(As published in The Leavenworth Times, October 6, 2011)
Everyone agrees, the economy has major problems. Obama’s “Pass it Now!” jobs package is actually nothing but another stimulus package. He’s throwing money at the economy and tweaking the tax code, selecting winners and losers. He dumped the job of paying for it on the Super Committee. Lots of luck there.
I think it can be done without spending a lot of money:
First, reform the income tax. The sixteenth amendment of 1913 made a permanent income tax possible, and Wilson put it in place in 1914. Since then, politicians have played with the rules – picking and choosing who gets taxed, who doesn’t. Like playing with a big glob of putty, they added deductions here, excise taxes there, tax brackets, categories, and tens of thousands of pages of rules about how to fill out the many, many forms. Democrats, especially delight in giving new tax reductions to the greater mass of voters at the expense of those who bear the tax burden.
A flat tax system would end all that. Everyone would pay tax on all income, period. It would be a lesser tax rate than the current one. There should be no taxes on people under the poverty line, but almost everyone else with an income would have to pay the same rate, without deductions. It would be fair that way, and the rates could be higher for higher incomes, but the essence should be simplicity. Class warfare would be history.
The flat tax wouldn’t catch everyone. Many with huge incomes don’t actually earn money – it comes to them through investments. But, they all spend money. That’s why some form of sales tax is needed. Rich people spend money, much more so than poor people, and they spend it regardless of how it came to them.
The simplicity of a flat tax and a national sales tax would allow the IRS to be operated with many fewer people.
Second, reduce the income taxes on business. Make it a flat tax as well – no deductions, no subsidies – and cut the rates way down. The economy would thrive, as businesses would be more willing to invest knowing most of the profits would be go to their stockholders rather than the government. Right now, the business tax rate is one of the highest in the world.
Third, free business from excessive regulation. Relax drilling restrictions, expensive coal burning rules, and silly EPA edicts. Let America become energy independent. This would create many jobs. We send way too much money overseas to buy oil.
Fourth, reform the legal liability exposure faced by doctors and businesses. Make the loser pay the expenses and limit the payouts. Defending frivolous lawsuits is currently a huge source of expense. Doctor malpractice insurance is so high some doctors leave the profession. Medical costs would drop.
Fifth, equalize the playing field in international trade by imposing tariffs of at least ten per cent on all goods imported into the United States. That would include goods manufactured by American firms in other countries – for example, Ford autos built in Mexico by Mexicans. All foreign made goods would immediately cost more, and it would make much more sense to manufacture them in America. Jobs and entire industries would stop flowing overseas. New manufacturing would spring up here. It wouldn’t matter that the other countries might retaliate, because we already sell less to them than they do to us. The American market is the largest in the world, and other countries would still want to be in it. Let them build their plants here and hire American workers to avoid the tariffs.
Sixth, close the border – really close it – to finally stop illegal immigrants and drugs. Put more boots and technology on the ground, until the border is secure. We wouldn’t even need many new laws. Enforce the laws already in place.
All these are fundamental changes, but I believe America would thrive again if we put them in place. Stop the endless politically based diddling around by giving more tax breaks and incentives to fix the economy. Instead, fix the inherent problems in it. The six reforms, and more like them, would set America on the right course again to be the strongest nation in the world.