid] Greedy Americans, who don’t realize how very very very very LUCKY they are…to live in such a Great Country that THEY would ‘want’ to grab the opportunities this country, Not Government, has to offer…rather than ‘suck America and the Tax Payer Dry”…..there are a lot more too bad(s) to offer, but, I’m sure we all get it or just add your own…

    Too bad because perhaps this conversation would not be needed… at all…

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