Pondering a Possible Tax Increase
In my ideal world, the >federal government >would do comparatively little. It would "promote the general welfare" by "providing for the common defense"... not much else.
So neither the North Koreans nor the Russians would invade. There would be no need for children to fight a guerrilla war outside Seattle during a "Red Dawn." Otherwise, there would be little for the president to do other than tell jokes at a Catholic dinner in New York once each year. >
But my vision of a small national government is not in America's immediate future, no matter how I might pontificate. >
I, like my fellow conservatives, have to make peace with a bloated national government. That does not mean I have to surrender my conservative principles. Yet, if I want to be a positive influence on national policy, I must think "outside the box" to bring conservative principles to the national discourse regarding the possible.
I must first realize that our federal government spends too much. Yet, much of what it spends is so politically sacred that there is no chance it will be eliminated from the federal budget. For those things, we need to either >raise revenue or borrow from China. And if these are my only two choices, I must reluctantly choose taxes.
But what taxes? Raise income tax rates? Cut rates and "broaden the base"? The latter is another way to say "raise taxes on lower-income-earners" And, while I might choose to "broaden the base" as a way of > giving more citizens some "skin in the game," I know that raising income tax rates on the 47 percent is "dead on arrival."
One alternative might be to raise sales taxes, not income taxes, and in doing so, level the playing field between Internet retailers and brick-and-mortar stores. Currently, many Internet sales are sales-tax-free. That is because a retailer collects sales taxes only if goods are shipped within a state or to a destination where the retailer has a store or office.
So if Internet sales do not originate in a state with a sales tax or originate in a state with a sales tax with product shipped out of state, then the seller is often not responsible to collect or pay a sales tax.
Technically, the recipient of the merchandise is supposed to pay a "use tax" to the state in which the recipient lives. In reality, almost everyone who buys goods on the Internet does not pay a use tax and is, therefore, guilty of tax evasion. In effect, we are a nation of use-tax cheats and do not even know it - although, to be fair, no state has an effective use-tax collection policy.
The result is that Internet sellers have a 5 to 9 percent tax and price advantage over brick-and-mortar stores. Congress could have the federal government collect from retailers and send to the states the use tax for the state in which an Internet customer lives.
Congress could then reduce aid to state and local governments by the amount it collects. The result of this "spending neutral" proposal would be a lowering of federal spending to state and local governments, while keeping those governments funded in the same amount as before.
This proposal would provide an additional bonus. It would return some control of state spending policy to the states. In practice, the federal government sets priorities for state spending and gives aid to states for spending on these federal priorities. This proposal would return some funding decisions to the states, each of which might have a separate priority.
Now, I am not a fan of raising taxes. I would prefer to cut spending on both social and defense programs to amounts well below the current unsustainable levels. Indeed, "we have a spending problem, not a taxing problem."
But the reality of life is that Americans voted in November to refrain from severe spending cuts and endorsed some tax increases. We have to live within that reality.
But within that reality there is opportunity. If taxes are going to be raised, perhaps there are taxes which can marginally benefit the economy. Perhaps there are ways to both raise taxes and cut spending - not as severe as that proposed by the "fiscal cliff," but with a positive economic effect.
Robert M. Levy is chairman of the Moore County Republican Party. Contact him at Law52@prodigy.net.
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