Raising Rates Isn’t the Only Way to Increase Taxes: Ask a Democrat

Right From the Start

The April 10 edition of the Statesman Journal, in light of the $3.5 Billion mythical budget deficit, carried an article noting that the legislature is focusing on twenty-three tax deductions, euphemistically referred to as “tax expenditures.” The April 11 edition of The Oregonian carried an article by Michelle Cole noting that there is little appetite in the evenly split House for tax increases.

Boys and girls you need to talk to each other. Eliminating or reducing tax deductions IS raising taxes. For those of you forced to endure an education in the Portland Public Schools, the measure of taxes is how much the taxpayer pays, not the rate at which he pays nor the deductions that are allowed. If you raise the rate, you increase taxes; if you reduce the deductions you increase taxes. You can put any color of lipstick you want on this pig and it is still a pig.

The term “tax expenditures” is another creation of liberals designed to reduce the stigma of the real intent of the parties. It is like changing “liberal” to “progressive”, “illegal alien” to “undocumented worker” and “union thug” to “labor leader.” The newest one emanating from Pres. Obama is “increased investment” instead of “increased spending” – as in “increasing our investment in education”, “increasing our investment in green technology” and “increasing our investment in alternative fuels.”

The most offensive element of the term “tax expenditure” is the notion that the state spends money in the form of tax deductions. That can only be true if you begin with the assumption that all of your income belongs first to the state and any amount you are allowed to keep is considered “an expenditure.” We have had an opportunity to study such a system for nearly three-quarters of a century and see its abject failure at every instance. It was called communism and it survived for those seventy-five years solely because it was coupled with a totalitarian regime that was among the most repressive in all of history.

Now, before all of you liberals get your panties in a wad, let me tell you that I hate deductions – but for a reason entirely different than yours. You hate deductions because it reduces the amount of other people’s money that you can spend on your favorite programs. I hate them because they have become the method by which government redistributes wealth and attempts to pick the “winners and losers” in an otherwise free and open economy. Frankly, I think the latter purpose is more egregious than the former. The idea that taxpayer money should be used to fund investments in unsustainable alternative forms of power is just as bad as the depletion allowances available to big oil. Forcing taxpayers to purchase “renewable” energy at a premium price by the Public Utility Commission is just as onerous as providing subsidies to not grow certain crops.

The ability of various groups to win favor from the government in the form of tax policy has created a massive cottage industry among lobbyists at the city, state and federal levels. Billions of dollars are spent each year by businesses, labor unions, and government leaches to ensure that they are advantaged in the market place. That is multiplied by the hundreds of thousands of tax collectors required at every level of government to extract wealth and matched by the accountants and tax experts necessary to wade through the volumes of deductions, credits, exceptions and giveaways. All of these are indices of government grown too large, too intrusive and too subject to manipulation by those with money or political power.

So, liberals, I’ll stand with you for eliminating these deduction if you are prepared to eliminate all of them and not just the ones that advantage the other side. And I’ll stand with you if you use these to reduce tax rates rather than just increase the amount of money available to government to engage in social engineering.

Here’s a pretty simple formula. Eliminate all deductions with the exception of taxes paid to another jurisdiction. Eliminate any taxes on an amount equal to Oregon’s minimum wage. That would be $16,800 ($33,600 for those filing jointly). That should also mitigate the effects of losing tax deductions for mortgage interest. For income in excess of that amount and up to five times the minimum wage, or $84,000 ($168,000 for those filing jointly) the tax rate should be an amount to be determined as shown below. For income in excess of five times the minimum wage, the tax rate should be twice the rate for the first rate group.

Businesses would pay at the same rate as individuals (over eighty percent of business currently pay at individual rates). Gross income would be adjusted to reflect the actual cost of goods produced or sold. There would be no deductions for entertainment, conferences, business groups, lobbying expenses or the like.

The tax rate should be calculated by determining the amounts necessary to generate sufficient revenue to match the amount of income tax revenue collected for 2010.

Having done this the number of public employees whose sole task is to enforce tax codes can be terminated, or whose task is to impose uneconomic decisions (such as the use of renewable energy, etc.) would be terminated. The hordes of lobbyist who curry tax favors would be put out to pasture and the accountants can go back to auditing which is where they actually lend value to the market place.

Will this ever happen? Of course not for two simple reasons. The Democrats want to use the elimination of tax deduction to increase revenues, and the army of lobbyists benefiting from this skewed tax policy will fight for job preservation. But then again you could always move to Texas, Wyoming or Nevada where there are no income taxes.

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Posted by at 05:00 | Posted in Oregon Government, State Budget, State Taxes | Tagged | 25 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Libs Stuck on Stupid Again!

    Don’t try to confuse fiscal illiterate Liberals with terminology none of them seem to understand. I seriously doubt that half of them even know how to balance a checkbook; much less reconcile a bank statement.

  • Bob Clark

    Not a bad proposal. I would suggest a better solution would be to allow state government to broadly tax anywhich way it wants but with a limit of collecting no more than say 5% of all Oregon economic output. Maybe this limit would be calculated on a rolling ten year average (allowing government to adjust down its share of output in good times and increase it in bad times).

    Of course, this won’t happen either at least not until the mainstream political philosphy of Oregonians changes. Currently, there are so many “violin” players any call for fiscal prudence and limited governance is drowned out by deafening dissonance. A month or so of this violent “violin” playing and even conservatives say uncle.

    • Ron Marquez

      …..”I would suggest a better solution would be to allow state government to broadly tax anywhich way it wants but with a limit of collecting no more than say 5% of all Oregon economic output.”…..

      If you could get the politicians to agree on a reasonable definition of “all Oregon economic output”. I like Larry’s proposal better because it’s clearly defined and leaves nothing for politicians to determine for us.

    • Ron Marquez

      …..”I would suggest a better solution would be to allow state government to broadly tax anywhich way it wants but with a limit of collecting no more than say 5% of all Oregon economic output.”…..

      If you could get the politicians to agree on a reasonable definition of “all Oregon economic output”. I like Larry’s proposal better because it’s clearly defined and leaves nothing for politicians to determine for us.

  • wc keepers

    I am all for reducing the deductions if the tax rate is drastically simplified and reduced. My wife and I made a combined 39,000 last year due to about 8 months unemployed and underemployed, yet we still owe Oregon about 1800 with a family of five. The idea that these taxes are designed punitively to punish the rich are ridiculous, what it does is reward certain types of activity while penalizing others for no coherent rhyme or reason other than the requests of lobbyists. I love the idea of deducting a minimum wage income per adult and taxing the rest at a flat rate or even a two tier rate as the author suggests. It makes sense for low income people too, not just businesses and a greatly simplified tax code saves everyone money and time

  • HBguy

    I think a majority independent left of center people would love this proposal as outlined. Though their preferred percentages, baseline year, or other details could differ.

    The problem with this type of proposal isn’t a lefty or righty problem. Its an entrenched interest problem, whether that entrenched interest is industrial, union, or financial industry. Go ask your lobbyist friends, or your friends at AOI, or at the Ram what they think about it.

    But, I will say that like the CRC comment co-authored by unlikely bedfellows, I appreciate the fact that this contains is some independent thought that can cross apparent ideological divides. Perhaps the author can recruit some known left of center thinker to co-author some more similar proposals.

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