Friday, October 27, 2017

Tax Policy: A Reponse to Rep Dan Newhouse

by Bob Scherpelz
Congressman, Dan Newhouse (R-WA4), sent out emails asking what we thought should be in the new tax policy. Here's what I sent him:

Congressman Newhouse:

Last week you sent a letter to us asking what we think tax reform should look like. Thank you for offering the opportunity to tell you my vision.

I would like to propose a radical idea: that the tax system should raise sufficient revenue to adequately fund all the essential functions of our government. We need a strong military, and a capable foreign presence. We need to provide a sound safety net to all of our citizens who need it. We should provide an infrastructure that looks like a world-class country rather than a shabby one. We must maintain our leadership in education and scientific research. I have probably forgotten a few areas, but I think that the USA should be the world's superpower; it should be the leader of the free world; and it should be a just nation, a model to all others. This sounds like an expensive proposition, but our country has tremendous wealth and resources, and if we had the will we could produce the nation I describe.

The nation's tax system should share the burden equitably, which means an aggressively progressive structure. This is based on standard Christian ethics, as President Kennedy stated, drawing from the gospel of Luke: "For of those to whom much is given, much is required". A progressive tax structure will produce better equity, both in income and wealth, working towards a just society.

I know that the Republican party is unlikely to follow my suggestion, since they are discussing large tax cuts, especially for the wealthy. Their justification is that the resulting stimulation of the nation's economy will more than make up for a decrease in tax revenue. A number of economists disagree with this principle and point out that recent tax cuts did not produce the promised economic stimulus. I propose that legislation providing a large tax cut should include an accountability clause. It should have numerical targets, as a function of time, for the growth of GDP, the growth of employment and worker wages, and the decrease of the national debt. If these targets are not met, the tax structure would automatically revert to one that raises enough income to bring the deficit and debt down to appropriate levels.

Eliminating the estate tax would be a terrible mistake. This tax affects only the wealthiest members of our society (I don't know anyone likely to leave $11 million to their heirs), so eliminating the tax would be a gift to the super wealthy. The argument of being "taxed twice" is phony: the recipients of the inheritance will be taxed for the first time. I don't see anything special about a given packet of money, tracking how many times it's been taxed: how many times will a $20 bill have sales tax applied to it.
 Simplifying the tax code would be a good thing, but of course every deduction has a defender. But if popular middle class deductions are eliminated, I hope that there will be a vigorous effort to eliminate the many provisions that benefit the wealthy. I would particularly like to see the "carried interest" loophole eliminated.

Congressman Newhouse, I know that you have a difficult job ahead of you. But there is an approach to taxation that has not been tried in a while: instead of treating taxes as an unjust burden that people should be freed from, I think that you should appeal to Americans' basic generosity and patriotism. Remind them that they are living in the greatest country in the world, that we could and should be the world's leader, but that this is not cheap, and there is no magic pot of money to tap - it is the responsibility of all of us citizens to share our treasure to make this country great. That argument would work with me.

Sincerely, etc.