2006: The Tax War Cometh

You thought the Republicans scored a coup when then managed to turn the Estate Tax into the “Death Tax?”  Think they pulled the wool over America’s eyes with tax cuts for the super wealthy?  Think again.  That was just the warm up.  

Having delivered on the Estate Tax, having easily picked off insane tax cuts for the billionaire boy’s club, having tossed mega-bucks to oil companies currently raking in record profits, the Republican hyper-privileged are not going to stop.  They’re swinging for the fences.

With 2006 elections practically on us, and every justification of the Neocon revolution in tatters, they’re going to be looking for a new causus belli – another sharp stick to poke in the eye of Democrats everywhere.  Like the Grinch, they’re going to “think up a lie, and think it up quick.”  And buddy, this one is going to be a whooper.  

The Republicans are going to run on eliminating the Income Tax.  And stopping them is not going to be easy.
A decade ago, no one would have thought the Estate Tax would fall like rotten fruit.  After all, it had been in place for most of a century, worked well, and affected only a tiny percentage of the nation.  Why should ordinary citizens take a hit so silver-spoon babies could keep more of daddykins billions?  Even most Republicans didn’t think this tax was vulnerable.  But never underestimate the effect of a good PR campaign.  By re-labeling this as the “Death Tax,” and through careful phrasing, the wealthy elite managed to convince even average citizens that the tax was unfair.  

True, the public is awake enough now that making the cuts permanent is going to be a little harder than passing the original hornswoggle, but they’ll wait for the right moment of distraction, or tack it onto the next “you have to support the troops” bill to fund the Iraqi fiasco.  Then they’ll get serious.

What’s next?  Tax cuts are so passé.  A Flat Tax is so Steve Forbes.  No, they’re going to push for a complete and total scrapping of the tax system.  

Frankly, the Republicans were going to take this step anyway.  If Iraq had worked out according to their rosy predictions, they would have ridden the coattails of that victory straight to the steam rollers smashing the IRS.  But just because they’ve been wrong on every important issue of the last decade, don’t expect them to even stop for breath.  After all, look at the Bush approach.  Tax surplus?  Why cuts are the answer.  Tax deficit?  Even more cuts!  

Besides, the party of Halliburton is in need of a major-league distraction.  And what better distraction than promising the most massive “something for nothing” deal in all of history?  

If you want a preview of the 2006 Republican platform, you need look no further than the bestsellers at Amazon.com.  Specifically, look at The Fair Tax Book by Neal Boortz and John Linder.  John Linder would be Congressman John Linder, R-GA.  Neal Boortz is a syndicated radio host on the Cox Network with a pitch that’s a good-ole-boy mish-mash of radical libertarian and terminal stage rabies.   What do these two intellectual giants promise in their book?  Everything.  At a discount.

In other words, in the 2006 elections, the Right is going to offer Free Money.  They’re going to tell the average middle-class American that they can get a 20% raise, and all they have to do is vote Republican.  It’s going to be the biggest bribe ever offered to the American public.

And explaining why this is nonsense, is going to be hard.

In a nutshell, here’s the Boortz-Linder thesis:

1. We eliminate the IRS – including not only personal taxes, but all corporate and business taxes as well.
2. We replace the income tax with a 23% sales tax.

Wait a minute, now.  If we replace the income tax with a sales tax, doesn’t that just shift the tax burden from one transaction to another?  No, say Monsieurs Boortz and Linder, because by freeing the corporations of their tax burden, they will immediately pass on the savings to their customers.  They promise that companies will be able to cut the prices of goods enough to eat all the increase in sales tax.  In other words, if you’re paying $40 for a toaster today, you’ll be paying $40 for a toaster tomorrow.   Only you’ll have more money to buy toasters.

With this miracle achieved, the economy will grow like never before.  Citizens will find themselves stuffed with tax savings, more confident, and ready to buy more goods of all sorts.  At the same time, American companies, freed of taxes, will be able to make goods so cheaply that they’ll be able to out compete factories overseas.  Manufacturing jobs will return even faster than they left.  In fact, as the world’s new tax haven, corporations will flock to America.  With all the new jobs brought in by this influx, Americans will have their choice of plum jobs at hefty salaries.  There will also be a huge increase in revenue as many of the industries now forced underground by “crushing tax burdens” pop up to play (vote Republican and make those prostitutes and drug deals pay their fair share!)

All this, and they promise that for the government the tax will initially be revenue neutral, matching the current income tax.  Long term, what with that expanding economy buoyed by new jobs and fat wallets, the tax base will actually grow.

They don’t exactly promise that their proposal will turn water into wine and make every woman look like Diane Lane, but then, I didn’t get through the last couple of chapters.  Oh, I forgot to mention that the plan includes an amendment to the Constitution, outlawing any future income tax.  Nice, huh?  

Of course, there are major problems with this fairy tale.  To shine a spotlight on the more obvious points:

1. Most goods sold in the United States are not made here (remember that goofy Perot guy and his “giant sucking sound?  Score one for the man with the ears).  So cutting the taxes that corporations pay will have next to no effect on what you load in the shopping cart.  Put on a 30% sales tax, things are going to cost 30% more.  Period.  (The book says 23%, but Mr. Boortz and Congressman Linder seem to have missed the 6th grade class on calculating percentages – they did it backwards.)
2. Taxes are a tiny fraction of the cost of goods.  The major costs are materials, energy, and labor.  Having no taxes will not bring corporations back to America so long as they can find the mix of those three components at lower prices outside our borders.
3. The book does not appear to address state taxes at all.  If the same tactic were applied there, expect the sales tax (the “it’s not a VAT!” VAT) to rise north of 40%.
4. Instead of “drawing money into the light,” this system would be much easier to avoid than the IRS.  Many transaction would be moved off the books, or converted into barter transactions to avoid paying this huge sales tax.
5. There would be a huge sales tax on homes, cars, and other large goods.  It might be nice to pretend that the cost of a toaster is going to magically decline, but does anyone really believe home prices will sink 30% and then some to make up the difference?  This plan promises to directly attack the one industry that’s been driving the economy for the last five years.
6. Say bye-bye to charities, as there’s no way to handle deductions under this plan.
7. While getting rid of the IRS might free up some D.C. office space, Boortz and Linder actually just replace the IRS with a new bureaucracy to handle the sales tax.
8. The plan would indeed make the US a tax refuge – and a spending wasteland.  Every incentive would be for companies and individuals who can afford it to make money here, and spend it elsewhere.

What the whole thing amounts to is nothing less than removing the tax burden completely from corporations, and almost as completely from the rich.  CEOs can make your money on the backs of US labor that pays 30% on every loaf of bread, then spend the dough in Monaco and laugh all the way to the bank.

For all that, this is going to be a hard fight.  A much harder fight than you might realize.  Boortz and Linder’s book is only the latest of several shots meant to soften up the public to this idea.  

While this might not end up as a major part of the 2006 campaign, it shows every sign of being this year’s model from the people who brought you such fine products as Iraq 2002 and Supply Side Economics 1980.  Right now, these ideas are all over right wing radio.  Right now, Republican pollsters are working “Fair Tax” questions into the spin they’re cooking for next season.  If they get any sign of traction, expect them to step on the gas.

The idea of killing the IRS and seeing your paycheck balloon will make fine 30 second sound bites.  As always, explaining why this is an absolute lie will be harder.

Praise Dean and pass the ammunition, because this fight is coming.