August 3, 2017

Republicans Hope to Simplify the Tax Code

The GOP looks to reduce tax rates for families and businesses — reform that would really stimulate the economy.

Trivia question: Whose idea was it to tax people at different rates based upon their income? Answer: Karl Marx, as in the father of Marxism, the ideology adopted worldwide by totalitarian communist regimes that are responsible for the murder of more than 100 million people in the 20th century alone. In his 1848 “Communist Manifesto,” Marx outlined the basic tenets of communism. Tenet One: abolish private property. Tenet Two: Establish a progressive income tax. Why? Because whatever you cannot confiscate in land, you can confiscate in income.

Thus, the graduated income tax finds its roots in the Marxist/Leninist/Communist concept of wealth redistribution. In Marxist theory, the land and money seized by the government would be given back to “the people.” In reality, the Soviet government seized the land and money and kept it for elitist government bureaucrats.

The U.S. adopted the graduated income tax as the 16th Amendment to the Constitution in 1913 (though some scholars claim it was never officially ratified). The same Soviet dynamic actually happens in our country today. Unaware of who is really getting the money, people think that high taxes are good for the poor and needy. Yet the elitist government bureaucrats benefit the most. Hopefully that can change.

Last week, a joint statement by House and Senate leaders, the Treasury secretary and the National Economic Council director declared their commitment to tax reform. They stated that the mission of the forthcoming legislation is to “protect American jobs and make taxes simpler, fairer and lower for hard-working American families.”

When the tax system burdens its citizens and business owners while disincentivizing basic things like hard work and saving, this lowers risk-taking entrepreneurship and discourages investing. All in all, a country that doesn’t work hard, doesn’t save, doesn’t create businesses and doesn’t invest in businesses doesn’t have much of an economy, does it? Tax reform measures could restore economic strength to American families and businesses.

The joint statement continues: “There should be a lower tax rate for small businesses so they can compete with larger ones, and lower rates for all American businesses so they can compete with foreign ones.” Furthermore, the objective is to create “a system that encourages companies to bring back jobs and profits trapped overseas.”

The U.S. has the highest corporate tax rate of any Organization for Economic Cooperation and Development (OECD) industrialized country. When combining the federal and state corporate income tax rates, the average is over 39%. The average of other OECD developed nations is 25%. The high corporate tax rates force companies to move abroad in order to make their business profitable. A lower rate would encourage them to stay here, which would improve our economy and create American jobs, not overseas jobs.

The joint statement also prudently rejects two tax options: a domestic consumption-based tax and a Border Adjustment Tax. A consumption-based tax comes in various forms but essentially is a higher sales tax (like the Value Added Tax or VAT tax prevalent in the European Union). Ideally, a consumption-based tax would shrink the Internal Revenue Service (IRS) and appears to be more fair, because all people have to pay taxes. The problem faced by other countries that have adopted this system, however, is that they create or raise a sales tax but never really get rid of the income tax — which means citizens get doubly taxed.

The statement also rejected the Border Adjustment Tax (BAT) that taxes imports, but not exports. In theory, this would incentivize American people to buy American-made products. In reality, everything imported would cost 20% more and would ultimately cost our economy jobs and businesses, according to the National Retail Federation.

Critics of tax cuts claim that our country would not receive sufficient tax dollars to then contribute to the debt. However, these critics fail to see that the deficit is directly related to spending. According to the Congressional Budget Office, tax revenues (i.e. money collected) are above their historical averages. The Heritage Foundation puts it succinctly: “Washington has a deficit and debt problem because it spends too much, not because it collects too little in taxes.”

Despite the failures of ObamaCare repeal, Republican tax reform has a high likelihood of happening in some form. While most bills require 60 votes and can be filibustered, there is an exception for budgetary bills called “reconciliation procedures.” This only requires a simple majority in both the House and Senate with a signature from the president, which means that passing tax reform under reconciliation could actually happen.

The Marxist graduated income tax was intended to destroy property, money and private businesses. Unless we realize that our burdensome tax system still intends to do the same thing, we will be at a loss. The good news is that our Republican Congress appears committed to reform. If they would lower tax rates for families and job-creating American businesses under reconciliation, that would be a win for the American people and for the economy.

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