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THE MYTH OF TAX REFORM

Last October we recognized the surging popularity of the term tax reform. The terms current stature with the political class does provide for some inroads for the FairTax but we should be aware right away that we do not have the same goals in mind. Because as we have covered before and as is readily noticeable, reform goes nowhere near far enough to mend this broken system. The FairTax can be more accurately defined as tax replacement rather than tax reform. One reason is because Title 1 of the bill repeals the entirety of our current tax code. It does not merely repeal some loopholes or sunset certain clauses. It outright repeals the current code. More importantly, it operates without the 16th Amendment which is the most damaging act in our history connected to private property. The FairTax is far removed from our current tax code not just in its execution but in its ideology. Our tax code as it stands operates with the assumption that everything you earn belongs to the government first. Before we get our paychecks we can see that someone else was there before us to denote the difference between our gross and net pay. Our income under this system is essentially the remainder we are allowed to keep after those in government have taken what they have deemed necessary. The scary part about this system is that there is no limit as to what they are allowed to take and we are reaching a point where a $16 trillion debt is going to have to be taken very seriously. That leaves our leaders to options on how to handle such a growing mess; they can cut spending, which has not happened since we are running over one trillion dollar deficits without blinking an eye. Or they can raise taxes. Which seems to be the preferred method for many in Washington since they can spin that. And woven throughout all of these historic events are the politicians that still promise tax reform. Far too often that reform is merely the changing of the rates and a settling back into old talking points that etched their way into the public lexicon decades ago. Sometimes, the proposals are some steps in the right direction but languish on their own without answering many of the questions surrounding tax changes. Instead of wasting time zeroing out the death tax only to have it resurrect in few years’ time, repeal it. Instead of arguing over the injustice of the marriage penalty, repeal it. Instead of waving goodbye to the jobs as they leave American shores, repeal the highest corporate tax rate in the world. Each of these tax problems would require months of political wrangling to fix and would most likely culminate in a watered down and temporary solution. Use the Bush tax cuts for an example. It required quite a bit of political capital to pass in the first place and because of partisan opposition they could never be made permanent. In 2009 the cuts were to sunset themselves and the latter part of the year, in a lame duck session, a full Democrat House and Senate passed a two year extension and it was signed by a Democrat President who ran against them just a year before. Now, after all of that discussion, debate, and time wasted over those same tax rates, that have remained unchanged for more than a decade, we will debate and harangue over them again after the 2012 election. We have wasted precious time arguing over the same tax rates even though both parties have passed them into law. In the meantime, both parties have been promising tax reform. You can find tax reform listed on most congressional websites accompanied by pledges to tackle the issue at an undetermined date set in the near but not too near future. Such promises have become a perennial fixture in the political landscape. Reform has shown to be nonexistent or temporary and hardly satisfying, it is time for tax replacement.

The last time one could argue that we had real and substantial tax reform could be 1986. All of the hard fought changes made nearly twenty years ago have been systematically replaced. The code was whittled down to two different rates and now has ballooned into six. Loopholes that were removed but now we stare down a document of over 70,000 pages long. There has been no erosion of the government’s ability to tax and the scope of that ability has only grown, notably with the addition of the Affordable Care Act. We see that reform will ultimately only bring us more of the same, our leaders foolishly spend their time crafting these majestic castles enshrining the ideas they believe in, forgetting that they build with the shifting sands on the shore and ignoring the incoming tide. Our best efforts at reform eventually wash away into the seas of time, forgotten to most, with our energies misspent and wasted. In Washington it seems easier to win battles that you eventually lose. And these are the victories shown to us when they return to run for reelection. They come home and expect us to be proud that they have passed H.R. 6169 which is a meaningless statement on what Congress thinks tax reform should include. Since one congress cannot hold another subsequent congress to the rules that it passes, H.R. 6169 is a meaningless gesture that acts as a smokescreen to voters under the guise of tax reform. We have had nothing but words in regard to tax reform for the past twenty years and now we desire action.

Even the most extreme method of tax reform, the flat tax, is nothing but a reset button on the process that led us here. We have covered a flat tax extensively before and there is no need to reiterate that it is nothing more than a Band-Aid placed ineffectively over a gaping wound. The flat tax, H.R. 6169, and the broken promises of the past twenty years all have one thing in common. They all try to tweak the current tax structure. By now most people have realized that it is this very structure that is the problem. The IRS has removed any right we had toward private property; it has limited our speech and our free exercise of religion, and shows no sign of arresting its own growth of power. Tax reform tries to work within this framework hoping that history deigns not to repeat itself this time. Tax reform will bring us more of the same on a temporary scale. For nearly 100 years our tax code has grown and no amount of tinkering will heal the harm that has occurred. It is time for tax replacement. To throw out this antiquated notion that government is deserving of the first fruits of our labor. To throw out this bloated government-centered bureaucracy for something based on the workings of a free market economy and a liberated people. It is time to repeal this oppressive system and put the government back to work for the people instead of the other way around. Do not buy the promises of tax reform, there is no such thing. Using history as a guide, there will be no tax revolution without your effort and aid. So if you would like to change the future, all you have to do is act.

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