Tax reform is essential for our economy to grow and prosper. America has to come to a better understanding of just what our tax system is and the consequence both good and bad of taxation.
First, people made much of the so-called Bush Tax Cuts, both pro and con, but what was never discussed was the fact that state and local governments dissipated much of the impact of those cuts. For example, in Pennsylvania, Governor Rendel took federal tax cuts as a signal to raise the state income tax rate over ten percent in a single year. He also proposed and did raise other taxes and fees in the state. You can see these very same consequences with many local governments and school boards.
Additionally, we do a very poor job defining what a tax is. In my opinion, the definition is simple. When government at the end of the day has more money in their pockets and you have less in yours, there has been a tax. Sometimes government disguises it by calling it lotto, a toll, or a user fee. The end result is the same, less money for you, more for government to spend.
Also, be very wary when a politician uses terms like revenue enhancement, or revenue increases. This means they want to spend more money and your wallet is about to be picked.
To properly reform taxation in America, we need to talk about unified approaches.
I would not reject out of hand a national sales tax, but I do recognize that the idea has some challenges. One of the biggest is that many states already impose a sales tax, and sales tax expansion, for instance to necessities, and sales tax increases at the state level are frequently discussed and occasionally adopted. Witness the Allegheny “Cultural” Regional Asset Tax for example. A sales tax at the national level, subject to increases, combined with varying sales taxes at state and county level, subject to increases could be crippling to the economy. I am also unconvinced the IRS will “go quietly into that good night”.
I am also intrigued by former Congressman Armey’s Flat Tax idea. You may still be able to find a copy of his book in print.
To sum up:
- Reform is needed and must take all levels of government into account. Taxation cannot be done in a vacuum. All levels of taxation that a person faces have to be considered, not just the one that this or that government wants to address today.
- Simplification has to be part of any reform.
- Taxes have to be defined. Calling government revenue by any other names doesn’t mean it is not a tax.
- We need a code of morality where taxing is concerned. Part of this is calling a tax a tax. Part of it is recognizing that certain actions are immoral. Double taxation comes to mind no matter how “moral’” the goal is. Government need to adopt a code of behavior and stick to it.
- Tax codes should have a minimal impact on business decisions. It is ridiculous that an industry considering expansion does not look to workforce, markets or production first when studying the issue. First they call a tax accountants and tax attorneys. I have no idea how much productivity is lost as a result or jobs.