Why Republicans Can Never Reduce GovernmentSubmitted by Nelson Hultberg on Wed, 04/22/2009 - 16:26
Most Americans do not understand it, but the major cause of explosive government spending is our use of progressive tax rates to redistribute wealth. This is because the progressive income tax permits large constituencies of voters to pay zero taxes and equally large constituencies to pay next to zero taxes.
As we see in the chart below, IRS statistics show that the upper 50% of income earners in the U.S. pay 96.03% of all taxes, while the lower 50% of income earners pay 3.97% of the tax load. The bottom 25% of income earners pay zero taxes. Thus, a progressive income tax spawns a "something for nothing" voter mindset that dominates all elections. [From the Internal Revenue Service, Statistics of Income Division, September 2002.]
When large groups of voters are allowed the privilege of paying nothing and next to nothing in taxes, an irresponsible electorate will inevitably evolve to demand a steady expansion of government services. This is basic human nature and one of the cardinal laws of economics. If government benefits are free (or nearly free), demand for them will be infinite. Consequently, in every election there is an automatic 50% base of voters who always favor those politicians who propose increased government spending.
Overcoming this infinite demand for government spending will be impossible until we genuinely reform the tax system and eliminate its "something for nothing" aspect. This means ending ALL deductions, special breaks, loopholes, and rate progressivity. This will necessitate the adoption of a simple equal-rate income tax (i.e., a genuine flat tax) that does not convey favors or exemptions to anybody.
Since voters would then have to pay for all government subsidies and pork barrel programs proportionately out of their own pockets, they would lose their overwhelming desire for such subsidies and programs. They would begin to favor politicians who advocate "reduction" of government instead of its "constant expansion," because this is the only way they could get their own taxes reduced and more freedom into their lives. All kinds of Ron Pauls would begin to appear in congressional elections every two years because the electorate would demand it. But as long as voters pay zero taxes or next to zero taxes, they will continue to favor politicians who offer more programs and more pork every November at election time. An "equal-rate tax" is the only way to end the automatic expansion of government.
But such a flat tax must be a real flat tax, not the plans put forth by Steve Forbes and Dick Armey. Their two attempts to promote a flat tax are not the answer because they increase the personal exemptions from approximately $19,000 to $34,400 for a family of four. This would greatly increase the number of people who pay zero and next to zero taxes (from 50% of Americans to perhaps as high as 65%), and thus increase the number of people who have infinite demand for government services. The Forbes-Armey "tax reform" would create an explosion of government, not a reduction. If we wish to shut down the inferno of government growth and spending, then we must truly shut down the progressive rates that are causing its relentless expansion, which means all voters must pay the same rates, which means no exemptions. Period.
In other words, no one is to get special privileges. All citizens must contribute to the system rather than leeching from the system. Under a 10% flat tax, if a man earns $100,000 annualy, he would pay $10,000 to fund the government. If he earns $8,000 annually, he would pay $800. This way everyone (no matter how small their contribution) has a stake in being a responsible citizen and voting for the common good instead of trying to get something for nothing by taking money from his neighbor.
Such a tax will quickly bring about a reduction of government, and as a result the 10% rate can be lowered accordingly. We could probably have a flat tax of 5%-7% within a decade or two because no one will continue to vote for all the pork and privileges if they have to pay for them out of their own pockets. Think what kind of country this would create -- where voters are demanding that Congress phase out excess spending, where they are willing to back up their demands by axing any and all legislators who do not do as requested. What a remarkable turn around this would be. We would have an America with a relentlessly shrinking government instead of a relentlessly expanding government.
Thus if we are to truly reform our political system today, here is where we must start. This is the all-important element, the linchpin to set in motion the beginning of the end of the Leviathan. All voters must pay proportionally out of their own pockets for their government services. No political activism favoring freedom will ever succeed until this element is set in place.
This is the reason why all our efforts to reduce government over the past 40 years have failed. We are ignoring the people's built-in predisposition toward automatically increasing government every election year that comes from progressive tax rates. This is the fundamental root of our problem. Our tax system has created "infinite demand" for government growth because it exempts 50% of the American people from meaningful payment of taxes!
Unfortunately the nature of our two-party system precludes us from ever rectifying this fundamental problem. Neither of our major parties are willing to put forth the necessary legislation to bring about an "equal-rate tax." Why? Because they know it would be death to their desires to be re-elected. Only about 20% of the people would support such legislation -- the libertarians, patriots, Goldwater conservatives, etc.
