Senator Tom Coburn (R-OK) appeared on NBC’s Meet the Press last weekend to discuss the deficit reduction plan under construction by his bi-partisan “Gang of Six.” When David Gregory asked if he could support a deal on the budget that includes tax increases, Coburn insisted “we’re not talking about raising tax rates at all,” but allowed that “a net effect of [increased] tax revenue would be fine with me.”
There’s nothing contradictory about these ideas. Increased Gross Domestic Product would produce a surge in revenue to the Treasury if tax rates stayed the same… or even if they were reduced and simplified.
However, the Gang of Six has been talking about eliminating various tax credits, notably those for charitable donations and home mortgage interest. Gregory pointed out that “if people’s taxes go up in some way, it would appear to be a violation of the pledge that you signed with a well-known Americans For Tax Reform Taxpayer Protection Pledge.”
Coburn responded that his “oath to the Constitution of the United States” is more important than “a pledge from a special interest group who claims to speak for all of American conservatives when, in fact, they really don’t.” That’s not going to sit well with Americans for Tax Reform, who did not include a “void if signatory has sworn an oath to the Constitution” clause in their pledge. They probably also won’t like being smacked in the face with a rolled-up copy of the pledge on national TV.
Besides, where does the Constitution require any of its sworn defenders to raise anybody’s taxes? It doesn’t even require them to balance the budget, a deficiency some of Senator Coburn’s colleagues have been talking about correcting. If you ever find yourself in possession of a working time machine, pop back to the late 18th century and tell George Washington that his successors would roll up $14 trillion in debt, with a $1.36 trillion deficit on a $3.5 trillion budget. Wait until just the right moment to add that the 111th Congress never even got around to passing a “budget” at all. Be sure to videotape his response for posterity!
Leaving Senator Coburn’s relationship with Americans for Tax Reform aside, there are many who insist that tax increases of some kind should be part of deficit reduction. Paul Krugman of the New York Times has long complained about how horribly under-taxed Americans are. Why not a deal that combines some tax hikes on the Evil Rich with spending cuts?
1. When such a deal is reached, the tax increases hit immediately, but somehow the spending cuts never happen. We’ve been down that road many times before. Even Ronald Reagan found himself suckered into such an arrangement, only to discover that if taxes are raised to give Congress more money, that money is spent. No surge of tax revenue will survive the gauntlet of “emergencies” that rush forward to consume it.
2. Raising taxes on any sector of a shaky economy is a bad idea. We need tax relief, and the accompanying creation of opportunities. Ending the tax credit for charitable donations will simply reduce charitable donations. Ending it for mortgage interest will hit the middle class harder than millionaires, and kick the battered housing market in a very tender place.
3. Most importantly, the most urgent priority for America is reducing the size of government, not just eliminating the deficit. A balanced budget is important… but a balanced budget in support of a $3.5 trillion behemoth is economic suicide, not fiscal sanity. Every tax increase makes the private sector smaller, and right now, we desperately need it to grow.
The extraction of taxes is not just a means of generating revenue. It is also a mechanism of control, as the architects of Big Government proudly boast, when they’re touting the intended effects of targeted tax credits. They only fall silent when the “unintended consequences” rear their ugly heads.
Progressive tax rates with thousands of complex exemptions are a chisel used in the sculpture of society, not a logical system for amassing an optimum amount of revenue with minimal burden upon the taxpaying public. The money brought in by this system is not carefully allocated to fund the vital duties of government. Politicians spend in accordance with their appetites, not their means. They only pretend to worry about how their programs will be paid for when public outrage can no longer be ignored.
Our tax system is far too complex. It should be flattened out and simplified, in combination with a dramatic reduction in spending. Just this once, let’s insist on the spending reductions first. We should be issuing directives to our uncontrolled government, not making deals with it.