Thursday, October 18, 2007

Taxation With Representation

Everybody hates taxes--theirs, not yours. Yours are just fine.

From time to time, some political would-be-savior will remember that tax-payers hate taxes, and try to get them riled up by offering some bright idea about shifting the tax burden around like a pea under a shell. Steve Forbes, an enormously wealthy man, drew attention to himself a few years ago and ran for President, partly on the platform that the current tax system was unfair. You can pretty safely assume he meant it was unfair to him. He wanted to abolish the federal progressive income tax system and replace it with a uniform national sales tax.

Recently the Speaker of the Georgia House of Representatives served up the same fix at a country club breakfast meeting. I will take the name in vain of neither the speaker nor the country club. Repeal property taxes and exemptions from sales taxes for groceries and other goods and services, including medical care, he chirped and got a big round of applause. This always strikes folks as fair who only spend a relatively small portion of their income on groceries and the other things it takes just to get by. Those of us who spend large chunks of our paychecks on basic necessities would be howling a different tune if such a plan ever came to pass.

I don’t know why some politicians love these sales tax ideas, but it’s nothing new. Bad as things are, they can only be made worse by the state legislature’s shifting the tax burden to those things people cannot avoid, like food and basic services.

The issue is not net dollars, $5,000 in taxes here vs. $2,000 there. Even if the simple math tells us that $2,000 is less than $5,000, tax fairness is a matter of tax distribution and has to be measured by what percentage of someone’s bank account has disappeared, the same size bite out of a smaller wallet. When consumption-based taxes are increased, the biggest burden goes against the less well off. In the interest of full disclosure, I will tell you that, as an owner of rental property, I pay more property taxes than income taxes.

Georgia already has a booming lottery business, a powerful magnet to draw in the discretionary spending, if hopefully not the grocery and rent money, of folks unable to calculate the odds against them or to resist believing in dumb luck. Legislators have no shame.

All those un-American countries in Europe have high taxes on consumer goods and services. These range from 15 to 20 percent in France, Italy, The Netherlands, Germany, and the Scandinavian countries, as any red-blooded American who has ever bought a beer or cup of coffee over there will tell you. European countries don’t call it sales tax. They call it Value Added Tax, VAT. Maybe they’re trying to convince people something is more valuable because the tax has been added. American politicians who would not get caught dead endorsing the kind of health systems that prevail in these Socialist democracies nonetheless think it is a great idea to up the taxes on a cup of coffee, a cart full of groceries, or braces for your kids.

My beer buddy Luther has a low opinion of politicians. Let them chase hookers and signal for new acquaintances in the public bathrooms, Luther says. It keeps them out of serious trouble and prevents them from making life miserable for the rest of us.

(Originally posted 9-6-07)

Copyright 2007 by William C. Cotter

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