There is a way, however, to bring about the necessary legislation. We need to form a political party that doesn't care about being immediately elected, a party that will tell the truth to the American people, and then be willing to wait until the truth wins them over in order to win the White House. To win the people over with the truth, however, we would need to form a third-party that could gain entrance to the National TV Election Debates where our presidential candidate could, like Ross Perot did in '92, give half-hour lectures on national TV about the necessity of enacting an equal-rate tax in order to stop the relentless growth of government.
It can not just be another conventional third-party, however, like the Libertarian Party or the Constitution Party. It would have to be a third-party that does not marginalize itself with utopian proposals.
Conventional wisdom today maintains that third political parties in America cannot work. But this is a fallacy; and the reason why is that all third parties, like the Libertarians and Perot's Reformers, in the past century have been built upon two catastrophic strategy flaws -- marginalization and cloning -- that doom them to automatic failure. But correct these two fundamental errors, and a powerfully effective third-party could be fashioned that makes it into the debates. (More on this below.)
Imagine, if you will, Congressman Ron Paul gaining entrance to the National TV Election Debates via a third-party to give scintillating lectures about proper taxation in a free society. Imagine him also including a lecture about how the Federal Reserve robs us of our savings every year and how it is responsible for the inflationary boom / bust economy we suffer from today. Such a performance would shake up the Demopublican political establishment, that is for sure.
What is so exciting is that we have the power today to accomplish such an education of the people if we would only develop the necessary will to pull it off. As I stated above, probably about 20% of Americans would support an equal-rate tax that would shut down "infinite demand" for government services. Certainly there are 15% of voters in this country who would do so; and that is all it would take to gain entrance to the all-important TV debates every September and October prior to election, where a freedom candidate could then take on the Demopublicans for their obtuseness and corruption.
The American people only support "progressive tax rates" because they have been bamboozled into believing that an equal-rate tax would hurt all low income earners. But this is not true, and I have written a book demonstrating that passage of a 10% equal-rate tax payable by everyone would actually raise the standard of living of the low income earner who presently pays zero taxes. (More on this below.)
The 25% of the population who pays zero taxes will not support a 10% flat tax no matter how persuasively it is presented. But what about the upper 75% of the population who presently pays all the taxes? How many of them will support a simple 10% flat tax with no exemptions that requires 10 minutes every April 15th to figure? Conceivably half of these voters (38%) would support such a tax policy. This is because once it is explained to them via lectures in the debates that lower income groups will not suffer and in fact will benefit from a 10% equal rate tax, then the massive guilt that presently dominates these voters will evanesce, and they will let common sense guide their vote. It is this guilt imposed by statist propaganda that makes Americans vote for highly progressive rates and continually push the exemptions higher and higher like Steve Forbes and Dick Armey have done.
Why cannot we use the Republican Party to do this, you ask? Because our present tax system is structured to reward those politicians who peddle more and more spending programs to the people, it doesn't take too long for Republican congressman to realize that to assure re-election they must play ball and give the people the spending programs they want, which means joining the Democrats to wallow in pork and privilege. Very few Republicans will ever go up against this system because they are in politics to "win power," not to tell the voters the truth about our problems.
Republicans know that proposing an equal-rate income tax would be death to their desires for re-election. Thus they will rise up in opposition to smear all mavericks such as Ron Paul who attempt to attack their use of this tool. It wasn't just that Ron Paul opposed the GOP hierarchy on the Iraqi War; he opposed them on their domestic capitulation to social welfarism also. This is why they treated him in the 2008 campaign like a skunk that showed up at the garden party.
Thus working within the Republican Party by trying to vote in more "conservatives" will never stop America's dictatorial drift. We have been attempting to do this for over four decades now, and the conservatives we send to Washington continue to be bought off by "infinite demand" as fast as we can send them.
In conclusion, the only way to stop the growth of government is to propose the enactment of genuine tax reform that will end "infinite demand." This will require a third political party willing to tell the truth to the American voters every election year. Republicans can never tell the truth to the people. And until the truth is told, the voters will continue to opt for the fallacies of statism.
For those readers who are interested in pursuing this way of thinking, I have written a book about it titled, The Ron Paul Revolution: Why We Must Form A Third Political Party to Win It.
The book explains how to avoid the two fundamental errors of marginalization and cloning, puts forth a plan for a resultant third-party, and explains why it is the only solution to stopping the runaway freight train of government growth. Those who preach that we must, at all costs, eschew third-party efforts and "remain within the GOP" are captives of a myth. This book shatters the myth and outlines a revolutionary political strategy (never before envisioned in history) that will unify all conservatives, libertarians, and independents into one party that can effectively challenge the statist establishment in Washington and bring about a dramatic political realignment equivalent to the Republican displacement of the Whigs in the mid-19th century. Click here for a review of the book.