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The Tax Cut 'Debate'

(Note: Though this was written in 1999 and in regard to a particular public argument, I believe that the application of the thoughts herein are also suited to the subject generally)

    A debate has raged lately concerning the disposition of the tax overcharge currently burning a hole in Washington’s pockets. The battle is characterized by most observers as one between conservative Republicans, moderate Republicans, and Democrats. One would suppose that the two nominally Republican groups are offering variations of the same theme, emanating from the same basic philosophical camp, but sadly, that would be wrong. The truth is that the moderate Republicans stand squarely in the Democrat’s socialist camp, backing the same unconstitutional policies, justified with the same tired claims of fairness, compassion, etc...

    These so-called ‘Republican Moderates’ reveal their true colors as redistributionists in their advocacy of "targeted tax cuts", rather than simply returning the overcharge to the tax payers whose money it is. This faction purports to find a middle ground between an outright, across-the-board tax cut and outright increased spending by proposing a tax policy whose name attempts to conceal that it is indistinguishable in every respect from the dispensing of subsidies, a practice which more openly bears the stigma of impropriety in today’s political debates. Thus, what is presented as a third way is a false choice, and is really just another repackaging of Washington’s favorite pastime.

    Specifically, to provide a lower tax burden for selected and approved behaviors or conditions, (as is proposed under a "targeted tax cut" plan), differs from being sent a check from Uncle Sam for the same behaviors or condition in only one respect: what the associated paperwork is called. Either way, if you qualify as an approved beneficiary you’ll get a pot of money that your neighbor won’t. Clearly, a targeted tax cut is just welfare, a special interest payoff, or a backdoor spending increase. It is not anything remotely identifiable as a tax cut at all.

    Even those benign modifications in the code such as the elimination of the marriage penalty don’t constitute cuts: they are simply the remediation of the inequities attendant upon the last round of "targeted tax cuts". If such proposed remediations absorbed the whole amount of the overcharge, an argument could be made for stopping there, but this is not the case. There is plenty of room left for an across-the-board rate cut.

    But, say these "middle road" voices, a marginal rate cut inordinately benefits the rich, while doing less, or nothing, for others. Nonsense. It must be remembered that rate issues apply only to net tax payers. They do not concern Earned Income Credit recipients, welfare beneficiaries, or any other net tax consumers. An adjustment in the rates to address the fact that those paying the bills are being overcharged does not create an obligation for a larger handout to recipients of charity. If that were the case, then it would follow plainly that welfare and other subsidies should all be cut proportionately whenever taxes are increased. I somehow have missed the clamor for this one?!

    The question of the fairness of the distribution of benefit can be judged simply by whether the percentage of reduction is the same for all net tax payers. It is not germane that the marginal rate reduction may result in a ratepayer at the top rate realizing a higher dollar savings than one at a lower rate. Top marginal rate payers are already shouldering a burden far out of proportion to their numbers, while placing no greater demand on government services than a non tax payer.

    Actually, the average top rate payer uses much less government than lower income tax payers and non tax payers alike. Relative to their numbers, top rate payers use fewer social services, police and prison resources, public health resources, etc.. By any measure of fairness, the well-to-do among us should be taxed at a lower rate than anyone, since they pay their own way to a greater degree than anyone. But, of course, they’ve got the money, so that’s where the government does it’s heaviest plundering. Say, doesn’t that make them a victim group deserving special protection? Maybe they should get a targeted tax cut.

    Every American knows in his or her heart that our system of government abhors the selective and targeted distribution of public resources, though this practice has become so pervasive in the past couple of generations that it has been legitimized by habit, and the platitudes defending it have been drilled into the heads of the general public by schools, the popular culture, and the media.

    The socialist prescription of "From each according to his means, to each according to his needs" is now the status quo, and those who seek to point out that, of necessity, such a dynamic enslaves those with more means to the interests of their fellows are demonized as "compassionless", or "mean-spirited", or "unfair". Like the courtiers in the Emperor’s New Clothes who were fooled into thinking that the reason they could not see what they were told was there, (but was not), was because they were not fit for their offices-- and so praised the lie to avoid being revealed as unfit, those with an instinctive understanding of the fundamental unfairness of progressive, targeted taxation have been kept quiet by fear of being thought insufficiently worshipful of the doctrine of "The Social Contract", and other mythologies.

    Happily, more and more now, the American instinct for true fairness is awakening, leading in 1994 to the embracing of the Contract with America and its’ promise to rein in the prostitutional selling of benefits to favored and supportive groups. Unfortunately for the Republican party, it’s moderate wing has not gotten the message.

    Any thoughtful observer knows that the startling setback in GOP ambitions in the ’98 election resulted from the leadership’s caving in to Democratic whining about compromise and acceding to a budget supporting business-as-usual redistribution of resources in the form of welfare, subsidies, and "targeted tax cuts". Seeing such gutless and unprincipled behavior, the GOP’s base stayed home on election day rather than casting a vote for Democrats Lite. Too bad they hadn’t heard of the Libertarian party.

 

    Of course, there are those who say that any tax cut is better than none, and even the deceptively titled "targeted tax cuts" do reduce the tax burden, if only for a limited number of tax payers. Unfortunately, while this is true, buying into this "half a loaf is better than none" proposition perpetuates and further enshrines the fraud of the Third Way. Let’s have true tax reduction, by cutting the marginal rate dramatically, and even out inequities like the marriage penalty at the same time.. Let’s target every tax payer for an equal cut. What could be more fair than that?

 

Peter E. Hendrickson