What happened to Tax Reform?

This post was originally posted on Red Virginia:
During the Republican debate in Dearborn, Michigan on October 9th 2007, John McCain was asked if he thought that tax system was fair and this was his answer “Sure it’s fair. The bulk of the taxes are paid by wealthy people. Should we reform our tax code? Absolutely we should fix our tax code, and we should fix it immediately.” He has said in other statements that what he means is to make it more simple. So my questions is as the title says “What happened to Tax Reform?”

No, I am not talking about making it more simple. That is like saying let’s put it in larger font. You are doing something but you forgot the real problem. The real problem is the structure of the income tax. I assume that John McCain has been hearing that tax cuts are only for the wealthy too long that he is beginning to agree. Even though it is a problem that we need to create private businesses to just to pay taxes, that is like spilling milk and saying the problem is that the milk is wet. The problem is that you spilled it! We need to change how and why we are taxed now.

There are three kinds of taxes: progressive, regressive, and proportional.

What we currently have is a progressive system, where the more money you make the more taxes you pay. When it comes to economic incentives this discourages those to work hard. It is a reward system imagine you tell your kids that the more they clean their room the less you will pay them. Go to McDonald’s and tell them better the food the less you are going to pay.  How about something more simple. Tell the guy who works in your factory that if he makes 100 widgets he gets 20% of the profits, when he makes the next 100 he gets 10% of the profits, and when he makes the next 50 he gets 5% of the profits. Only the tax system could justify such incentives, through force.

In Karl Marx’s Communist Manifesto he said “In the most advanced countries the following will be pretty generally applicable: a heavy progressive or graduated income tax.” I personally would rather subscribe to Economist’s Gregory Mankiw’s view, “If policy makers’ primary goal is … economic prosperity for all, they should avoid focusing on the politics of envy.”

What is the purpose of a progressive tax? Most people say to raise money for the government but some how we did it for 137 years before that. The real purpose of a progressive tax is to redistribute income from the rich to the poor. Conservatives should be against this for this and the discouraging of work reason. When did someone have the right to take money from someone else who worked hard for it?

What do we need? That leaves regressive and proportional. Regressive is where the poor is taxed more and less as they get more rich. This would create an incentive for people to work harder and move their way up. Almost a reward system for working harder. If the numbers were low this would not be a bad idea, but no one would ever agree with it.

That leaves a proportional tax which is a tax that is uniform to everyone. This to me shows that your point of this tax is one thing and one thing only; to fund the government. This Conservatives should rally behind. It allows you to work as hard or a little as you want. It doesn’t penalize people who are on the margin. It’s purpose isn’t to expand social welfare programs.

Aren’t Conservatives against social welfare programs? Well maybe if the government income system wasn’t set up for these, we could get somewhere with reducing and eliminating them.

~Barry AUH2O

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Published in: on November 16, 2008 at 9:48 pm  Leave a Comment  
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