by R. Lee Wrights
BURNET, Texas (March 24) – I have heard it said by some that the “revenue-neutral” Fair Tax will “jump-start the economy for the next 100 years.” That is simply not true. No tax has ever jump started any economy. Taxes have the opposite effect. They stall the economy by stiffing incentive and creativity. The only thing a tax stimulates is a desire to avoid it by those who the tax is imposed upon.
What this country needs is tax relief, not tax reform. All you have to do is look at American history to see the proof of this. When taxes are reduced, and the nation is at peace, the economy thrives and people prosper. When taxes are raised, and the nation is at war, the economy stagnates. There is no escape from these simple economic realities.
Daniel Mitchell, a Heritage Foundation senior fellow, examined three periods in U.S. history and found, “There is a distinct pattern throughout American history: When tax rates are reduced, the economy’s growth rate improves and living standards increase.” And while lower tax rates are important to economic growth, they are not the only critical issue. “Both the level of government spending and where that money goes are very important,” he wrote.
We also know that cutting taxes, along with cutting regulation and eliminating trade barriers, was a key factor in fostering economic booms in Great Britain, New Zealand and Ireland during the 1980s and 90s. Any time taxes and regulations are decreased; the citizens who drive a nations economy become wealthier. Indeed, the very signs of economic recovery and boon are a wealthier people and a poorer government.
Fair Tax fans are proud to defend their proposal because it’s “revenue neutral.” It will generate as much revenue as is currently collected with the income tax and other federal taxes. But that’s just the problem; it’s not a tax cut, so it won’t stimulate the economy. Indeed, it’s likely to create havoc by suddenly changing the incentives to spend and save. It’s like rearranging the deck chairs on the Titanic. All the Fair Tax does is change the method a bloated federal government employs to extort money from the people. It merely rearranges the already staggering burden of government on the shoulders of American taxpayers.
The economy will continue to flounder so long as those who run government think they’re smarter than us, and are better judges of how we should spend our money. Economic growth and prosperity will continue to stagnate so long as politicians can use money wrung from taxpayers to subsidize the businesses and industries that finance their campaigns. America will never regain its economic preeminence so long as the tax code is used for social engineering, to manipulate people into buying hybrid cars, saving for their retirement, or investing in historical buildings.
How can the Fair Tax “jump-start” anything if it allows the federal government to take the same amount of money from the American people? What difference does it make if the spending addiction of politicians and bureaucrats is fed with money generated by a national sales tax or a payroll tax? In either case, the money is taken from the people and is no longer theirs to spend. Americans do not need tax replacements or tax reforms. Americans need tax relief!
The only thing the Fair Tax is sure to jump-start is more federal spending, because as Milton Friedman noted, “In the long run government will spend whatever the tax system will raise, plus as much more as it can get away with.”
R. Lee Wrights, 53, a libertarian writer and political activist, is seeking the presidential nomination because he believes the Libertarian message in 2012 must be a loud, clear and unequivocal call to stop all war. To that end he has pledged that 10 percent of all donations to his campaign will be spent for ballot access so that the stop all war message can be heard in all 50 states. Wrights is a lifetime member of the Libertarian Party and co-founder and editor of the free speech online magazine Liberty For All. Born in Winston-Salem, N.C., he now lives and works in Texas.