Opinion | Morgan Liddick: Tax reform debate hinges on principle
“The Republican plan … (slashes) taxes dramatically for the wealthy and increases the national debt by trillions of dollars.” — Senator Michael Bennet
“Lower taxes will mean bigger paychecks and result in Coloradans keeping more of their hard earned dollars. It’s time for Washington to get out of the way and let Americans spend their money how they want, not how Washington dictates.” — Senator Corey Gardner
And there, ladies and gentlemen, we have the argument about tax reform in a nutshell: Democrats appeal to class hatred, howling that the Republican proposal will give their amorphous bogeyman “the wealthy” boodles of money while impoverishing our grandchildren. Republicans speak instead of the freedom to keep for oneself more of the money one earns. Nothing could present a starker contrast.
Understand that Senator Bennet’s statement has about the relationship to truth that a sailboat has to Four O’ Clock Run at Breckenridge, and we have a complete picture. No, senator, the tax rate for the super-rich will probably drop by only 1.1 percent, to the 38.5 percent mentioned in the Senate’s version. The death tax will probably remain as is. As to the national debt, well… if you are so concerned about that, stop funneling so much money to the 66 percent of the federal budget that is “mandatory spending,” that is, payments to individuals on autopilot. That’s right: about two-thirds. If one wants to reduce federal spending, individuals receiving government checks must expect less. Period.
Now that the Senate has pretended to address tax reform with an essentially stand-pat proposal, the situation is more complex, and chances of any sort of tax reform are slim. This spells doom for the Republican party, since it signals failure to accomplish any of the objectives which they have promised their constituents for years: immigration reform, tax reform, health care reform. As such, failure removes any positive rationale to vote Republican in upcoming elections: They are incompetent to achieve anything they pledge.
Unfortunately for us all, their failure also reveals the rot at the heart of both our politics and our society. Senator Gardner is right: In tax reform, as in health care and on other questions involving economics and government policies, the conservative position is generally that the money one earns is one’s own; that taxation is confiscation — permissible for a narrow range of objectives but questionable when transferred to other individuals for their own use; and that the individual knows better than an army of bureaucrats the best uses of his (or her) income. But fewer and fewer of us really want that freedom. We prefer the soothing syrup of a faraway group making our decisions for us so we don’t have to worry. Such is the seedbed of tyranny.
Conservatives also know that government subsidies mask true costs, thereby destroying the efficient transmission of information through prices. Obamacare was a windfall for insurance companies, since it allowed them to increase premiums astronomically to address the actuarial problems caused by its mandates. Few cared, because for those in the individual marketplaces, subsidies covered most of the increases. But those who didn’t receive such largess were faced with reality: 50 to 200 percent increases annually. This is unsustainable, as most realize. Some Republicans cared enough to try a fix; Democrats were willing to watch the system fail, so they could argue for their real inamorata: single payer health care. And other Republicans, motivated perhaps by a perverse desire to hurt the president no matter the cost to their party, helped them.
Similarly with some provisions of the House and Senate tax proposals, particularly the elimination of deductions for state and local income taxes. Such taxes particularly affect citizens of high-tax states like California, New York and New Jersey; deductibility is a form of federal subsidy that masks the real cost of these confiscatory rates.
Cutting another social engineering giveaway, the home mortgage interest deduction, is also controversial — and telling. The House proposal caps mortgage deductibility at $500,000, which a few Republicans and all Democrats decry as “a new tax on the middle class.” But only 6 percent of homeowners have mortgages above that limit, seemingly making this a “tax cut for the rich” that Democrats willingly embrace to balk the Republican plan.
Thus the incipient collapse of tax reform. Something that could have been truly revolutionary and beneficial will either be reduced to a recapitulation of its 77,000-page, lobbyist-addled, business-killing, frustrating, inefficient, giveaway- and carveout-laden former self, or it will not be passed. What could have been a straightforward flat tax or at least a modified simple tax that recognized one’s money was one’s own, not Washington’s, will vanish in a cloud of the usual recrimination, wild accusations and fustian.
And the Republican party will take another step on the road to irrelevance.
Morgan Liddick writes a weekly column for the Summit Daily News.
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