Looking at America's Taxing Alternatives


It's time to wade into an issue which is being discussed loudly and hotly but with very little in the way of facts to help mediate the controversy. This question is the idea of America scrapping the progressive style of taxation and moving to the flat tax or some other system of national taxation. There are many reasons why these latest substitutes for the progressive tax are again being examined but, as I think you'll find, very little of that has to do with easing the burdens of a supposedly unfair ax system off the shoulders of the middle- and lower-classes. Let's examine the truth about each of the major alternatives being deliberated.

A flat tax demands payment to the government of a set percentage of very limited forms of income, say 10% of all earned income. The flat rate scheme offered by Steve Forbes in his presidential campaign and nearly all of the others put forth since have as their base, a taxation of all wages and salaries earned in America. This sounds rather fair until, upon closer examination, it is noted that very little of the income that the wealthiest Americans receive is in the form of wages or salaries. The STP options and planes and all of the other perks given in lieu are not considered wages or salary so would not be subject to the flat tax.

In fact, when Steve Forbes was asked what percentage of his estimated $150 million annual income derived from true wages and salary, he refused to answer. When asked what would stop him from taking all personal compensation in forms that cannot be deemed wages or salary, allowing him to pay nothing whatsoever in taxes, he again refused to answer. You can rest assured that all CEOs and any others who can negotiate their compensation packages will simply omit any taxable income and allow you to make up the difference.

Another form of national tax being kicked around is a Value Added Tax (commonly called a VAT), pretty much a national sales tax. Again, those with the least would pay the most. With a VAT system in place, you would pay the government a set percentage of the purchase price as a tax, again say 10% or so. That means that if you buy $100 worth of groceries, you'll pay Uncle Sam $10. If your weekly salary is $200, for instance, and you spend all of it for goods and services you are paying $20 a week in taxes or 10% of your income.

Now consider that your weekly income is $2,000. You buy food and clothes and the like and spend $1,000 a week doing so. You will pay the government $100 in taxes or just under 5% of your total income. The percentage gets nearly to zero by the time you get into America's wealthiest five percent.

Either way, flat tax or VAT, the rich pay a far, far smaller percentage of their income in taxes than do the middle- and lower-class taxpayers. Neither have even the appearance of fairness going for them.

The idea of the progressive income tax was meant to tax each American according to what they could afford to pay. It was also meant to assure that those who used government services the most would pay the most to support them. The military of a nation is not there to defend the poor but to defend the nation's wealth from outside invasion and internal rebellion. The nation's police are intended to protect the wealth and safety of its citizens from the criminal element but how much wealth and safety is there in Compton as opposed to Bel Air? The educational system is intended to educate the population, but who needs an educated population more than its corporations and businesses? Every other government system is intended primarily to benefit the wealthiest citizens, including Welfare, which may well have been intended to keep the poor docile and not robbing the rich for survival. We'll soon see how well it used to work.

Historically, nations levied their tax burdens on their poor because the wealthy owned the power to do so. Ninety years ago, the progressive income tax was devised to alleviate that burden and insure that all shared in the support of their nation, each according to their ability. Suddenly, the GOP wants to end that fairness by devising other, far less suitable schemes to spare their wealthy owners the burden of supporting their government.

I offer no argument against the fact that the current incarnation of the progressive income tax is badly flawed. The thousands of pages of tax laws are indefensible, at best, but necessary to hold all of the special interest exemptions and reductions currently allowed. As is usual, the Republicans prefer to destroy what we have in favor of a new system of their choosing which will move far, far away from even the appearance of fairness and towards the complete dependence on the middle- and lower-class for the tax revenues of America. Instead of another annihilation like "Welfare Reform", some very simple changes would bring the progressive tax back into the even handedness it should stand for. For instance, the removal of all special interest tax breaks, the return of a minimum tax for Corporate America, the simple act of demanding every American pay their fair share and quit whining about it would do wonders for our annual revenue.

We need to grow up and stop believing in the "trickle down" fairy tales and the flat tax lies. We have a system which would work if we could just keep corporate lobbyists and Congress away from it. You, as a voter, have to stop listening to the lies of those who have long since been bought and paid for and begin using the sense God gave you to find better ways for America to grow into her future.

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Copyright 12/24/97