Anyone with a familiarity with the FairTax would have easily concluded that the first twenty minutes of last week’s Presidential debate could have been avoided completely. We have talked before about the time wasted debating the current tax code and the critically important issues that are pushed aside to rehash the same debates that were concluded only a few years before. This is not a new problem. Part of the issue is that what is being fed to the American people is only an illusion of choice. There is nothing new placed before us in the coming election and the choices that are present have always been the arguments surrounding the tax code. Should we raise or lower the tax rate? It is a sad statement of current political discourse that if you ask those on the right or left this question the answer will always be, yes. Those on the left perennially support raising taxes, even if on certain segments of the population, while those on the right continuously argue for lowering them. Because of the competitive nature of politics and the embedded nature of the tax discussion there will always be disagreements surrounding the tax rates. We live in an era where politicians of both stripes are pledging to work in a What, historically, we have been left with is never a blissful age of political agreement but a series of electoral victories by one party that undo what the other had done in the years that they had won. The political pendulum swings to and fro granting power to opposing parties that then change the tax code up to fit their ideological views. That is why we hear about taxes in every Presidential campaign. If the code were simplified, there would be little need to go about constantly changing it. But here we are again. The beginning of the New Year will bring about drastic increases in what many are calling Taxmageddon. The thought behind this taxmageddon hits at the heart of what is wrong with the perennial tax debates and the fickleness of Washington politicians. The rise of the tax rates that hit on January 1 of the next year is a stunning show of failure on the part of those politicians promising bipartisanship or lasting solutions that have yet to deliver. The tax cuts passed in 2001 and 2003 by a Republican Congress and President and passed again by a Democrat Congress and President are going to expire which will result in automatic tax increases no matter who is elected. These tax rates, which have been passed by both parties and debated in public, at least three times, are the complaint of both parties as well. They both argue that they do not go far enough in their respective directions but all ignore that they are temporary! All this goes to prove that all the haranguing in Washington over the exact same tax rates we have operated under for a decade has far more to do with political gamesmanship than the good of the American public. This is precisely why we need to move to a tax structure that involves the public in the decision process rather than continuing to treat them like ATMs.
One undeniable fact that is obfuscated by the heightened spin of a Presidential election year is the limits that our tax code faces in combating the very real problems our country is facing. One of the lines in the debate concerned the need for a “balanced approach” to solving our out of control debt and crippling deficits. It seems that the only spending cuts that are consistently found are to future spending increases due to the nature of baseline budgeting. These future cuts do little to change the fact that we are currently more than one trillion dollars over budget. It should also be noted that these paltry cuts mixed with the proposed tax increases still cannot bridge the trillion dollar gap either. Even if the wealthy had all of their income taken in taxes it could not hope to bring in enough revenue to cover the rise in expenses. And one would only need to look to France to see how the wealthy react to overbearing tax rates. In short, they leave. The same event precedes every institution of oppressive government policy. Waves of emigration marked the rise of the Soviet Union. Taxing those that have the most means to avoid it is similar to trying to nail Jell-O to the wall. It should also be noted that those creating the tax code make sure that there are enough loopholes to exempt themselves, which necessarily leads others to follow. This endless cycle of politicizing the tax code and rewriting the actions of the recently defeated should explain why we have a code that exceeds 70,000 pages and is the topic of nearly every political debate.
In fact, this perpetual loop shows itself in the history of our tax code. Our original code was written in 1913 after the ratification of the Sixteenth Amendment. Since that time the code has been through 57 legislative changes, meaning that all of congress passed and the President signed 57 pieces of legislation that changed the tax code and how it operates. In just less than one hundred years we have passed 57 pieces of legislation. We could not go an average of two years without something passed that affects the way we collect taxes. This is an unstable tax code; it has been changed with more wanton disregard than a Latin American country’s constitution. It is a political football that is tossed around the field sometimes used by political parties to score political points. But the American people are left sitting in the stands, suffering to watch a game that has no end and forced to pay no matter who scores the points. We have ceased being part of the debate and only get to look on at party leaders as they hash it out, only every four years on national television. The rest of the time it is behind closed doors or away from our notice. We deserve something better.
The FairTax focuses on government transparency by making the people an active participant in the tax process. By switching to a consumption tax model, and repealing the current one and the government’s ability to do so, the American people are the arbiters of tax revenue and can be apprised of when and where their money is going. Spending debates on Capitol Hill will change to reflect the change in the method of revenue collection. All spent money is weighed against itself, meaning that the same account that pays for defense and road construction will pay for the ridiculous spending binges on completely unnecessary pork-barrel projects. It ends the constant change of the tax code because any change made affects everyone. That is a very important difference to our current code. Businesses will no longer have to lobby for exemptions and loopholes year round because the corporate tax is eliminated. Politicians can no longer play class warfare for the camera because everyone pays the same rate. Changes will no longer escape our notice because we see them every time we spend. Our focus can shift to watch Washington because their irresponsible spending is directly reflected to the tax rate. If we could reign in spending to match the original role of proper government function, then we could lower the rate to coincide. If we could lower the debt and cost of serving it, then we could also lower the rate to coincide. This is a dramatic shift from our current habits and actions. Even in economic crises, a consumption tax model is more stable than one based upon income. We have created for ourselves a system that is prone to wide swings based on the business cycle and the political cycle, is it any wonder why it is needlessly complex and overbearing? What the FairTax offers is a portrait of what government should be, responsive to the needs of the public, responsible in its actions, and lean enough to adequately respond. We currently have none of those traits and are pushing in the opposite direction. It is time to change that and support a code that represents our best efforts and not what we can get away with. Then we can focus on the important issues facing today without sounding like a broken record.