A modest tax proposal

Originally printed in Marketplace April 15, 2008

Since this issue date is the date of Tax Day, you will doubtless read somewhere these words from Supreme Court Justice Oliver Wendell Holmes Jr., which are posted above the front door of the Internal Revenue Service in Washington, D.C.: “Taxes are the price we pay for a civilized society.”

Few people remember another quote from Holmes: “Any tax is a discouragement and therefore a regulation so far as it goes.”

The income tax, authorized by the 16th Amendment to the Constitution, is 95 years old this year. (No public celebration is being planned.) The first income tax law included rates from 1 percent on the first $20,000 of income (more than $660,000 in today’s dollars) to 7 percent for incomes of $500,000 and more (almost $17 million in today’s dollars). Fewer than 1 percent of people paid income taxes, and, according to the Tax Foundation, taxes took up just 5.2 percent of income in 1913.

Today, 30.8 percent of our income is gobbled up by various taxes — more than the average costs of food, clothing and housing combined, according to the Tax Foundation. Despite this, Gov. James Doyle and our state legislators have competing “budget repair” plans that leave budget shortfalls of $1.42 billion in Doyle’s plan and $1.65 billion in the Assembly Republican plan, as of this writing. (The fact that Congress can’t create a balanced budget goes without saying.)

You may have noticed that one set of candidates for elective office believes you should pay more in taxes than you already do. Both Barack Obama and Hillary Clinton have announced their support of allowing what have been called the “Bush tax cuts” to die when they are set to expire in 2010. (Elimination of a tax cut is in fact a tax increase; if the rate you pay increases, your taxes have in fact increased.) At some point, I assume someone will seriously suggest the following simple tax plan:

1. Write down all your income from the past year.

2. Send it all to us.

Anyone who really believes that person’s taxes are too low can make a gift to reduce the federal debt, of course. (Send your checks to: Bureau of the Public Debt, Attention: Department G, P.O. Box 2188, Parkersburg, WV 26106-2188.) It seems to me, though, that if there are people who truly believe our taxes are too low — and, by extension, believe that the government knows better how to handle their money than those people — the government should accommodate them in a more direct fashion than making them write a check to the feds.

Thus, my modest proposal: I believe that taxes should be raised on anyone who believes that their own taxes are not high enough. This would cover anyone who votes for the Democrat in the November presidential election, since both Obama and Clinton do not want those Bush tax cuts to continue, or any other election in which there is a clear choice between someone who wants to cut taxes (Republicans who are not RINOs, Republicans In Name Only) and someone who believes the converse.

It would cover anyone who believes that our future fiscal commitments (Social Security, Medicare, the accumulated federal debt, infrastructure, etc.) require higher levels of tax revenue than the government already takes from us. It would cover anyone who espouses great big new government programs, such as the Healthy Wisconsin proposal for single-payer health insurance paid for by taxpayers, or federal variations on that theme. It would also apply to anyone who believes that taxes on certain icky things (cigarettes, alcohol, foods someone considers unhealthy, gasoline, etc.) should be increased so that people use less of them. It would even apply to those who believe that they should have the power to decide that other people have too much money (see http://www.faireconomy.org/issues/responsible_wealth).

This would apply in Wisconsin too. Teacher unions are fond of saying that revenue limits hurt education generally and things like arts education in particular. And, by the way, teachers are underpaid; just ask them. There are also those who believe we don’t spend enough money on roads or schools or political campaigns, or that hospital rates or gas taxes aren’t high enough. Even organizations that should be nonpartisan, such as the League of Women Voters, believe taxes are too low in Wisconsin.

With my modest proposal, everybody would get what they want. Those who believe any problem can be solved by higher taxes funding more government spending could feel virtuous because they’re actually footing the bill. And those of us who believe since government wastes our tax dollars, more taxes mean more government waste would not have to feed the tax monster.

It is, however, the height of hypocrisy for people to call for more government spending when they aren’t affected by the resulting higher taxes. I could suggest that cigarette taxes be substantially increased, and it doesn’t affect me since I don’t smoke. I am, however, smart enough to realize that tax levels beyond a certain point on products encourage black markets and, by extension, organized crime and perhaps even terrorism, according to the Bureau of Alcohol, Tobacco, Firearms and Explosives. Moreover, the premise that tobacco tax increases don’t affect nonsmokers is false, as the National Taxpayers Union reports.

The hypocrisy list includes those who, for instance, call for keeping the estate tax (including Warren Buffett, George Soros and Bill Gates Sr.) when Buffett owns businesses that profit from the estate tax and all of them have enough money to structure their estates so they don’t have to pay any inheritance taxes. That also applies to those who believe the tax system should stick it to the “rich” (defined as anyone who has more money than you do) out of their apparent belief in a converse relationship between one’s wealth and one’s virtue. This is at the same time that, according to the Congressional Budget Office, the top 1 percent of U.S. income-earners, who earn 18.1 percent of all income in the U.S., pay 38.8 percent in income taxes, and the bottom 40 percent of wage earners (up to $37,400 in pretax dollars) have a net negative income tax liability.

My modest plan is democracy in action — those who think we should pay more in taxes will, and those who don’t won’t. I’ll let professional politicians figure out how to enforce this.