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William F. Buckley proposed a simple tax reform in 1973. The language barrier that separates people like Buckley from that odd species we call Congress prevented his thoughts from finding fertile soil. And in the 40 years between, the tax code has become only murkier and more dangerous.
“Our tax laws were,” Buckley wrote in Four Reforms: A Guide for the Seventies, “designed historically to raise revenue for the operations of government.” He continues:
Along the way the operations of government inflated in purpose and ambition, evolving from modest Jeffersonian instruments for effecting the safety of the state into the gargantuan instruments of the social perfectionists.
He points out that attempts to cure a social ill through tax code always and everywhere exacerbates the ill and sprouts new seedlings of destruction. For example, the ill-fated luxury tax of the 1990s, which intended to punish conspicuous consumers who spent their hard-earned dollars on boats, planes, and furs, ended up destroying several American industries and displacing tens of thousands of not-so-wealthy workers. The rich, meanwhile, could import luxury items from Latin America, Asia, and Europe, often cheaper than their American equivalent even before the luxury tax took effect.
Here’s a little history of how we got here, and a reiteration of Buckley’s modest proposal of 1973.
At the height Roosevelt’s New Deal, only about 3 million Americans paid any income tax at all. But World War II changed all that. To feed the war machine, Congress broadened the tax base to about 42 million Americans, most of whom viewed their new tax burden as a) worthwhile, b) reasonable, and c) temporary. Most Americans had one or more family members fighting in Europe or the Pacific, and paying a portion of their income to fund the war effort was something of an honor. At the time, there was but a single tax rate paid by all Americans, married or single.
When the war ended, some states created “community property” laws which stated that wives were entitled to half the husband’s income. This led to a change in the tax law which allowed men to deduct alimony payments, which led couples to divorce for the tax advantage, which created scandals as more couples lived openly in sin.
So Congress amended the law again to allow married couples to pay separate taxes which tended to drop them a few rungs on the tax ladder, reducing their overall tax rate. This caused overall government revenue to drop about the time General Marshall’s plan to rebuild Europe needed funding.
In 1951 then created the unmarried head-of-household allowing single working parents to pay taxes at a lower rate, as if they had a spouse who didn’t work. This perturbed the single taxpayers who wrote the Congressmen (they were almost all men then).
As Buckley points out, at this point it should have become clear to anyone that “to favor somebody is almost necessarily to discriminate against somebody else.”
The single taxpayer complaints led to more reforms in 1969. Now, single taxpayers could not pay more than 20 percent more than a married taxpayer in the same bracket. (Confused yet?) Now, dual-income households in which both husband and wife worked were furious that they were paying more taxes than single people in the same tax bracket. Congress responded, but now couples with children complained that they were paying the same amount as childless couples, discouraging family creation and giving the childless unfair economic advantage.
And on we go, until in the latest fiscal cliff tax cut/increase/pork festival, NASCAR owner get special tax advantage to compensate for their inability to turn right.
So the tax code is now heavier than health man can bench press, the IRS cannot explain what you should pay, and businesses spend as much on tax avoidance as they do on research and development.
It’s time to stop the madness.
While some believe the way to drum up broad support for change is to propose radical elimination of the income tax altogether, scientific investigations of political change reveal that people prefer incremental and evolutionary changes to revolutionary changes. Therefore, I won’t endorse the Fair Tax, even though I like it better than what Buckley proposed.
His proposal? A simple flat rate of 15% that applies to all income. No exemptions, no deductions, no brackets.
The flat tax should appeal to Warren Buffett and his ilk, because he and his secretary would pay the same damn rate for a change. The formula, which I’ve blogged about many times, is stupidly simply: what did you make? Multiply by .15. Send it in.
True, this would be a tax increase for many people. Sorry. We have a $16 trillion+ national debt to pay down. When some future president phones into Dave Ramsey to yell “We’re Debt Free!” we can look at reducing the rate.
The biggest social problem this proposal creates is the displacement of thousands of tax workers at H&R Block, Intuit, and the IRS.
I think we can deal with that, though.