A flat tax rate on all income regardless of source will shift the discussion to spending and end the politics of envy
There is a legend that after being knocked around early in his career, Hall of Famer Bill Russell was advised by storied basketball coach Red Auerbach to throw an elbow in a nationally televised game to send a message to his adversaries.
President Obama has thrown the Republican Party off its game. House Republicans passed the first tax increase in the history of Republican controlled Congresses. Rather than respond with substantial sweeping proposals to cut spending, House Republicans passed a “baby step”, attempting to “force” the Senate to pass its first budget in four years, a measure Democrat Senate leader Chuck Schumer gleefully promised would include further tax increases and new spending proposals. When President Obama declared in his inaugural address that “we do not believe that in this country freedom is reserved for the lucky, or happiness for the few”, he signalled that he continues to view class struggle as the raison d’etre of his administration.
If the Republican Party does not want to be the doormat of President Obama’s second term, they need to throw a metaphorical elbow and stand up to the President. While liberals have suggested President Obama’s mission should be the destruction of the Republican Party, the goal of Republicans should be the elimination of class envy and economic division from our political discourse. Without the ability to fan the flames of class envy and economic division, Democrats will be forced to stoke the embers of a less popular liberal social agenda. By embracing a flat tax regardless of whether Democrats would endorse such a measure, Republicans will signal they no longer wish to play politics by rules set by liberal Democrats.
The economic virtues of the flat tax are well established. Its political virtues are often ignored. The political power of the flat tax is often why Democrats fight it so hard. Political outsider Herman Cain vaulted to the lead in the Republican presidential primary process based on the power of his flat tax proposal. So powerful is the idea that every Republican presidential candidate in 2012 (except the eventual nominee) endorsed a significant flattening of income tax rates and simplifying the tax code. Republican House Budget Chairman Paul Ryan endorses a significant flattening of income tax rates in his Path to Prosperity. While these proposals are a step in the right direction, endorsing a flat income tax rate no matter the source of the income will allow Republicans to claim the mantle of ending the Marxist politics of class envy and economic division.
For years, the mother’s milk of Democrat politics has been to fan the flames of class envy and economic division. In President Obama, Democrats have an ideologue who is more successful at playing this game than any of his predecessors. Americans collecting disability insurance and food stamps are at record levels. Nearly 1 in 6 Americans live in poverty. When Mitt Romney talks about the 47% of Americans who receive government benefits, Americans who receive these benefits worry that Republicans plan to cut their lifeline. Talk of growth and opportunity becomes an abstraction because nearly half of our fellow citizens do not pay our country’s bills. With the growth of public debt skyrocketing to unprecedented levels, conservatives appreciate this course is unsustainable.
Despite such stark economic conditions, Republicans face a political problem. With a record number of Americans having left the workforce and relying on public benefits, President Obama has expanded the base of reliably Democrat voters. Since most of these voters do not pay for the benefits they receive, they have little incentive to change the system.
Republicans face an additional political problem. Democrats have successfully mocked Republican proposals to cut taxes in order to spur economic growth by equating them with eating chicken soup when you feel ill. Even if Mitt Romney had endorsed a flat tax proposal similar to the one suggested by his running mate, Democrats would have continued to fan the flames of class envy and economic division because people who earn capital gains and dividends pay taxes at a preferential rate.
Consequently, if Republicans want to stop being characterized as the party of “the rich” and become the party of “the country”, they need to endorse a flat income tax on all income regardless of source so everyone has equal “skin in the game”. Supporters of President Obama were shocked and appalled when their payroll tax withholding rose as a consequence of the recent ‘fiscal cliff’ law. Perhaps they would have been even more outraged had they learned that the tax increase President Obama’s auto-pen signed into law was used to subsidize tax breaks for Hollywood, NASCAR, Goldman Sachs and Puerto Rican rum distillers to name a few. This is one reason why Democrat pollster Pat Caddell suggests 3/4 of Americans believe their country no longer operates by the consent of the governed. Not only would Republicans be rewarded politically for supporting a ‘we are all in this together approach’ to tax policy, but a flat tax rate would help shift the focus of national debate from taxes to spending.
Republican presidential candidates were chastised for their unwillingness to support a 10:1 ratio of spending cuts to tax increases. Yet, Congress passed a law that arguably cut taxes and increased spending by an inverse 1:10 ratio. If everyone actually paid income tax much less at the same rate, voters’ interest in how Congress spends taxpayer money would increase dramatically. The political conversation would shift from income redistribution through a progressive income tax structure, government subsidies and spending programs to how much do we really want to spend and how much do we need to tax everyone to do it.
