Taxation

Social Class Journal 

     The best government, in my view, is the one which taxes least. Or at least imposes the fewest taxes possible while still performing the constitutional duties. Ever since the early days of our republic, the size of the federal government and the scope of the issues in which it meddles has increased dramatically. While I believe that the federal government has a prominent role to play in protecting the people’s rights, I believe that the federal government has a smaller role to play in the economic issues facing individuals. The new deal dramatically increased the powers of the federal government, a power grab from which the country has not recovered. Among these economic issues are the redistribution of income and wealth. If the government was to pay for just national defense and other basic functions such as courts, emergency relief funding, and other basic entities which enforce simple regulations, the spending required would be much less than what is spent today. I believe that where we go wrong when this country tries to redistribute wealth and income, we must impose heavy tax burdens on our citizens, and that is unacceptable. The spending required for redistributing wealth and income is financed by excessive taxation and deficit spending, both of which hurt the economy and the country as a whole. I believe that the government must stop the redistribution of wealth, and therefore, the levels of taxation required to sustain the government’s essential and proper functions will be significantly less than the levels of taxation today. It is with this in mind that I will address the fourth topic in the assignment, the issue of taxation as a whole. 

     Contrary to the belief held by the left and the president that the “wealthiest Americans should pay their fair share”, the tax system in this country punishes success and severely places the tax burden on the rich. According to the CBO, in 2008 the top 1% of earners payed 38.02% of all federal income taxes, while the top 10% payed 69.94%. Contrast that with 1980, when the numbers were 19.05% and 49.28%, respectively. I don’t know of anybody who said that the tax burden then was unfairly burdening the poor then, but all of a sudden, the top earners aren’t paying their fair share? This is surely political rhetoric. Our tax system is already very progressive, and in my view, it does not need to be more so. I feel that if the poor do not pay anything (the CBO reports that the bottom 47% of earners payed negative net federal income taxes in 2009), they will not appreciate their welfare checks and they will feel entitled to the checks, instead of realizing that the money they receive in assistance was actually earned and not pulled out of uncle Sam’s knickers. I believe that the math should work out so that if any income bracket earns X% of the income, they should pay X% of the taxes. A welfare state cannot survive if the levels of taxation are lowered, and it is fully my intent to eliminate the welfare state. Although the Center for American Progress states, correctly, that growth during the 1950s was more than 4% annually and taxes were high, the real reason is not high taxes on the wealthy, as implied. The real reason for economic growth during the post war era was the growth in manufacturing due to the increasingly technologically advanced world and the move to the suburbs. The reason that the United States benefitted the most from this was because Europe and the rest of the world was in ruins after the War, and the United States had all of the necessary infrastructure in place to become the primary manufacturer of goods for the rest of the world. The CAP is also misleading, because the actual rate of taxation for the top 400 earners in 1955 was 51.2%, not the 92% they would have preferred. Also, according to taxpolicycenter.org and the OMB, the total revenue for the federal government as a percent of GDP in 1955 was 16.5%, while in 2006 it was 18.2%, indicating that the federal government took less away from the economy in the 50’s than today. Combine that extra private capital with no competition from the outside world and with today’s ease of completing transactions through the internet, and most economists would agree that that would result in very high growth. 

     In my assessment, fair means that each individual pays the same percentage of his adjusted gross income in income taxes to the federal government. Of course, this differs from the definition of fair by Liberals, who have somehow determined that fair means the higher earners must pay almost the entirety of government revenues, while the lower income earners must become dependent on them. According to the Cato institute, income inequality has not increased due to the changes in the rules regulating what is reported as income. Therefore, the solutions and changes for our income tax structure should not try to make everybody earn the same amount, but they should allow for everybody to pay their real fair share (not the left wing fair share). The income tax should be levied in a manner as simple as possible:

• Elimination of all existing personal income tax structure
• Elimination of the AMT
• Elimination of the capital gains tax and estate tax
• 17.5% income tax after healthcare expenses (including health savings accounts), dependent deductions, mortgage interest deductions, retirement account deductions, education saving accounts, and basic food deductions
• A “Buffett rule” allowing optional donations to deficit reduction. 

     The solution is not to make more loopholes that divert energy and time from productive uses into finding innovative ways to reduce taxes, but to simplify the system and make it permanent so that everybody wins. In this system, the rich will still pay more as a percentage of their income. However, in my view, this system follows the 14th amendment, something that the progressive tax system does not. It also does not allow for the government to collect too much revenue and then distribute it among the people. This prevents too much dependance on the government for welfare, while allowing those truly down on their luck to have a social safety net. This is accomplished by eliminating the government subsidies of middle income workers, something that the Affordable Care Act expands by allowing a family making nearly $45,000 eligible for medicaid. 

     In summation, the government has grown too big, and is financed by too much taxation and deficit spending. If spending were lowered, the tax system simplified and rates reduced, and the mentality that government is the only solution to economic woes eliminated, the country would be much better off.