Thursday, April 12, 2012

Tenther on the Issues: Budget and Taxes

It seems like every year- let alone every election year- the linked questions of the Budget and Taxation come up.  Conservatives tend to favor reducing both, liberals tend to favor growing both, and a wide swath of the population seems to believe you can increase the budget but reduce net taxation.  So, in the second of my series: "Tenther on the Issues" we'll examine the Budget and Taxation from a Tenther's perspective.

First off, we have to address how we view the budget.  It seems that the government views a budget as "what we'd like to spend," instead of "what we can afford to spend."  No household or business could run that way- but government- with the power of Taxation- can do so with virtual impunity.  So the first thing is to reverse that trend.  Before we talk about whether the budget should shrink or grow, we have to define "budget."  And that definition must- in a sane world- be "what we can afford."  However, with the Federal Government able to tax citizens directly- as well as print money at will- "what we can afford" is "anything."  They just have to be willing to confiscate all private wealth and then inflate the currency to Weimar levels.  Something the current administration seems not to have too many compunctions against doing.

Having defined the budget as "what we can afford," we find the first problem, "we can afford anything."  So how do we address that?  Through a Conservative / Tenth Amendment lens, there is a single "pure" answer, and then there is the "practical" answer.

The Pure answer is to repeal the 16th and 17th Amendments, return the right to appoint Senators to the State Legislatures, and remove the right to tax income from the Federal Government.  Giving Senatorial Appointment powers back to State Legislatures serves as a check on the Federal Government's power, and removing direct taxation from the Federal toolbox forces the Federal Government to live more within its means.  The Federal Government would then be forced to fund itself through tariffs and duties, as well as from the States instead of from the People.  This would force the Federal Government (well, okay, "strongly encourage") to realize it cannot, in fact, "afford anything."

The Practical answer is to accept the current system, and fight for deep, deep tax cuts.  A flat tax would be nice, but is politically impractical.  However, reducing the tax rate down to, say, 15% on top earners would go a long way to cutting into what the government actually takes in in a year.  This would allow wealth to stay where it belongs- in the private sector, to be distributed as those who earned it see fit.  This would still require a graduated (or "progressive") tax system, and the bottom earners would still pay no taxes.  Politically, there probably isn't much (yet) we can do about that.

However, this "Starve the Beast" strategy only works if two things happen.  First- the tax cuts have to be deep enough to push us back down the Laffer Curve far enough to negatively impact tax receipts.  Second- the budget has to be realistic and balanced.

That may be the hardest thing of all.  When the Federal Government focused on what it was supposed to focus on (mainly National Defense, from an expenditures standpoint) this wasn't a problem.  The current entitlement mentality, however, makes this a dicey political proposition, at best.  Special Interest groups from the Elderly to the professionally poor, from Energy Companies to Environmental Groups, all want their piece of the pie- and they're willing to pay with votes.  Worse, to our politicians, they'll threaten to have those votes withheld from any politician who does not kow-tow to their demands for ever increasing funding.

This must stop.  And the only way to stop is to embrace the Federalist paradigm established by the Constitution.  In those places where the Federal Government has no business, it must stop spending.  From Education to Farming, from Medical Research to Medical Care.  Every single one of these things should be cut.  To some extent, some of these things must continue for a time.  It would not only be impractical, but imprudent and inhumane just to cut off all Social Security payments and Medicare.  However, specific plans must be laid to end even these "Sacred Cow" programs.

Those who pay no taxes must stop being net tax consumers (that is- too many of them pay less than zero dollars in net taxes- they actually get subsidies).  Tax deductions must be streamlined and clearly defined.  What defines a "charity" must be reviewed, and those laws strictly enforced.  We cannot afford to continue to spend money on pet causes, however well intentioned those causes may be.

Once all of the spending the Federal Government shouldn't be doing is cut out, I believe we'll find that we have far more money than we thought.  Serious consideration can be given to paying off our debt- instead of merely servicing it.  True Federal Spending (predominately Defense and Government Operations spending) would actually be able to grow, probably at a furious rate.

All the while, the People would be more free, and would have more of their own money to direct toward causes important to them- from TVs for their own homes, to the SPCA or Scientific Funding.

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