Subject: [Homestead] The myth of a "simple" sales tax., and myth of a crushing tax rate
Date: Wed, 09 Feb 2005 14:12:06 -0500
The absence of public clamor for tax reform is partly explained by the
fact that federal tax revenue as a percentage of gross domestic product
is at the lowest level -- 16.2 percent -- since 1959
Consider Mack's Florida.
It is one of seven states without Satan's fingerprint -- an income tax.
But it has a sales tax that raises $18.3 billion annually. That tax
would raise $26.5 billion were it not for the approximately 440
exemptions that are the reason why only 57 percent of transactions are
taxed. Tattooing, body piercing, tanning services and lap dances are not
taxed. Neither are ostrich and racehorse feed, although dog and cat feed
are taxed. Lawn mowers are taxed but lawn services are not. Pool
services are not but chemicals to clean pools are. Charter fishing boat
services are not, fishing rods are.
Asked, when he was near death, to name things he regretted not doing,
Andrew Jackson said: "I didn't shoot Henry Clay, and I didn't hang John
C. Calhoun." President Bush, who seems determined to leave office with
/nothing /undone -- except, maybe, horsewhipping Harry Reid -- vows to
transform not only Social Security but the hydra-headed tax code.
He chose wisely when he asked former senator Connie Mack, a Florida
Republican, to chair the President's Advisory Panel on Federal Tax
Reform, which will make recommendations by July 31. While in the Senate,
Mack served on the Finance and Joint Economic committees -- and he has
lived with Florida's baroque sales tax.
The executive order establishing the panel lists three objectives for
tax reform. The third is to promote economic growth. The second is to
achieve fairness. The objective listed first, however, is to simplify
the code to reduce compliance costs -- including wear and tear on
taxpayers' patience. Woodrow Wilson, with his obnoxious penchant for
drenching everything with moralism, said paying taxes is a "glorious
privilege." Perhaps. But simplicity might make the privilege even more
glorious and also might, Mack thinks, get the public interested in reform.
The absence of public clamor for tax reform is partly explained by the
fact that federal tax revenue as a percentage of gross domestic product
is at the lowest level -- 16.2 percent -- since 1959. Perhaps the
promise of simplicity, a code "easy to understand," as the president
said Wednesday in his State of the Union address, can stir the interest
of taxpayers. Campaign finance laws are now such a mare's-nest of
ill-defined or undefined terms that no candidate can be confident that
he or she is not breaking the law. The tax code, too, is like that for
many of the 87 percent of tax filers -- 114 million of them -- who do
not use the short form. Furthermore, it is offensive that performing the
civic duty of paying taxes is so daunting that the percentage of people
relying on professional help to perform it is at an all-time high.
Mack, who served three terms in the House and two in the Senate,
understands the political class's metabolic urge to use tax codes to
implement social policies and dispense of favors. Consider Mack's Florida.
It is one of seven states without Satan's fingerprint -- an income tax.
But it has a sales tax that raises $18.3 billion annually. That tax
would raise $26.5 billion were it not for the approximately 440
exemptions that are the reason why only 57 percent of transactions are
taxed. Tattooing, body piercing, tanning services and lap dances are not
taxed. Neither are ostrich and racehorse feed, although dog and cat feed
are taxed. Lawn mowers are taxed but lawn services are not. Pool
services are not but chemicals to clean pools are. Charter fishing boat
services are not, fishing rods are.
In the federal tax code, as in Florida's, almost every wrinkle is there
because a muscular interest group arranged to have it put there. Other
wrinkles, just by existing, have summoned into existence interest groups
that have learned how to benefit from them and now will die in the last
ditch defending them. Which is why radical reform of the code involves
picking one or more fights with almost everyone.
But that is one reason why the fights are worth picking. Tax
simplification would be political reform, reducing the influence of the
Washington-based lawyer-lobbyist complex that exists to wrinkle the
code. Unfortunately, even rhetorical simplifiers are operational
complicators. At last summer's Republican convention, Bush described the
tax code as "a complicated mess -- filled with special-interest
loopholes" and vowed to "simplify" it. Well.
The Weekly Standard's Andrew Ferguson notes that Bush's nomination
acceptance speech also included promises to make America "less dependent
on foreign sources of energy," and to provide "opportunity zones" to
attract businesses to poor communities. Bush also promised to "give
workers the security of insurance against major illness," to encourage
the construction of 7 million "affordable homes" in 10 years and to make
it easier for everyone to go to college. Sure as God made little green
apples, these promises would, as Ferguson says, involve adorning the tax
code with more exemptions, credits and deferrals.
In the great -- or so it then seemed -- 1986 turn toward simplification,
the reduction of rates was paid for by reducing exemptions and other
complexities. However, Congress, having had its fling with
simplification, soon reverted to form: Since then the tax code has been
amended more than 6,000 times. Such is the tide Mack and his panel must
try to turn.