REPLACE the Bush Tax Cuts
December 14, 2010 Leave a comment
Republicans, Conservatives, libertarians, independents, and even Democrats who aren’t rabidly Liberal are all defending the Bush tax cuts, insisting that some or all of them must be extended…but it’s not because any of us like them.
In reality, even Conservatives and Republicans never really liked the cuts, except as a lesser evil versus no cuts at all…and the same is even more true, today.
Why aren’t the Bush “cuts” likable? Because they’re ridiculously bloated with rules, exceptions, special favors for special interests, bureaucracy, government winner-picking and other distortion of the economy, and therefore are insanely expensive to implement.
In other words, Americans have to PAY billions of dollars, in time and actual cash, to deal with the complexity it adds to the tax code.
Unlike the Reagan tax cuts, that may actually have saved taxpayers even more in compliance cost than in taxes reduced, the Bush tax cuts were estimated to add up to $114 billion per year in compliance cost, with its maze of tax credits, exemptions, and other economy-distorting favoritism and punishments. This nearly cancelled out the actual “cuts”.
It is estimated that simply complying with the overall income tax costs about $350,000,000,000 every year. That is a little less than ten times as much as the “tax cuts for the rich” that the Liberals are trying to block being extended right now. It is far more than the ENTIRE set of Bush tax cuts being debated now. It is over several times as much as ALL of the cuts, including the Stimulus welfare disguised as “tax cuts” that Obama is demanding be extended as well.
We could let the ENTIRE tax cut package expire…all of the Bush cuts for the “wealthy” AND “middle class”, all of the Obama stimulus “cut” handouts, including in both cases all of the tax credits that give free money to people who don’t pay real income taxes at all…and yet leave the taxpayer with MORE money in their own hands, if:
We simplify the tax code.
We could flatten it, while letting the overall revenue estimate INCREASE to eliminate all of those “cuts”, and people would still save so much that the economy would prosper.
This could be done by eliminating most exemptions, credits, and other economy-distorting favoritism, and reducing the number of tiers of taxpayers.
We should, as any real economist has insisted for at least two decades, implement a flat tax…everyone pay the same tax rate…whatever it takes to match the current income tax revenue. Exempt everyone’s income up to the poverty level, so nobody in poverty has to pay, but leave everyone else paying the EXACT same amount.
This would reduce tax compliance to less than one tenth of its current cost. But let’s imagine it leaves compliance as high as $100 billion dollars per year.
That means we’d save $250 billion next year. Inflating this over ten years the way tax cut estimates usually are, this would “inject” between three and four TRILLION dollars into the economy in the next decade.
We don’t need Bush/Obama “cuts” that cost us more in compliance than they actually save us per year. What we need is a simpler, fairer tax system that we can pay and then get on with our job of creating wealth for ourselves, and therefore the economy.