Redstate

By CraigLinton Posted in Miscellanea — Comments (1) / Email this page » / Leave a comment »

The debate tonight between John Kerry and George W. Bush should be exciting. This will be the first time the two will have the opportunity to respond directly to voters concerning domestic issues. One issue that should come up is taxes. Our current tax code is a mess, according the Citizens Against Government Waste:

The Internal Revenue Code has 5.5 million words covering 17,000 pages.  As of June 2000, the U.S. Treasury had issued an additional 20,000 pages of regulations and clarifications.  The tax code is estimated to cost individuals and businesses more than $200 billion in 2003 in compliance costs.  Additionally, businesses will spend 3.4 billion man-hours doing their taxes, while 1.7 billion man-hours will be spent by individuals.  More than half of individual filers need assistance to prepare their taxes.

Q: Who is willing to mop up this mess?

Read on to find out.

A: Red-State-endorsed Jim "Hero of the Taxpayer" DeMint, that's who.

The liberal gang of South Carolina and Inez Tenenbaum would have you believe that Jim DeMint's 23% national sales tax proposal is just another mean-spirited right-wing ploy to tax the poor and benefit the rich. In fact, Tenenbaum has even accused Jim "Hero of the Taxpayer" DeMint of wanting to raise taxes! Nothing could be further from the truth.

Demint's 23% sales tax plan is just one (warning: .mpeg) of many that he's promoted in order to simplify our tax code.

In theory, a 23% sales tax is simple: instead of a tax on income, the federal government would tax consumption. Citizens would keep their entire paychecks. Taxes would be paid at the cash register, the way that state, county, and city taxes are currently collected.

In practice, the 23% sales tax is difficult to implement. Inevitably, businesses would try to avoid the tax by selling items "wholesale," the underground market for untaxed goods would grow, and government oversight would be needed to ensure the proper collection of the tax.

Even arch conservatives Dick Armey and Grover Norquist have questioned the plausibility of a national sales tax. In a 1995 Policy Review piece, Armey wrote, "Any sales tax will become a complex, pervasive, multi-rate, value-added tax. We will soon be living under a VAT -- possibly the most insidious tax scheme ever devised." Not exactly a ringing endorsement for the sales tax, even though Armey stumped for DeMint this week. Likewise, Norquist expressed much dissatisfaction for a national sales tax:

The sad truth is that by moving to a national sales tax, we do nothing to abolish the IRS or even permanently abolish or reduce the income tax. Instead, we put a new tax on the table while keeping the infrastructure and collection system for the old tax in place. This is why no sales-tax-for-income-tax swap has ever held for long. Not even repealing the 16th Amendment will do the slightest good. If the federal government stops taxing income, the states will start, creating their own mini-IRSs as needed.

...

There are many more technical arguments for a sales tax or VAT, all of which say that in theory a transactional consumption tax will increase savings, enhance exports, reduce the deficit or provide some such benefit. In fact, empirical evidence in study after study shows putative correlation of the sales tax with these desiderata simply does not hold in real experience, perhaps because the side effects of the sales tax are so severe. There is no benefit in savings, no benefit in exports, no benefit in deficit reduction not even a successful complete replacement of an income tax by a sales tax anywhere.

[Norquist, Grover G. "National Sales Tax Will Mean Big Government." Insight Magazine 11.6 (6 Feb. 1995): 20. Accessed on 8 Oct. 2004 via Factiva.]

Armey and Norquist have endorsed DeMint, despite their misgivings about the national sales tax issue. According to Norquist, "...I firmly believe that a national retail sales tax is infinitely superior to the Kerry/Tenenbaum plan of supporting the status quo."

So if a national sales tax is off the table, what's left? The simplification of the national tax code. Tenenbaum might incorrectly have you believe that the 23% sales tax proposal is the only tax reform plan up DeMint's sleeve. DeMint's platform, however, is about tax reform--and a 23% sales tax is just one idea of many.

South Carolina readers should remember a commercial in which DeMint leans against a tower of tax code volumes stacked nearly as tall as he is. (If not, there's a screen grab to the left. View the entire commercial: "Tax Code" [warning: .mpeg]) That would all be changed if the DeMint-sponsored TRAC Act were enacted. The TRAC Act would set up a commission similar to the way congress handled Base Realignment and Closure (BRAC). In Tax Foundation's September/October 2003 publication, DeMint outlined how TRAC would work:

Unlike previous tax reform bills that set deadlines for implementing a new tax code, TRAC is open-ended. It’s a process similar to BRAC (Base Realignment and Closure): Establish a commission with a mandate and authority to plan real tax reform within two years. Then the plan would be implemented immediately or over a period of years, depending on the commission’s recommendation. The final recommendation of the commission would be automatically introduced by the House Speaker and Senate Majority Leader, and those bills would be subject to special rules in both the House and Senate that ensure consideration within a reasonable time.

Rather than modifying the tax code in increments, the recommendations of the TRAC commission would be voted up or down. Thus, the problem of senators and representatives trying to squeak-in constituent exemptions would be minimized, if not excluded entirely.

Former House Majority Leader Dick Armey explained the benefits of this proposal in a recent op-ed in the Greenville News.

Commissions are helpful because they can put the national interest — the interest in an overall coherent policy — ahead of the myriad of parochial concerns that can dominate an issue in Washington. In extending the base closure commission concept to tax reform, Rep. DeMint is on to something — perhaps only an independent BRAC-style commission will be able to transcend the special interests currently holding the tax code hostage.

Inez Tenenbaum's one page platform is hardly a plan. The largest part of her plan is, "Stop Jim DeMint’s 23% National Sales Tax." That's not a plan; the 23% national sales tax has no momentum in the Senate. Her explanation of simplifying the tax code is all of two sentences long. She also wants to enact protectionist policies that give tax incentives (subsidies) to businesses that "reward them for employing their entire U.S. workforce on U.S. soil." (I think she means outsourcing. How else do you define "U.S. workforce" other than those who are on "U.S. soil"?)

The choice is clear this November: South Carolinians can either vote for an innovative tax reformer, Jim "Friend of the Taxpayer" DeMint, or Inez Tenenbaum.

If you do not live in South Carolina, you can still show your support for DeMint by investing your $x.02 in his campaign. Consider a donation to DeMint an investment in America's future.