Longtime Tax Debate Rages

A major debate raging in America today deals with taxation. One of President Bush's major domestic achievements has been his tax cuts. Predictably, they have generated criticism from the left, ranging from Howard Dean, who believed all his tax cuts should be repealed, to John Kerry, who argues in favor of only repealing those tax cuts for "the wealthy."

This debate seems new to us, but it really isn't. As Benjamin Franklin famously said, "In this world nothing can be said to be certain, except death and taxes." Debates on taxes have been with us as long as there has been a United States of America (and long before). "Taxation without representation" led to the founding of this great nation. Sadly, we have drifted away from our founding ideals of minimal taxation.

Let's stop and think about the taxes we pay (or will pay). First of all, we have the federal income tax, the most well known. Then we have the payroll tax, which funds Social Security. Then we have property taxes. Then we have taxes on gasoline. Then we have corporate taxes, sales taxes, and so-called "sin taxes," generally levied on alcohol and tobacco products.

That's quite a lot of taxes. They consume around 40% of Americans' income, which means that for over four months out of the year, you are essentially a slave for Uncle Sam. Most people don't realize just how much they pay in taxes. That is no coincidence. The government is sneaky. They hide taxes. Money withdrawn from your paycheck is not missed nearly as much by the average taxpayer because the taxpayer never saw the money. Having it taken away after you cash your paycheck is much more difficult than never seeing it at all.

Heavily taxing corporations seems like a good idea. After all, these greedy companies are making plenty of money anyway. They should pay their fair share! Unfortunately, this is not how it works. Corporate taxes are a myth. What do you think the average corporation does when faced with a tax hike? Why, it simply raises its prices, and trims back raises and benefits for employees. So who really ends up paying the tax? The consumer, of course. Want higher prices? Soak the corporations!

Income taxes are the most obvious of taxes to the average American. While some argued that Bush's tax cuts favored the "rich," the simple fact of the matter is that only the "rich" pay income taxes. According to IRS data, the top 50% of wage earners pay 96% of the income taxes. So any reduction in the income tax will benefit the "rich."

Since tax cuts generally benefit the rich, does that make them bad? Of course not! Taxing the rich is about as productive as taxing corporations, since it is generally the rich who own companies. How many poor people have ever hired you? Taxing them more simply means they will have less money with which to hire employees. Thus supporting higher taxes for the rich, taken to its logical end, equals supporting unemployment. Besides, should the government really limit how much we can earn? How much is too much?

Many people denounce forcing the poor to pay taxes, instead favoring soaking the much maligned rich. Meanwhile, many of these same people advocate for "sin taxes." Yet, by and large, the poor drink and smoke more than the rich. Therefore, a sin tax is disproportionally a tax on the poor. Then again, it's none of the government's business if you chose to drink or smoke anyway, but that's another topic for another day.

Payroll taxes may seem to be the fairest form of taxes, since you get back what you pay in later in life in the form of Social Security. Of course, if you die before you reach the right age, you lose your money. Plus, is it really necessary to force people to save their own money? Are we too dumb to plan for our own futures? Our elected officials in Washington think so.

My point here is not to argue that all taxation should be abolished. Some taxes are a necessary evil. Sadly, they have become far more complicated and excessive than the founders ever envisioned. Instead of all the complicated tax codes, why not institute a much simpler flat tax?

The answer is to reduce tax rates, and abolish certain taxes (like sin taxes). President Bush only has it half right. He's reduced taxes, but not the size of government. For example, is it really necessary to have a Department of Labor? Deficits should be reduced by downsizing government agencies, as well cutting the pork barrel, not higher taxes. After all, should our tax dollars really pay for things like bridges in Sioux Falls, SD, or museums in Cheyenne, WY?

John Brown is a senior in political science and history at the University of Tennessee @ Knoxville. Contact him at johnnyb325@aol.com, or visit www.johnnorrisbrown.com. This column originally appeared in the March 25, 2004 edition of The Daily Beacon, available here.