Weekly Opinion Editorial
TAX AND
SPEND DOESN’T WORK!
by Steve Fair
There is a consensus
among economists that the best income tax system is one that strikes a balance
between economic efficiency and fairness. An efficient tax system is one that
does the least to hurt worker production, provide incentive and is fair. Unfortunately, there is great disagreement as
to which plan best meets this criterion, but it’s for certain the current
progressive income tax plan in America
is neither efficient nor fair.
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Here are five accepted systems of taxation among economists:*****
First, there is the ‘per-capita,’ or “head” tax. This tax system requires each person to pay their per-capita fair share of the costs of government. This is universally accepted as the most efficient and fair tax system because everyone pays the same for the same benefit derived from government. There are no freeloaders- everyone has to pay their own way or have someone pay it for them. It’s like a toll on a toll road- every car pays the same because they all derive the same benefit from using the road.
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Secondly, there is the “flat” tax, which taxes each dollar of income at a single rate of percentage. This is levied on all earned income from the first dollar and the system does not have any deductions or credits. Herman Cain’s 9/9/9 plan is an example of a flat tax.
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Third, there is the ‘digressive’ tax, which is a proportionate tax only on income above a certain threshold. In other words, a portion of your income is exempt and you pay a percentage- either flat or progressive- on the income above that.
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Fourth, there is the national sales tax or consumption tax. Under this plan, every person living in the United States would pay a sales tax on purchases of new goods and services, excluding necessities. Currently sixty one members of Congress, including Senator Tom Coburn, support the national sales tax.
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Fifth, there is America’s current system- the progressive tax, which taxes incremental income at higher marginal rates as income rises, resulting in an increase in taxes as a percentage of income as income increases. In other words, the more a person earns, the higher the percentage of income tax they pay.
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Advocates of the progressive income tax system say the system is
fair because people with higher incomes have more to lose so they should
pay disproportionately more for the protections and services afforded them by
government. They also believe that
because taxes are a burden on society, everyone should share equally in that
‘burden.’ Since the more money you make
means you likely don’t experience as much financial difficulty as your lower
income neighbors, these folks believe higher-income people should pay enough
more in taxes to equalize their ‘burden’ or sacrifice.
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President Obama has proposed a plan that would increase taxes on American
families with taxable incomes of more than $250,000 a year. According to the U.S. Census Bureau, that is
about 4 million households. Obama’s
proposal of hiking the income tax rate on the rich plays well at a campaign
stop, the crowd roars, probably because most in the audience pay little or no
federal income tax. Over 50% of Americans do not pay any federal
income tax! In fact the federal personal
income tax provides refundable tax credits like Earned Income Tax Credit and
the Child Tax Credit, which can reduce or eliminate personal income tax
liability and result in ‘negative
personal income tax liability.’ That
means many people get a refund check from the IRS when they haven’t paid a dime
in federal income tax.*****
With America’s national debt now over 16 trillion($51,000 per citizen) and Congress and the President unwilling to cut any federal spending program, income tax increases are his primary solution to the crisis.
What the President fails to mention is that raising taxes on the rich will not solve our debt crisis. According to the Joint Committee on Taxation estimates this new tax would yield between $4 billion and $5 billion a year, so even if we collect the Buffett tax for the next 250 years, it would not cover the federal deficit in 2011.
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America needs a radical overhaul of our tax system. We should implement either a flat tax or a consumption tax. The current system is broken. It’s been proven time and time again- we cannot tax and spend ourselves into prosperity.