President Obama will raise a quarter of a trillion dollars in new taxes in 2013. Each of these new taxes affects a different subset of taxpayers. As a result, President Obama has been able to set taxpayers, Americans, against one another. It is an Alinsky-style strategy of divide and conquer. Unfortunately, it has worked! Republicans need to fight back and propose a system for funding our shared obligations that unites Americans and respects our traditions. Otherwise, who knows where America will be in 2016.
— FreedomWorks (@FreedomWorks) January 29, 2013
Taxes hikes are a distraction. It is all about spending.
Barack Obama is a master magician. The great ones keep your attention focused on their right hand while they pick your pocket with their left. For a lawyer who voluntarily surrendered his law license, Barack Obama has proven an exceptional ability to frame the public debate.
When presenting the administration’s “fiscal cliff” proposal to Congress, Treasury Secretary Geithner asked for three things; taxes, spending and executive authority to unilaterally raise the debt limit. In reply, House GOP “Leadership” acquiesced agreeing to cap deductions including the mortgage interest deduction effectively raising taxes. Barack Obama proposes to raise taxes to cover eight days of government spending. The Republicans countered with four. Both parties claim to be raising “revenue” and not levying taxes.
House “Leadership” claims to promote fiscal restraint while removing fiscal hawks from key leadership positions. The Democrat Senate does not pass a budget for three years while quietly incorporating the 2009 Obama “stimulus” into the spending baseline thereby enacting a permanent stimulus. By claiming that “it’s time to rip the Band-Aid off and reach a deal” or “it won’t kill the country if we raise taxes a little bit on millionaires,” Republicans are validating the virtue of these new spending levels and relinquishing their mantle as the party of low taxes and limited government.
While some have suggested Obama’s objective is to “kill” the Republican Party by forcing it to relinquish its core principles, the “tell” to Obama’s principal goal is Treasury Secretary Geithner’s proposal to “lift the debt limit to infinity.” Obama understands the only leverage fiscal conservatives have at forcing any measure of spending restraint or entitlement reform is through debt limit negotiations. Obama has not presented any spending cuts during “fiscal cliff” “negotiations” because they are not in his political interest. If Republicans agree to raise taxes, Obama forces them to go back on their pledge and achieves a political “win”. If Republicans hold firm on their principles, Obama gets massive tax hikes on everyone to pay for increased spending. Obama is buying ad time to try and force the Republicans’ hands, something conservative talk show host Mark Levin suggested Republicans do to explain the virtue of cutting spending and not raising taxes.
The only way Republicans regain the upper hand is to hold firm to their principals, articulate their position and exert their leverage at the upcoming debt limit negotiations. Capitulation will hurt the country as Obama has demonstrated an unwillingness to cut spending and proposed tax hikes will cover little current spending. Moreover, members who capitulate will pay a heavy political price as they will force conservatives into open revolt.
— FreedomWorks (@FreedomWorks) December 4, 2012
Turn on cable news and you hear Democrats and an ever increasing chorus of Republicans cheer about our need to raise “revenue”. Revenue usually refers to income or earnings, the profit or proceeds from the sale of good or services or one’s labor. It does not often refer to taxes or levies. Yet there go the politicians claiming their entitlement to an ever increasing slice of the proceeds of our work as their reward. Language aside, it seems instructive to ask, what do they really need the money for? Maybe we really do need to pony up for the good of the country. Maybe all we need is a few of those “rich” fellas to kick in a little more.
It turns out that “one time” ‘we have do this since we face the worst economic crisis since the great depression’ “stimulus” is the new federal baseline. In other words, our government has been spending the equivalent of a trillion dollar “stimulus” every year since Barack Obama took office. While it is no surprise our government has been running trillion+ dollar deficits year after year after year, by endorsing the idea that our government needs to collect more “revenue” to pay for this increased spending, politicians are endorsing the belief that we need to continue spending at this increased rate!
Some Republican politicians have suggested that “it’s time to rip the Band-Aid off and reach a deal.” Other Republican pundits have decried that it “won’t kill the country if we raise taxes a little bit on millionaires.” In fact, raising taxes on the “rich” as Obama has suggested would fund the federal government for a grand total of 8 days at current spending levels. While raising taxes on the “rich” may not “kill the country,” it will not help it much either. What it might do however, is “kill” the Republican Party which will lose its mantle as the party of low taxes and limited government. Further, it will immunize President Obama and Congressional Democrats from blame when the 8 days of new government funding does little to balance the budget or improve the economy.
Though promising voters they would not vote to raise their taxes, some Republican politicians have suggested “the world has changed” from the time they signed their pledge. Yet, some have remarked that “if politicians won’t keep their word when they sign their names, what use is what they say when they don’t?” The pledge is not a promise politicians made to some “purist” who runs an advocacy group, the pledge is a promise politicians made to the constituents who elected them. That is the fidelity that is being broken when politicians go back on their word.
