Tax holiday by spending cuts

It was published in the Spokesman-Review print edition yesterday that the Republican-controlled House of Representatives want to “balance the budget” by no longer funding the IRS.  If you are a person who hates paying taxes that sounds like really great news.  If you are a tax cheat, or someone who works hardest at looking for tax shelters, that’s even better news.  Of course, tax cuts take money out of the Treasury in the form of revenue no longer collected.  But, when it comes to people who do not file tax returns even refuse to do so for proclaimed “ideological reasons,” that is an even higher amount of revenue not collected for the Treasury.  So in the interest of balancing the budget, the GOP will go after the political target called the IRS, and become political accessories to the crime of tax scofflaws anywhere.  Quite frankly, I don’t have the numbers of what it would cost the Treasury to no longer allow the enforcement of tax collections.  But let me take an educated guess, that it would cost the Treasury more, raising our deficits higher, than it would cost to keep your friendly or not so friendly IRS agent on the payroll.

Years ago, during the Reagan era and especially afterwards, there were some particularly radical Republicans who deemed that we should get a “flat tax.”  Say, to take a number out of the air:  15% regardless of the income status.  Which would mean that a person who was paid $8,000.00 a year on average would get the same 15% income tax as a guy making $8,000,000,000.00.  However, what would that mean in actual tax collections?  The guy who only makes $8,000.00 in total income would have $120.00 taken out.  Where as, the guy who makes $8,000,000,000.00 would have comparably:  $120,000,000.00 of total income taken out.  That would seem like a lot of money, but more easily afforded by the really wealthy dude than the $120.00 that is taken out of the wallet of the working impoverished.  Given my tax penalties of the last year, where my take home pay from where I work was no more than a little over $6,000.00 and the income tax on that take home pay was $48.00, a 15% flat tax would actually increase the amount of taxes to be paid.  While significantly dropping the taxes that the truly wealthy had to pay.  Then, if you take out the deductions, such as apparently Rep. Michele Bachman wished to do (reference a recent Froma Harrop column) for oh the costs of certain medical supplies or medical procedures, that actually would also increase the tax penalties against people who are in particular struggling to make ends meet.  Where as our really wealthy dude would weather the blow of the loss of any deductions just fine because he won’t be audited by a defunded IRS.  And further, can squirrel the vast majority of his income in tax shelters and not have to account for its whereabouts.  And yeah, even better yet, can put out a paw for a lot of federal dough in the way of subsidies, no less.  It is actually nice that a newspaper like the Spokesman-Review publishes such material, the GOP have made it plain whom all they care about, “the American people” consist in actually about 1or 2% of the presumably taxpaying public.

But even if the GOP had been able to make a go of a “flat tax,” there would still be the necessity of who would enforce it.  As already described, your guy who’s a tax scofflaw or who runs his megawads of greenbacks to an off-shore bank at the first opportunity, isn’t necessarily going to give it up to the feds or the states at the first opportunity.  So, around the same time as the GOP first floated the “flat tax,” they also floated the “VAT,” the Value Added Tax.  Now what would have been the cost of implementing a “VAT?”  We also saw an attempt by Congress back in the day to push a luxury tax on fine jewelry, high priced toys like yachts, etc.  Only the luxury tax once implemented was soon repealed.  Especially when it met with some heavy resistance from yacht and jewelry sellers.  Then compare the “VAT” to a luxury tax.  It could be considered, like a luxury tax, a tax upon a tax.  Precisely, you have your state sales tax for any and all items purchased within the state (for any state that actually has one and depending on what the tax exemptions might well be), the “VAT” would become yet another sales tax that presumably would be collected for the federal coffers.  Only, unlike the luxury tax, the “VAT” would affect the dude making $8,000.00 face an extra tax burden and having the dude who makes $8,000,000,000.00 have kittens on the very idea that he would have to pay a “VAT” at all, just as with the luxury tax.  Well, the guy with the $8,000.00 take home pay would be more likely to pay the “VAT” than the guy who can invest wads of cash in his favorite member of Congress.  If that particular history of political theory regarding taxes at least proves helpful.

Froma Harrop had suggested in her recent column that much debt could retired if we didn’t have to subsidize the wealthy.  Well, if the GOP were operating on some degree of common sense, much debt could also be retired by getting the scofflaws to pay up, and the people looking for tax shelters to account for their annual income as well.  Just don’t consider the GOP looking beyond protecting their own brand of sacred cows at all costs to the potential detriment of the nation and the ultimate failure to balance the budget and significantly reducing the debt.

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2 Responses to “Tax holiday by spending cuts”

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