L. Neil Smith's
THE LIBERTARIAN ENTERPRISE
Number 226, June 1, 2003
Mr. Ed Tells All!
Repeal All Taxes on Income
Special to TLE Issue 226
Are conservatives in both Houses of the Congress so desperate to pass President Bush's $350 billion tax cut package that they're just willing to chuck their principles, just so that they can claim that they are "cutting taxes" to score points with their constituency?
It seems that way to me. After all the GOP-controlled House and Senate have already passed the package, and conservatives just want to make it sound like they are "cutting taxes" when actually the cuts are diminutive in comparison to the original $726 billion tax cut. Moderate Republicans were, according to Yahoo! News, "concerned about record deficits," yet they "refused to sign onto any bill cutting taxes more than $350 billion over the coming decade." How nice! Moderates who, like their conservative cousins, espouse the liberal class warfare mindset but cry about "record deficits!" With that kind of a response, you would think that they would go into a song and dance, just to pry support out of the hearts of duped taxpayers. After all, why ruin the fun when the name of the game is to loot the American people of the fruits of their labor (their hard-earned money) and give it to those who simply have no right to that money in the first place?
Seriously, the Republicans have outsmarted the American people. (Not that any of the taxpayers give a hoot about this issue anyway.) What never surprises me is the fact that both the collectivists on the left and the right refuse to backpedal on the argument that a tax cut over $350 billion levies a "cost" to the American people. Anyone who is well versed in Economics 101 can easily inform the public that tax cuts, regardless of their size, do not "cost" a dime to those who pay taxes. That "cost" is allotted to the government. And while we're on the subject, that "cost" to the government is actually a good thing, considering that the government has no business putting its hands on that money from the get-go.
Nevertheless let's not kid ourselves here. The tax cut is not just piddling, but also an embarrassment to the principle of fiscal conservatism. With the tax cut reduced from its previous form to its current state as it is, it will only give $35 billion a year to those within the higher income brackets within a 10-year period. Do the math. With the current fiscal year deficit now exceeding $300 billion (an estimate provided by the Office of Budget and Management) and the total federal deficit surpassing $2 trillion, it makes the "huge" tax cut sound like it was an April Fools' Day joke. (It might as well have been anyway.)
How is that possible, you say? Well, it's really simple. The original $726 billion figure, if retained and passed in its initial form, would have given those with taxable incomes a $73 billion tax cut annually. That would have amounted to a measly 4 percent of the total deficit. (Bear in mind that Congress doesn't have any money to pay its bills.) A deficit, when incurred, is the product of the president and both Houses of the Congress spending more money than they receive in taxes. The enormous increasing amount of spending is due to our recent war with Iraq, and there are no signs of any halts in the increases anytime soon.
A ridiculous aspect of the current tax-cut debate in Washington is that huge tax cuts are "irresponsible" and are earmarked for the rich. This truly isn't something new. The Democrats have been pushing this hogwash for years. That even includes many left wing observers, writers, and pundits who will use any excuse to justify the increases in spending, the borrowing, and the level of taxation in order to characterize the GOP as a threat to the welfare state and the federal programs which the government provides.
The top dog Democrats, especially those in the Senate Finance Committee, are just as pathetic. "I'm not opposed to creating millionaires. I think the country needs more millionaires," quipped Senator Mary Landrieu of Louisiana. "What I'm opposed to is constantly this other side coming to the floor trying to give breaks to the people that are already at the top at the expense of those at the bottom." Really?
Democratic Senator Max Baucus of Montana, who serves on the Republican- controlled Senate Finance Committee, took potshots at the dividends tax cut plan, saying, "This is absurd. This is irresponsible." Irresponsible? Irresponsible for whom? Those at the top of the income ladder?
The "me too" collectivists within the Democratic Party just simply don't get it. Tax cuts allow people to retain more of their hard-earned incomes. When tax rates are lowered, families are able to save on their tax costs and have more control of their pre-tax dollars than they would without the cuts. Thus, the incentive for savings is energized, and those with more money in their pockets are able to save, give away, invest, or spend. When corporate tax rates are lowered, businesses have more incentives to save, invest, give away, or spend their funds. They are very likely to invest their money in improved customer service, and spend on research and development to provide more efficient and better products and services for their consumers. This also means that workers and businesses are able to produce more, which, in return, will enable economic growth. Let's not forget that this always translates to more taxable revenues for the government. (Not that it's a good thing.)
However, when tax rates are raised, both families and businesses have fewer incentives to save on their tax costs and have less control of their tax dollars than the other way around. When this occurs, there are no savings and no room for growth and investment. Once the money is taken, it's gone. Eventually it will be spent on projects to placate the statists' politically-sweetened supporters, whether or not we want them.
Nevertheless, the liberal collectivists in the House and the Senate keep touting the class warfare mantra by maintaining that huge tax cuts are earmarked for the wealthy. They say that low-income earners - those who earn $20,000 or less a year - should be getting those cuts. Has it ever occurred to them that one can't get a tax cut if he or she hasn't paid a dime in federal income taxes?
A few members of the class war crowd say, "But of course they do pay taxes! They pay the Social Security and Medicare taxes! Shouldn't they get a tax cut?" Now we're getting somewhere. It wasn't too long ago that some of the class warriors argued that payments to Social Security and Medicare were merely "contributions." (Note: the "C" in FICA stands for "contributions.") Perhaps one should be reminded that a refusal to pay those taxes results in arrest, prosecution, conviction, and incarceration, along with the possibility of a fine.
Keep in mind that, in 1998 dollars, the top 1 percent who made over $269,000 a year paid 34.75 percent in federal taxes. The top 10 percent who raked in over $83,000 a year paid over 65 percent in taxes, and the top 25 percent who earned over $50,000 a year paid over 82 percent in taxes.
Besides the liberal collectivists are the ones who aren't serious about slashing taxes. What they want is to give tax cuts to those who don't pay taxes and to raise taxes on those who do. Where's the fairness in that?
Conservatives who abandon their principles just to get an inferior tax cut plan in motion are useless to freedom. By doing so, they become collectivists and central planners like their liberal collectivist counterparts. They are just simply an aberration - a morally bankrupt, perverse, and deviant representation of progressive liberalism gone insane.
The unseen tragedy in all of this is that leftists and rightists think they own this issue.
The only way to end the immoral, perverse confiscation of incomes is to repeal all taxes on income, which would include the federal income tax, the tax on dividends, the corporate income tax, the marriage penalty tax, and the payroll tax and replace the entire tax code with nothing. While we're at it, let's repeal the 16th Amendment so that another tax code is not established. That would also entail the abolition of the Internal Revenue Service, and that is long overdue.
The sooner the tax system is dismantled, the better off we all are in the end. By taking this action, we will free ourselves from the clutches of the tax organism and shrink the bloated leviathan to its intended constitutional form.