April 22, 2002

ARE YOUR TAXES TOO LOW?

    "(The Republican) mandate to cut taxes, it’s complete. Taxes have been cut as much as is humanly, or inhumanly, possible."
                                                                            Margaret Carlson, CNN

You may be tired of thinking about and paying taxes after April 15th, but many in Washington think you’re not paying enough. In fact, the preposterous idea that Americans are undertaxed is accepted as truth by a significant number of the members of Congress. These members believe today’s taxpayers are perpetrating an injustice by not paying more taxes, and that most of the money you make presumptively belongs to the government. Since your money really belongs to the government, tax cuts represent a government "giveaway."

This mindset revealed itself last week during a vote on the House floor. At issue were the exceedingly modest tax cuts passed by Congress last year, which the Senate modified to expire in 10 years. The bill voted upon would remove the expiration date and make the cuts permanent (at least until Congress tries to raise taxes again). This simple measure was stridently opposed by almost 200 members, many of whom subjected us to lectures about the "irresponsibility" of not revisiting tax cuts often to make sure the government has plenty of money. These lawmakers (apparently) really believe taxes have been cut to the bone and government starved to its limits.

Nothing could be further from the truth. Federal spending is wildly out of control, as evidenced by an annual budget that doubled between 1990 and 2000. Congress will spend $2.3 trillion in 2003, an astounding 22% more than 1999. Federal taxes now consume more of the legitimate private economy (as a percentage of GDP) that at any other time in our nation’s history except WWII. The federal budget is full of billions in unconstitutional and wasteful pork, and no serious person can argue otherwise. Those who oppose tax cuts simply use populist arguments to mask their support for the special-interests that benefit from uncontrolled spending.

No tax debate in Congress would be complete without some members pointing out the terrible fact that some Americans make more money than others. The tired class warfare argument, namely that the rich somehow don’t pay their fair share, remains endlessly popular on the Hill- even though it is demonstrably false. IRS statistics show that the top 1% of earners pay a whopping 36% of federal income taxes, while the top 5% pay 55%! In fact, earners in the top half account for 96% of income tax revenues, while the bottom half pays only 4%. Surely Marx would approve of this tremendously progressive tax system, yet the media and the left continue to perpetuate the myth that wealthy Americans use an unfair tax system to enrich themselves.

What the collectivists in Washington always seem to forget is that wealthy Americans are not a static group, but rather a dynamic one- because we still have class mobility in our relatively capitalist society. In other words, some taxpayers in the bottom 50% intend to move into the upper 50%, where they quickly will be thrust into higher tax brackets and deemed "rich" by the IRS. In fact, a family needs only an income of about $53,000 to find themselves in the top 25% of all taxpayers. These upwardly mobile Americans, whom Congress ought to be encouraging, presumably won’t be too excited about tax hikes for the rich when they find themselves labeled as such and footing the bill for a spendthrift Congress.

An income tax would be wholly unnecessary if Congress restrained itself and spent your tax dollars only on legitimate constitutional functions like national defense. Remember, the federal government operated for more than 120 years without an income tax, using excise taxes to raise necessary revenues. Rather than squabbling about tiny changes in the existing tax code, Congress ought to be drastically reducing spending and scrapping the incomprehensible tax code altogether.