Wedge Issues: Taxation

Today, FoxNews ran a story hidden in the basebar of the organization's homepage that said that Bush Administration officials were huddling with members of Congress to hammer out alterations to the tax code, including one that really took me by surprise; the Administration is floating the idea of eliminating the IRS altogether.

(here's the story: FoxNews link)

Now, normally I'd greet this idea with at least a modicum of joy. After all, nobody likes being taxed, even those of us who barely earn enough to come up onto the IRS's radar.

However, there is the simple matter of funding the federal government, and that's where the Administration, as usual, becomes a collection of right-wing moneyhoarders: they want a national sales tax.

In order to fund the government at the level it is now, the national sales tax would have to be somewhere between 23 and 30 cents on the dollar, for every dollar spent on taxable expenditures (rent and mortgage are not taxable, so more on that later). In simpler terms, presuming you spend about one third of your income on rent OR on mortgage (which is about the average), your tax rate will be between 14 and 20 percent on every dollar you spend at stores, online, or elsewhere. Anywhere an item crosses a state line, it becomes federally taxable, and will become fair game for the feds.

This is, to put it bluntly, an idiotic idea. The only people that this will benefit are those who currently pay more than 23 percent income tax, which is people who earn $68,800 dollars or more, or families that earn more than about $120,000. Otherwise, you're going to end up paying more in federal sales tax than you would otherwise.

Here's an example: I've earned $20,726 this year. My rent has, thus far, been $6,600. That means my taxable expenditures shold be about 14,100 dollars. Problem is I've actually spent more than that, about $18,000 all told (as have most Americans - private debt load is increasing, which means that Sally and John Public are spending more than they're earning). So my taxable expenditures are around $18,000 this year. At the lowest possible federal tax rate, I'd have paid $4140 in additional income taxes.

But wait! My federal witholding taxes this year have only been $2300! That means that my tax rate would almost double under the administration's plan.

The Democratic Party must act. First, it must begin to run ads indicating what the Administration intends to do. Secondly, these ads must be run 24/7, in all 50 states, and must use real people. These ads must explain why the federal sales tax is a bad idea, using these same real people.

Finally, these ads must point out that the only people who would see any tangible benefit to this program would be those who earn above a certain level. In the end, it's about the top 10% of people within the United States - the people who tend to be protected by the Republican Party anyway.

Secondly, the party must push its own tax agenda - this agenda must include the John Kerry platform of taxation - extending tax cuts to the poorest, increasing the income floor for taxation, and increasing the tax rate on all persons earning $175,000 or more, per year. That way, when the Republicans vote against it, the Democrats can instantly begin accusing Republicans of voting against making the Bush tax cuts permanent - precisely the sort of attack the Democratic leadership needs.

Since the 1950s, the Republican Party has been one which promises fiscal restraint and ends up hitting hardest those who are least able to bear the burden. This Administration has shown itself no different, and the Party must react.