Tax Reform

The Bush administration stands firm on pushing Tax Reform back, while advocating Privatization of Social Security first. The NYTimes reports many Republican Congressional members wish to consider both Initiatives jointly. Bush is being sagely advised by experts in the area. It is also why this Author wishes he would take on Tax Reform first. Here is Why:

It remains a firm goal of upper-Income Republicans to transfer the Total Tax Burden downwards upon Consumer and Worker. This is their absolute primary motivation, though shrouded in rhetoric. Economists and Tax Specialists suggest this be an impossible goal, though, as economic realties will destroy any expected Windfall gains for the Wealthy.

The intrinsic problem comes within the framework of necessary payment for Government services. Republicans publicly espouse elimination of Government expenditures, but they lack the Votes to terminate hated Welfare programs, and they moan loudly at the thought of canceling Profit-enriching Government supply Contracts. The real reason for the hatred of Clinton by Republicans was not his Womanizing, but his suppression of those lucrative Contracts. They currently are in a quandray: Bush has saved them from taxation while maintaining those luxurious Contracts, but only at the price of huge Deficit spending; an Option which All realize has it's limitations. Taxation will have to underwrite Government spending once more, but taxing Who?

The Outline of Wealthy Republican troubles consist of ability to pay:

1) Consumption Tax--most favored, but least revenue-generating; remember, Government expenditures account for 20% of all U.S. Income with Consumer Spending only consisting of about 60% of that national Income. Any strictly Consumption Tax will have to be about one-third of all Consumer prices, and probably more on the order of one-half of the Consumer Price. Economists mention this will sharply suppress Consumer Demand, even if American Taxpayers can regain approximately 16% of their Income from foregone Income taxes. It also have the pitable effect of being a regressive tax extraordinare, in that it would sometimes triple or quadruple the tax burden of the Poor, to the point where they might curtail their Consumer spending by 80%--relying on Government subsistence.

2) A National Sales Tax could work slightly better, but only if it included provisions horrid to Republicans: such as applicability to Business production purchases, and with inclusion of percentage taxation on the purchase of Financial Paper. The absence of the later two elements would provide only about half of the tax revenues currently gained by the Bush truncated Income tax.

3) There is the Flat Income Tax, which the Author favors by the way, but has problems which bothers by Right and Left; mainly the elimination of Tax credits, Deductions, and Exemptions.
Failure to eliminate these reductions in taxation will simply reduce total tax revenues without simplification of the Tax Code, and Government spending would still not be funded. It has one further failure which would drive Republicans wild: there is no way sufficient tax revenues could be raised, even with eliminations of Tax credits and Deduction; Capital Gains income would have to lose it's sacrosanct status, and must be considered as simple Income to get acceptable tax revenues.

4) The Value-Added Tax has the difficulty of vasting increasing Production Costs at every stage of production. This effect has the sad impact of enduring all the disadvantage of the Consumption Tax upon Consumption, the same evil impact of the National Sales tax appliciable to Business purchases, and insufficient revenue unless some aspect of the Income Tax is retained.

It is the sincere hope of this Author that any Republican wandering by this blog will have started to cry somewhere along the route. lgl