Tuesday, April 14, 2009

Change We Could Believe in

When people don't pay income taxes they have little stake in the economic health of the nation and a lot of incentive to vote for whatever politicians will keep their tax at zero. In the U.S. approximately half of wage-earners pay no income tax at all, while ten percent of wage-earners account for 70% of tax revenue.

Students of government going all the way back to Plato have pointed out that no polity can sustain itself when people who don't pay taxes are able to vote to tax the wealthier citizens in order to provide them with the amenities of life. When the less wealthy have access to the public purse it won't be long until they clean it out, which is what we've done in this country.

Former White House Press Secretary Ari Fleischer compares the tax burden in the U.S. to an inverted pyramid with the narrow top 10% supporting the rest of the structure. Such a pyramid poised on the point is inherently unstable and so is our tax structure.

Fleischer argues that everyone who earns anything should be required to pay something and he's right. I have not yet come across a cogent objection to the Flat Tax plan that would assess everyone who has an income a particular percentage (say, 20%) with no deductions and few exceptions.

Another intriguing proposal is the Fair Tax.

Whatever plan is adopted it's clear that the current system is unworkable. If a sizable portion of the president's cabinet selections, including the secretary of the Treasury (Timothy Geithner), plus much of Congress, including the chairman of the committee that writes the tax code (Charley Rangel), can't figure out what they owe then the code needs to be overhauled.

That would be the sort of meaningful change that we could actually believe in.

RLC