For anyone that has filed a tax return over the past century, it can be easy to conclude that the tax code in the United States today is a very complex one. In fact, the tax codes in most of the Western world are rather intricate.
This is why many Republican lawmakers and political candidates – 2012 Libertarian presidential candidate Gary Johnson being one of them – have introduced plans to revamp the tax system in order to make it fairer, more sufficient and simpler to understand. Some concede that the initiatives, although nice to see, won’t do much in the grand scheme of things.
Former Texas Republican Congressman and three-time presidential candidate Ron Paul published an op-ed this week on the Ron Paul Institute for Peace and Prosperity website. The article presented the case that any tax reform initiatives are futile endeavors unless spending reforms take place.
The bestselling author of “End the Fed” and “The Revolution: A Manifesto” said that any tax reform plans might even raise taxes because they close loopholes, which Paul says is another way of saying they want to increase efforts to steal the people’s money.
Paul cited Thomas Di Lorenzo as saying, “…private individuals always spend their own money more efficiently than government bureaucrats do.”
The current GOP plan is called “dynamic scoring,” a proposal that tax cuts through investment and business can increase revenues to the federal government. Paul wrote that tax cuts should be large enough that they actually slash money that enters into government coffers.
“Sadly, politicians in Washington refuse to consider any tax plan that would decrease government revenue,” stated Paul. “This is because the prevalent attitude in DC favors protecting the welfare-warfare state over protecting our liberties. As the obsession with the Laffer curve shows, even many alleged supporters of the free market only pretend to support liberty as a means to enhance the well-being of the welfare-warfare state.”
Paul argued that most Washington legislators omit the fact that deficit spending is a tax in itself. In addition, it allows the Federal Reserve to monetize debt and institutes an inflation tax on the American people.
“Instead of worrying over the latest plan to enable the government to more efficiently take our money, people who want to advance liberty must focus on breaking the intellectual and political consensus in support of the welfare-warfare state. Only then can we radically reduce all taxes, including the most insidious and regressive of taxes — the inflation tax,” Paul concluded.
There is a grain of truth in Mr. Paul’s insight into the relationship between tax reform and spending. Good tax reform should increase good jobs and the need for government safety net spending.
For example, replacing the job killing payroll taxes with a 1% wealth tax or 8% VAT (or half of each) would create full employment and higher salaries for all. That would make most of the spending problem disappear.