After a few years in Congress everyone becomes a “shower adjuster.” You remember the shower adjusters. They were the folks sent out by President Jimmy Carter during the energy crisis of 1979.
To save energy President Carter turned down the temperature in the White House, donned a cardigan sweater and urged us all to do the same. And each morning when you started your shower the government shower adjuster showed up in your bathroom to adjust the shower knob so that your water temperature was just warm enough for you to shower in, but not too warm to waste heat.
Well, I made that last part up, but Congress is full of shower adjusters, both Republicans and Democrats, in the debate on taxes. They have different goals in mind, but both are convinced that they know exactly how to adjust the knobs on the Rube Goldberg machine that is the 75,000-page tax code. They promise to get a result that is just right to fund the government without crippling the economy’s ability to continue to produce those revenues.
The IRS code was first introduced in 1913 with a 27 page law accompanied by about 400 pages of illustrations and instructions. Today it is about 6,000 pages of code with 75,000 pages of regulations. The more complicated and confusing it gets the easier it is to turn a knob and pick winners and losers.
Democrats want the rich to pay more and the poor less. They believe that people who make huge incomes won’t miss the money and that government can spend it more wisely. Republicans believe that if the tax burden is too high people will change the way they earn and the government will get less.
The Tax Reform Act of 1986 reduced the number of tax rates from 15 to four, reduced the top rate from 50 percent to 28 percent, and shifted the burden from individuals to corporations. That lasted for four years.
President G. H. W. Bush signed a bill that added a new 33 percent rate and, for the first time, taxed Social Security payments on higher income retirees.
Three years later President Clinton added a new top rate at 39.4 percent and taxed more Social Security income.
And so it goes.
Within 20 years the 1986 Act had been amended 15,000 times. So long as politicians know how much you make and how you make it they can get the rest.
It has now been 30 years since the Reagan reform and Republicans in the House have another major overhaul ready to go. Among other things, they respond to President Trump’s concern about foreign imports by imposing a new sales tax on imports as well as a rebate of income taxes on items we export. We’ll hire real smart bureaucrats who will know just how much to turn this knob here clockwise and that one over there counterclockwise and everything will work out just fine. For the first time our federal government will have both an income tax and a sales tax. The sales tax will be the easiest to increase since it applies to foreign companies. In time foreign nations will be forced to retaliate against American companies.
And so it goes.
The Republicans in the Senate have reform in mind too. They think the sales tax knob is a dumb idea.
As sure as the night follows the day, the next Congress will know better how to work the knobs. They will amend the code. There will be different winners and different losers.
There is a way to end this picking of winners and losers. It is accomplished by getting rid of the IRS machine. Disrupt it. Blow it up.
The single most prominent disrupter in politics today is President Trump. He did not genuflect before the established order. They ridiculed him. They laughed at him. They lost. He owes nothing to them – or their institutions – including the tax code.
He wants to change the established order, and nothing will change the United States, and ultimately the world, more profoundly than totally eliminating the tax code and abolishing the IRS.
If we fund the government with a simple straightforward sales tax our government will not know what we do with our earnings, investments, contributions, gifts, healthcare, business costs, insurance, capital expenses, hiring practices or payrolls among other things. And, indeed, it’s none of the government’s business.
The FAIRtax (HB25) accomplishes all that and more. It will be the biggest force of disruption to the status quo since the passage of the income tax 104 years ago. And it fits neatly in President Trump’s wheelhouse.
Businesses do not have a mechanism for paying any of their bills other than price. They collect revenues from their customers and use it to pay their bills, including their tax bill. Eliminating business taxes reduces costs, drives down price and makes us more competitive in a global economy.
Additionally, eliminating the tax code eliminates the decisions made for tax reasons rather than economic reasons and also eliminates upwards of a trillion dollars each year in compliance costs creating even more downward pressure on prices.
With no income taxes or payroll taxes there will be a significant increase in take-home pay. That and lower prices will give the American consumer a huge increase in purchasing power.
Studies have concluded that the FAIRtax would cause an immediate 70 percent increase in capital spending creating increased productivity and jobs. A tighter job market means increased wages reversing three decades of wage stagnation.
Eliminating the tax on capital and labor would be the strongest magnet for manufacturing that we’ve seen in 100 years causing a huge increase in economic growth. One study undertaken 10 years ago concluded that the FAIRtax would yield an 8 percent increase in economic growth in the first year and will give us sustained economic growth necessary to save Social Security and Medicare.
And for good measure, eliminating the tax code eliminates the Johnson Amendment. Pastors will be able to preach without looking over their shoulders for the IRS.
Moving from taxing income to taxing consumption changes the paradigm from collecting revenue at the point of a gun to a truly voluntary system that puts the taxpayer totally in control.
In addition to being bold, this change is permanent. Future Congresses will no longer have the information or ability to change it. Selecting how people win or lose at the retail checkout will be too complicated and too obvious to even attempt.
I said earlier that nothing would change America, and the world, more than abolishing the IRS. Other nations will see their manufacturing base move to the United States and we will be so competitive in a global economy that other nations will be forced to copy us causing a new burst of freedom across the globe.
Not a bad legacy for the disrupter, President Trump.
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