Common Sense and Taxes

Yesterday I saw something amazing: a letter to the editor of the Washington Post that actually nibbled at the edges of reality in the discussion of taxes. In this letter, a local gentleman commented on an earlier op-ed piece in the Post, closing with this memorable sentence: "The fact is that we live in a country with low taxes, and politicians should let it be known that if we want to keep it that way, we will have to forget about our children's future."

I want to buy that man a drink.

As you know if you've been reading this blog for any length of time, I consider myself to be a tax realist. I don't like paying taxes any more than anyone else does, but I realize one important fact: taxes provide the money on which the government runs. Contrary to what the most wild-eyed anti-tax crusaders would have you believe, the Constitution does not prohibit the federal government from levying taxes on us. The Founders knew that it takes money to run a government, and that's why Article 1, Section 8 of the Constitution says, "The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States..." The Founders were not opposed to taxation...they were opposed to taxation without representation, to taxes levied by a king many thousands of miles away who was not required to answer to his subjects for how the money thus raised was spent. That's why the Constitution grants the power of taxation to the Congress, whose members are, in theory, closer to the people they represent, and not to the President.

Everyone hates taxes, but everyone loves the services the government provides. The government needs money to operate, just as you and I need money to run our families. We earn our operating funds by holding down jobs. The government, at every level, raises operating funds in three ways: taxes, fees for services, and borrowing on its credit. No one likes paying taxes, but no one likes paying fees for government services, either (would you want the fire department to wait until you wrote the check for their visit to start saving your burning house?). If the government borrows money to meet its obligations, the money it borrows is no longer available for you and I to borrow to buy houses, cars, college educations, etc. And the principal and interest on the borrowed money becomes a millstone around the necks of our children and grandchildren.

So, how about a little reality in the political hyperbole, eh? Instead of candidates rushing to promise that they'll cut our taxes, why not have them show a little fiscal responsibility and understanding of the basic economics of government by admitting a few things:

1. Taxes are a necessary evil, they provide the money the federal government needs to operate, and the authority to levy them is clearly assigned to Congress in the Constitution.

2. Taxes ought to be fair. The definition of "fair" is key, here. For instance, I think it's fair that I pay taxes on my income, but I don't think it's fair that there are wealthy individuals (and major corporations with profits in the tens of millions) that pay little or no taxes because they're able to manipulate the tax system in ways we lesser beings can't.

3. The government has an obligation to the citizens to wisely spend the money it takes from us in taxes. I have a few suggestions:

a. Immediately cut off foreign aid to nations that can't show the money is being spent for the intended purposes.

b. Immediately stop the odious practice by members of Congress of "earmarking" money to be spent on projects in their home districts. There is no defensible reason why I, as a Virginia taxpayer, should see my federal taxes being spent on a railroad museum in Pennsylvania or a local bridge in Alaska. Things at the state and local level should be paid for with money raised by state and local taxes.

c. Spend our federal taxes on things that will benefit all Americans (that's the "common defense and general welfare" thing that the Constitution talks about). There's no reason why we can't have good health care, good basic education for every citizen, a clean environment, and safe, secure borders...unless it's because we're spending the money to build those railroad museums in Pennsylvania and bridges in Alaska, and to prop up corrupt governments overseas.

Okay, that's enough ranting. I'm sure that people with degrees in economics and highly-paid positions in liberal and conservative think tanks can shoot my thoughts full of holes, and convincingly explain to you why all the things that appear to be patently stupid are really unarguable truths of the world of high finance.

But what do I know? I'm just a guy trying to live my life according to economic rules that don't seem to apply to the government that wants me to pay its bills.

Have a good day. More thoughts tomorrow.

Bilbo