L ots of other countries, including Estonia, Latvia, Serbia, Lithuania, Russia, Slovakia and Romania — note the many former colonies of the Soviet Union — are cutting taxes, simplifying their tax codes and even adopting flat-tax systems. Here in America, though, Congress is stumbling along in the opposite direction.
Waggish Republicans on the House Ways and Means Committee call Democratic Chairman Charles Rangel’s latest tax reform proposal the “Mother of all Tax Hikes.” The committee’s minority staff estimates that if the New York congressman’s proposal is enacted in its entirety, the federal government will take another $3.5 trillion chunk out of the economy, the largest single increase in American history, while adding more confusion to the already stupefyingly complicated U.S. tax code.
One of the Rangel legislation’s centerpieces is a proposal to eliminate the Alternative Minimum Tax, which was supposed to make the rich “pay their fair share” when it was first passed in 1969. In reality, only an annual legislative “patch” has protected millions of middle-class taxpayers from having to pay huge AMT levies. But here’s the string — the $800 million Rangel gives with one hand by killing the AMT, he takes away with the other hand by raising other taxes by an equal amount.
Rangel and other Democrats also hope voters won’t notice that their promise to expand government health care and other benefit programs they’ve been promising will be financed with a 4 percent surcharge on those people who make more than $100,000 annually. But government benefit programs always grow, and so will the taxes required to pay for them. And oh by the way, did you know Rangel eliminates charitable, mortgage interest and state/local tax deductions when calculating the surcharge? Plus, he wants higher capital gains taxes on investments just when some experts fear the economy may be about to slow down. No wonder even House Speaker Nancy Pelosi has backed off from her initial enthusiasm for Rangel’s proposal.
It was 25 years ago when the Hoover Institution’s Alvin Rabushka and Robert Hall in a memorable editorial in The Wall Street Journal outlined a flat tax that would it make it possible to file income tax returns on a single postcard. Under a flat tax, everybody would pay a certain percentage of their earned income — with no loopholes, deductions or gimmicks. Savings would be tax-free. Revenue collection has far outpaced expectations in many of the foreign countries that have done gone to flat taxes. Wouldn’t it be refreshing for Congress to do something so sensible on taxes for a change?