Where can we begin making serious spending cuts? I challenge GOP lawmakers to read the House Republican Study Committee’s Spending Reduction Act of 2011. It lays out $2.5 trillion in cuts to federal programs most taxpayers have never heard of. This is without even discussing cuts to so-called entitlement programs which conservatives understand need to be reformed.
Rather than increase income tax rates, some Republicans have proposed curtailing deductions on mortgage interest, state and local taxes, and charitable contributions. Ignoring the semantics that eliminating a deduction on which a taxpayer relies is the functional equivalent of raising his income tax rate, decreasing the deduction taxpayers are allowed for mortgage interest will further depress housing prices in an already depressed housing market. Reducing the ability of taxpayers to deduct state and local taxes will amount to double taxation as some of those taxes are taxes on income. Reducing or eliminating the deduction for charitable contributions will result in considerably less holiday cheer for many charitable institutions.
Throughout the year, Tea Partiers traveled to Wisconsin to help a governor survive a recall election in a state that they do not live in. They traveled to Texas in the sweltering summer sun helping to ensure we “extremists” had representation in DC. Many more traveled to Ohio and Virginia because we appreciate that all elections are important as the votes of every politician effect us all. We know who is up for re-election in two years. We are watching and we are coming!
In the wake of being pummeled by ads depicting him as a heartless robber baron who leaves cancer-stricken women to die, Mitt Romney unveiled his VP selection on a Saturday morning at 9am on the final weekend of the Olympic Games. This was not only an effort to stem the tide of negative news coverage, but also an effort to allay conservative fears reignited by remarks made by his press secretary defending Romneycare. Lest anyone forget, in answer to an ad accusing Mitt Romney of killing a cancer-stricken woman several years after she left her job at a Bain Capital owned plant, Mitt Romney’s press secretary stated,
“To that point, if people had been in Massachusetts, under Governor Romney’s health care plan, they would have had health care.”
In other words according to Mitt Romney’s chief spokesperson just last week, if this woman had been living under socialized medicine in Massachusetts, she would have been fine. It is only because she lived in one of the 49 states without socialized medicine that she dropped dead!
In an effort to allay some of those conservative fears, Mitt Romney nominated House Budget Committee Chairman Paul Ryan as his running mate. As the author of the House Budget Plan, Paul Ryan is the face of Republican efforts to reform entitlement programs and create a more growth oriented economic environment. Mind you, the House Budget Plan does not endorse the Cut, Cap and Balance approach promoted by the House Republican Study Committee. In fact, the House Budget Plan does not endorse a balanced budget amendment at all preferring to balance the federal budget slowly over time, over the next 28 years. That aside, by nominating Paul Ryan, Mitt Romney demonstrated he intends to make reforming entitlements and promoting economic growth the centerpiece of his fall campaign.
In picking Paul Ryan, Mitt Romney has overlooked one key area of disagreement between the two, tax policy. Mitt Romney’s tax plan favors an across the board rate cut maintaining the “progressivity” of the Internal Revenue Code, Mitt Romney’s word and a funny one for someone seeking to convince Republican voters of his conservative bona fides. The House Budget Plan by contrast, favors a flattening of the Internal Revenue Code to two individual rates and a significant tax simplification effort. Mitt Romney favors no such effort with the exception of a willingness to phase out or eliminate deductions for mortgage interest and state and local taxes for taxpayers in the upper income brackets. The problem with the Romney approach is that he does not favor a rate reduction that will equal or exceed the phase-out thus INCREASING the net tax liability of small business owners in the upper income brackets that the ENTIRE GOP Congressional caucus pledged to protect.
Before Mitt Romney announced his VP pick, President Obama launched a character assassination calling Mitt Romney a ‘Reverse Robin Hood,’ stealing from the poor to give tax breaks to the rich. Ignoring the Marxist assumption that it is “stealing” money from low income earners and the federal government money if higher income earners are not taxed as heavily, Mitt Romney would do well to negate this political narrative by endorsing a flat tax that goes beyond the House Budget Committee proposal and is completely flat and independent of income source and taxpayer status. This proposal would tax all income at one rate, no matter the source or status of the taxpayer. It would be hard to argue Mitt Romney is a ‘Reverse Robin Hood’ in such an environment. If you make more, you pay more but you are not penalized for making more. Further, such a proposal would eliminate the negative economic incentives the Internal Revenue Code provides by directing economic activity to tax-advantaged enterprises. Also, such a proposal would eliminate the cudgel legislators wield over taxpayers for directing tax policy. In one instance, tax revenue rose by nearly 80% over a three year period in the early 2000’s when Russia implemented a flat tax. Not only is a flat tax good politics, it is good policy as well.
