Magazine article The American Prospect

Tax Missimplification: It's Not a Done Deal

Magazine article The American Prospect

Tax Missimplification: It's Not a Done Deal

Article excerpt

Two days after his re-election, President Bush offered the public some guidance on what he says will be a central goal of his second term: "tax simplification." Bush said he wants to "encourage people to invest and save," i.e., he favors still more tax cuts for the rich. He added that he'll propose a tax code that "rewards risk," i.e., one that offers even more tax breaks to business. No surprises there. But as previously hinted, this time around Bush offered a twist: His plan will be "revenue neutral." Of course, that requires raising taxes--by a lot--on everyone else to break even.

The two leading right-wing proposals to replace the progressive income tax are a flat-rate wage tax and a high-rate national sales tax. Either would increase taxes on most Americans by thousands of dollars a year. That's not something that you'd think would be popular. In fact, while Bush only touched on these ideas during his campaign, the national-sales-tax scheme was put to the electoral test in several House and Senate races. It didn't do well.

In Georgia, for example, Republican House incumbent Max Burns lost a race that featured ads criticizing him for supporting a national sales tax. In South Carolina, Democrat Inez Tenenbaum came from far behind to almost catch Republican Jim DeMint in a race for an open Senate seat, entirely due to her attacks on the sales-tax plan DeMint had introduced in Congress. Defenseless, DeMint began claiming he didn't support his own bill (and resorted to gay bashing to win). Seven-term North Carolina Republican Representative Charles Taylor survived a scare only after he, too, denied that he supported his own sales-tax bill. In Colorado, Democrat Ken Salazar beat beer baron Pete Coors for an open Senate seat after condemning Coors' "crazy" sales-tax idea. Likewise, the flat-rate wage tax was an issue in a number of races a few years ago, and it also flopped badly.

An additional complication for the president and for tax-deform backers is the bitter war on the right between flat taxers and sales taxers. Sales taxers generally hate the flat tax because it doesn't "abolish the IRS," by which they mean rename it. Flat taxers like Grover Norquist detest the sales tax (and its cousin, the more easily administered value-added tax) because they think a sales tax would be too easy to increase--and might lead to reduced deficits or (gasp! …

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