Sunday, March 27, 2011

When you start with the wrong premise, you get a wrong conclusion

On my Facebook page, we've had a discussion about who is responsible for the debt and the spending. This is in light of the fact that many people blame the President, failing to recognize that it is Congress that passes a budget and authorizes the spending.

Historical records of the debt show that the U.S. debt increases more when Democrats are in charge of the House and Senate. While the debt has increased, rather than decreased, since Ronald Reagan was president, it increases less when Republicans control both houses or when there is a mixture of control.

This disconnect over who is responsible for the actual spending seems to apply to our current President, Barack Obama, as well. But with him, it's even worse.

In reviewing some other items, I came across this quote of his from the 2011 State of the Union address:

"Over the years, a parade of lobbyists has rigged the tax code to benefit particular companies and industries."

Is it true that lobbyists have 'lobbied' for changes in the tax code to benefit the industries they represent? Absolutely - that's what they get paid for.

But the lobbyists have not 'rigged the tax code.' They may ask for changes in the code. They may suggest changes in the code. They may even propose language for changes in the code.

But the people who actually make the code and turn it into law are the members of Congress. They are the only ones who have the authority - which they exercise freely - to create so-called loopholes and 'rig' the code to benefit anyone or anything.

The rest of the quote is:

"Those with accountants or lawyers to work the system can end up paying no taxes at all. But all the rest are hit with one of the highest corporate tax rates in the world. It makes no sense, and it has to change."

But even this is a warped and inaccurate view of what is actually happening.

As soon as Congress writes an exception, exemption, special provision, etc...other companies will ask their accountants and lawyers to figure out what it means to them and how they comply. It would be foolish of a company to ignore a deduction or credit they are 'entitled' to take by virtue of a law or provision Congress has created.

Just look at how so many elected officials encourage families to take advantage of the Earned Income Tax Credit. Here in Lucas County, the Democrat Commissioners and several other Democrat elected officials formed task forces to go around and inform people of this tax loophole, saying that families needed to ensure they were getting all the credit due to them. Why is a company getting a credit due to them under the same tax code any different?

Is Pres. Obama correct that it needs to change? Probably. I'm certainly not a fan of the complicated and overly-burdensome tax code as it exists today. I spend a small fortune having an accountant do our taxes so we can make sure we're in compliance for our businesses.

But the change needed isn't to cherry-pick provisions and eliminate them because the government wants more money and wants to be sure that only one entity responsible for paying taxes pays the most it possibly can. The solution would be to eliminate the current tax code and go with something more simple and easier for everyone to comply with.

I'm not advocating a specific plan (flat tax, fair tax, national sales tax or VAT), but I know that we won't come up with a viable solution if we're starting from a bad premise - and promoting the idea that lobbyists - rather than politicians catering to special interests and donors - 'rig' the tax code is certainly the wrong premise.


Timothy W Higgins said...

Right on the mark again Maggie!

Jefferson, in a letter to Madison wrote:

"The question [w]hether one generation of men has a right to bind another. . . is a question of such consequences as not only to merit decision, but place also among the fundamental principles of every government."

They understood from the beginning of this country that we have no right to bind future generations to the debts incurred by the present one. This is a fundamental principle that Congress since early in the 20th Century, has failed to comprehend.

And while arguments about "paying a fair share" of taxes ring endlessly about Congress, little discussion is held about substantive change to a tax code that has admittedly been manipulated by accountants, lawyers, and lobbyists. Few of those responsible for voting into place a tax code that has grown so ponderous that few members can carry its written form are willing to seriously consider simplifying it.

Both "Flat Tax" and "Fair Tax" proposals have been halfheartedly offered, but never seem to get traction in a legislative body far more happy to bemoan the current state of affairs and demonize their political opponents for creating it.

It is to legislators (and presidents) of both parties to whom our real anger should be shown, for failing to understand that the government checkbook must be balanced. Taxes are an obligation to those living in a free society, but not for a government using them over-reaching programs and wealth redistribution.

-Sepp said...

Maggie, I've always thought that a national sales tax would be the way to hits everyone.

The problem is that the government will overspend at every opportunity simply because it has the ability to do so and, it will.
There is also no accountability whatsoever because they can perpetually point fingers at someone else.

Google Analytics Alternative