When the excitement of the VP announcement dies down and the political conventions are over, Mitt Romney will have to combat the same character assassinations that were haranguing him prior to the announcement. On July 31st in Texas, an insurgent grassroots Tea Party candidate shocked the political establishment beating a sitting Lt Governor for the Republican U.S. Senate nomination. The Lt Governor was a $20 million self-funded candidate in his fourteenth year of elected office. Yet in the span of two short months, Ted Cruz turned a 150,000 vote deficit after the initial primary into a 150,000 vote win after the runoff election representing a nearly 30% vote swing. He did it by embracing the grassroots, attending over forty Tea Party forums across the state and engaging voters at every opportunity. When the Lt Governor embraced his inner Obama accusing Ted Cruz of being responsible for the suicide of young man, a character assassination similar to the ones Mitt Romney is now facing, voters were in a position to give Ted Cruz the benefit of the doubt. This was not merely because of the ridiculousness of the charge, but also because voters knew Ted Cruz since he had made himself accessible to them. Republican strategists might be quick to dismiss the Cruz win as one of a conservative candidate in a conservative state. After all, the saying goes that Presidential elections are won and lost fighting for “moderate” votes. Yet according to a Yankee Institute survey, a whopping 70% of true blue Connecticut voters support cutting spending without raising taxes. In Wisconsin, Governor Scott Walker survived a recall vote with a 10% margin of victory after signing legislation ending forced unionization. Over 60% of Connecticut voters favor the abolition of teachers unions according to the same Yankee Institute survey.
Mitt Romney needs to leave his Boston Brahmin liberal elitism in Taxachusetts and embrace the conservative values that are held dear by Paul Ryan and represent the core of the Republican Party. Mitt Romney needs to propose policy initiatives that move him closer to Paul Ryan and not use his VP pick as conservative window dressing. Mitt Romney should not shun conservative voters. We are hard working Americans who, after the federal government has racked up $16 TRILLION in debt, have had enough. Win our hearts and minds and the rest will follow. Need proof? Ask Ted Cruz and Paul Ryan!
“I’m going to probably eliminate for high income people the second home mortgage deduction,” Romney said, adding that he would also likely eliminate deductions for state income and property taxes as well.
“By virtue of doing that, we’ll get the same tax revenue, but we’ll have lower rates,” Romney explained.
That would be true if state and local income and property taxes averaged less than the 7% Romney has pledged to lower federal income tax rates. By reducing federal income tax rates by no more than 7% and eliminating a deduction that is greater than 7%, Mitt Romney will effectively raise an individual’s net tax obligation.
OWS will be furious with CNN over this: Global Public Square (GPS) host Fareed Zakaria did a segment on tax reform Sunday in which he argued for a simpler, less progressive tax system. Yes, you heard that right: a CNN host reported that the US tax system is already more progressive than most European nations, i.e. weighing more heavily upon the richest ten percent. A better system, Zakaria argued, would be one in which less of the financial burden was placed on the top 10% and more on the other 90%.
“I am going to lower rates across the board for all Americans by 20%. And in order to limit any impact on the deficit, because I do not want to add to the deficit, and also in order to make sure we continue to have progressivity as we’ve had in the past in our code, I’m going to limit the deductions and exemptions particularly for high income folks. And by the way, I want to make sure you understand that, for middle income families, the deductibility of home mortgage interest and charitable contributions will continue. But for high income folks, we are going to cut back on that, so we make sure the top 1% pay their fair share or more.”
Earlier this week, White House economic adviser Gene Sperling announced his support for changes in the tax structure. “[W]e need a global minimum tax so that people have the assurance that nobody is escaping doing their fair share as part of a race to the bottom or having our tax code actually subsidized and facilitate people moving their funds to tax havens,” Sperling said at an official White House meeting. He even indicated that President Obama “supports” this change.
The amount of money the federal government takes out of the U.S. economy in taxes will increase by more than 30 percent between 2012 and 2014, according to the Budget and Economic Outlook published today by the CBO.
At the same time, according to CBO, the economy will remain sluggish, partly because of higher taxes.
“In particular, between 2012 and 2014, revenues in CBO’s baseline shoot up by more than 30 percent,” said CBO, “mostly because of the recent or scheduled expirations of tax provisions, such as those that lower income tax rates and limit the reach of the alternative minimum tax (AMT), and the imposition of new taxes, fees, and penalties that are scheduled to go into effect.”
The U.S. economy, CBO projects, will perform “below its potential” for another six years and unemployment will remain above 7 percent for another three.