24 February 1995

The Tax Bite

By Phillip Martin


When the United States government was being established many years ago, it was set up to be a small, efficient office to run the affairs of the country. American government functioned for nearly one hundred and fifty years in a low income tax environment, during which time it experienced the largest period of growth, the Industrial Revolution. Mismanagement is keeping it from doing this again. Richard Cartwright, liberal finance minister and chief tax spokesman for the Canadian government in 1876, sums it up as follows "All taxation, however disguised, is a loss per se...it is the duty, and the sacred duty, of Government to take only from the people what is necessary to the proper discharge of the public service; and that taxation in any other mode is simply in one shape or another, legalized robbery" (Adams 443). While today's demands far outstrip those of the past, a firm grasp of our government's spending is not only a sound premise upon which to run this country, it was called for many times in the establishment of it and is nessecary for the continued life of this nation.

Washington has strayed far from its initial purpose in that their clear misuse of power and gross negligence have destroyed economic balance in regards to our national budget. the American people are poised on the brink; their actions during these next few years will define how America compares on economic terms to the other nations. "for the first time in decades, the majority of Americans are seriously debating the integrity and judgment of their federal government. Not that they are fully armed with information - they are not - but there is a gnawing concern, an undercurrent of grumbling overheard on supermarket checkout lines and in public opinion polls"(Gross 1).functioned for nearly one hundred after years of government irresponsibility the American public must take hold of their future and once again control their own destiny. The legislative branch of the American government has within it many difficult problems to solve but some large answers will clear up many of the smaller problems. On top of the list for Congressional reform is the reduction and streamlining of Congressional Committees. The number of committees and subcommittees has reached almost 300. This places almost half of our congressmen as Committee Chairmen, which inflates their egos and fills their calendars wasting valuable time which could be better spent. This number should be cut in half as well as the number of staff members, which number approximately 3700. Perhaps that would let a little light , and space, into the over busy halls of Congress

In the days of FDR Congress passed an enormous amount of Legislation, yet it was accomplished with personal staffs of only two people for each member of the House. Even in the more complex postwar days of Harry Truman, Congressmen had only five staffers. Today the 535 members of both houses of congress employ almost 12,000 personal staff people, an impossible army that must be thinned out. Once again the first step here would be to reduce that number by fifty percent. Two things need to happen here; one is that we need two determine what the essential operations of the federal government are and, two, fit those items within a balanced budget including a steady payment upon the principal, not just the interest, of the current deficit.

Each year on April 15th Americans encounter the deadline at which they must either report their taxes or file for an extension. Upon Examination of this process it becomes obvious that the complexity of this current tax system lends it self to the fee and care for two business which exist solely because of this tax system. Both the IRS and the countless number of Tax Consultants in America survive on this business and would obviously oppose any change in the tax system as it would endanger their jobs, just as any one else would try to protect their own. In a series of statements by Henry Bloch, founder of the nation's largest tax service, H&R Block says "the fairest tax is a very complex tax" and in regards to a flat tax "that just isn't right. It would help the wealthy people"(Wichner d1). When has there been a time when what was fair was "right" and is it fair to penalize someone for doing well while "rewarding" those who do not exceed or fail at their task. A flat tax environment would go a long way in cleaning up a major economic ill for the government it would reduce the number of employees required for the IRS do to the relative simplicity of the tax code and as a side benefit Americans would not have to play guessing games as to how much of their income would be heading off to uncle sam each year for they would be able to easily see a simple percentage and budget accordingly.

Currently American Congressional members are riding this wave of tax-cut fever as James Russell reports "It took the political upheaval of November 1994 to awaken the federal government to the rising tide of voter anger over high taxes and excessive government spending. Now the winning Republicans and the losing Democrats are trying to outdo each other with tax cut proposals"(Russell). Throughout the year it has become evident that when tax levels are lowered governmental revenue increases a fact supported by many economic experts "Contrary to popular belief, tax cuts do not automatically lead to lower governmental revenues, whatever the level. Historically, they have brought about higher revenues by stimulating the capitalistic system, encouraging private endeavor and broadening the entire economic base"(Russell).

On January 6 of this year President Clinton addressed these same concerns “Two years ago, I formed a partnership for prosperity and opportunity with the democratic leadership in congress. Along with then Speaker Foley and Majority Leader Mitchell, The democrats put together majorities that we needed in both the House and the Senate to make the hardest choices Washington has made in over a generation -- to cut federal spending deeply; to raise revenues, largely from income tax increases on the top 1.5 percent of our people, and corporations with incomes over $10 million; to reinvent and restructure the government so that it would be much smaller and still work better; and to invest in education, research and technology, and tax relief for working families of modest incomes"(Clinton). As Mr. Clinton's words are put to closer examination maybe some information, as to what the current trends in the political arena are, could be ascertained. In his opening statement that he had to form a partnership with men who should already be his partners, due to the fact that they are all three members of the same party and he is the President of the United States, give truth to the premise that government today has lost the ability to effectively accomplish its duties in an expedient manner. Next Mr. Clinton discusses making hard choices; hard choices and action, Which will become apparent, are to entirely different concepts which Mr. Clinton needs to discover. The president states that they intended to cut federal spending, history will note that by 1995 the deficit had risen and not decreased and that the budget had climbed along with it. When he talks of raising revenues it is obvious that only one thing will accomplish such a raise, a raise in the federal income tax, which Mr. Clinton reports that the increases will come from that top 1.5 percent of wage earners and the corporations worth over $10 million or for a better explanation look at it this way, those who own the company that the average American works for and the company that the average American works for. What this means in real terms is that these people and corporations will have less capital to work with, which means fewer new company and less job openings. With less people working there will be a smaller tax base and a smaller tax revenue from which to pay for all of the new unemployment claims and other social programs paid for by the government.

Each fiscal year after both Congress and the President consider all of their respective personal agendas filling the budget with many self interest projects they intentionally spend much more money than they receive creating and propagating the federal deficit. It is interesting to note that the last President to present the congress with a balanced budget was President Nixon and that was only for one year of his time in office. The current fiscal deficit for the United States is roughly $1 trillion or $1,000 billion dollars, now to fully consider the magnitude of this sum of money we can relate the value as summed up by Gary Allen "Consider: one Billion seconds ago, the first atomic bomb had not exploded: one billion minutes ago, Jesus was still on earth. Or to put it in a monetary perspective, if you spent one million dollars at the rate of $1,000 a day, it would take two years and nine months to spend it all. But at $ 1,000 a day, it would take 2,739 years to exhaust one billion dollars. Now are government manages to blow almost $1.5 billion every day, rain or shine, including Sundays, holidays, and the day of the super bowl game"(Allen 12). With a spending rate as such, it is plain to see why the government is in such a precarious position.

As history unfolds itself the effects of the United States economy upon the rest of the world becomes more apparent, especially when comparing various time periods. Time has shown that as our government has grown our direct effect upon the other nations has decreased not to mention the fact that our once pristine title as the world's economic power has all but been forgotten. James Russell points out that this phenomenon is nothing new Adam Smith new it all along, he states "More than 200 years after his death' Adam Smith's "invisible hand" powering free-market forces is the driving economic momentum in most of the world.

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