CAPITAL JOURNAL: Tax Cuts Gain Relevance as Outlook Dims

The Wall Street Journal ^ | November 27, 2007 | GERALD F. SEIB

[Aristotelian]

So far, tax cuts have seemed largely a pro-forma campaign plank for Republican presidential candidates: Call for extending President Bush's tax cuts, establish your Reaganite credentials, and move on.

Until now, that is. With the economy heading toward an election-year slump, or worse, tax cuts to stimulate the economy are starting to look better and better as an item on the campaign menu. . . .

recession in the middle of the 2008 presidential campaign would be a game-changer for both parties.

For Republicans, the bad news is that they inevitably would shoulder much of the blame because they control the White House. The good news for them is that they can start pushing tax cuts as a way to spur a slumping economy. That's a better argument than pushing tax cuts for their own sake, which is pretty much where Republicans have been. The moment may be meeting the message.

For Democrats, the tax-cut question will be the opposite: If the economy is perilously close to recession, do you really want to propose tax increases? And a tax increase is precisely how Republicans portray any move to undo the Bush tax cuts.

[Aristotelian]

I'm not so sure I buy the premise of an economic slowdown bordering on recession, but I am glad to see tax policy moving front and center in the election. This should help the GOP, whoever the nominee is.

[Man50D]

But the new wrinkle Mr. Thompson has just added is a proposal for a voluntary flat tax. Taxpayers would have the option of paying a flat income tax, with two rates. For joint filers, that would be 10% for incomes up to $100,000 and 25% above that.

This is not a new wrinkle. Mr. Seib needs a history lesson. When the 16th Amendment was enacted in 1913 it began, like Thompson's proposal, as a two tiered flat tax system. It ranged from merely 1% on the first $20,000 of taxable income and was only 7% on incomes above $500,000. In 1939, 26 years after the Sixteenth Amendment was adopted, only 5% of the population, counting both taxpayers and their dependents, was required to file returns. Today, more than 80% of the population is under the income tax.

Fred Thompson's proposal is simply more tinkering with an oppressive overly burdensome and complex 67,000+ page tax code system. It will revert us back 94 years but eventually will become once again the monstrosity it is today. If Fred Thompson were truly serious about reducing the tax burden he would call for a fundamental change by replacing federal income taxes with a national sales tax as outlined in the Fair Tax Act(HR25/S.1025) currently before Congress. Those who ignore history are condemned to repeat it.

[Man50D]

Fair Tax ping!

[kinoxi]

It sounds good (fair tax) at first, unless you try to buy or sell something in a larger denomination such as a car or a house...

[Mom MD]

Yes, but you have your whole pay check to pay the tax with. When was the last time you actually got to bring your whole check home?

[kinoxi]

I don’t owe the IRS. I’ve been self employed most of my life. I don’t relate to your point. The tax system needs an overhaul granted, but a flat tax does not work in situations related to housing and other high dollar transactions IMO.

[Aristotelian]

Huckabee is the only GOPer running who advocates the fair tax, and he has no chance at getting the nomination. That makes debating the fair tax moot as far as this election cycle goes. Others want to cut the income tax. That will contrast nicely with Dems’ calls for raising taxes.

[etlib]

For Republicans, the bad news is that they inevitably would shoulder much of the blame because they control the White House.

But, of course, the problem is that the Dems control congress where the tax policy must originate. And, any on-coming recession is likely due to economic pull-back due to the almost certain knowledge that the Dems will allow the "Bush tax cuts" to expire resulting in a huge, sudden tax increase.

Sad that the public and even the WSJ don't even realize this.

[Man50D]

Huckabee is the only GOPer running who advocates the fair tax, and he has no chance at getting the nomination. That makes debating the fair tax moot as far as this election cycle goes.

Wrong. Read my tag line. Duncan Hunter is a cosponsor of The Fair Tax. Regardless of that point having support from a candidate is helpful but not essential. President Bush didn't support denying amnesty for illegal aliens this summer but a strong grassroots movement by the people forced Congress critters to reject amnesty for illegals at least twice. The Fair Tax is experiencing the same growing grassroots momentum.

Others want to cut the income tax. That will contrast nicely with Dems’ calls for raising taxes.

That's the same BS and line of thinking people have been fed for the last 94 years since the income tax was enacted and it has resulted in an increasingly burdensome and complex tax code. It's time to think outside the box with The Fair Tax.

[Man50D]

The tax system needs an overhaul granted, but a flat tax does not work in situations related to housing and other high dollar transactions IMO.

I'm advocating The Fair Tax Act, not a flat tax.

[Aristotelian]

I didn’t know that about Hunter. It diminishes my opinion of him.

The main problem with the Fair Tax is the tax base. You can’t get a tax base large enough to replace the federal income tax and FICA at a reasonable tax rate. Even GDP isn’t large enough. Also, the Fair Tax creates the absurd situation in which gov’t taxes itself. It’s a non-starter.

[Goreknowshowtocheat]

I have years of overhaul on my shelf. I have been in the tax preparation business at one time in my life. I almost welcomed each tax overhaul or simplification. Each simplification brought more clients and more complication. This is utter nonsense that these guys want to simplify anything. They want the public confused so they can be easily manipulated. Until we get the tax where we pay without being criminals then we are slaves and unindicted criminals. (since ignorance is no excuse) I can assure you 99% of the people are ignorant of what the jibberish in the code says.

[kinoxi]

I can assure you 99% of the people are ignorant of what the jibberish in the code says.

I'd say that's about accurate in my experience. I'm doing three 1040x's right now for someone who had three different paid preparers screw hers up. The tax code needs to be simplified so that the average person isn't intimidated due to it's complexity and can confidently do their own. I've taken courses and done an immeasurable amount of personal research in the last decade plus and still need to constantly refer to the code as seemingly irrelevant nuances are enacted periodically. It seems intended to confuse the general population.