Lee Wrights: Jump Start The Economy With Tax Relief, Not Tax Reform

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 WrightsR. 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.

Lee Wrights for President
Contact: Brian Irving, press secretary
press@wrights2012.com
919.538.4548

18 thoughts on “Lee Wrights: Jump Start The Economy With Tax Relief, Not Tax Reform

  1. Robert Capozzi

    lw: No tax has every jump started any economy.

    me: Sorry, but this essay is weak. Wrights quotes Dan Mitchell making the standard supply side argument that lower MARGINAL RATES lead to HIGHER tax revenues. (I’m curious why Wrights used an old Heritage piece by Mitchell, as Mitchell’s been with Cato for years now.)

    lw: 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.”

    me: I guess Wrights is contending that the means of taxation don’t matter at all. Or, that somehow any change to the tax system will only make matters worse! I’m scratching my head here. Mitchell and Friedman don’t/didn’t believe that, iirc.

    There are a LOT of reasons not to advocate a FAIR Tax. I don’t advocate it, either, and I think Johnson has made a mistake hitching his campaign to that issue. But this essay seems to miss/avoid the point of the economics of taxation, perhaps entirely.

  2. Gracemarie Collins

    Mr. Wrights tax relief doesn’t work. You are offering just what the exsiting government offers tweaking which hasn’t helped. We need to dump the whole system and replace it with the Fair Tax! I would urge anyone reading this to check The Fair Tax out for yourselves. http://www.fairtax.org. There is over 20 million dollars worht of research behind this bill HR25 and a lot of non partisan support. Thank You

  3. Thomas L. Knapp

    RC@2,

    “I guess Wrights is contending that the means of taxation don’t matter at all.”

    There are several definitions for the word “guess.”

    Given its complete disconnection from the content of the piece, the only one which your usage resembles is “to judge of at random.”

    Wrights’s point is not that the means of taxation don’t matter, but rather that the amount of wealth removed from the productive economy by taxation does matter.

  4. Steven Wilson

    The word taxation is a language game you can’t win.

    Tax=price

    In a market device, a price is the money value per product or service. In a free market, a customer is a price seeker and through their own choices, dictates what is in the market device.

    A tax is a price by force upon customers that might not ever receive anything for that price exchange.

    I pay taxes wherein a set percentage are spent on roads in my county. If I don’t drive on all of the roads, does this mean I should get a refund?

    Lee Wrights has been trying to explain to people that a budget needs utility. To tax blindly and only look at the final bill total is foolish.

    Lee Wrights explain clearly the opportunity cost associated with a firm that spends OPM.

    Cheers to Lee for another winner. Freedom fighters unite.

  5. Steven Berson

    I need to strongly note that when we look at historical, recent and current data on various nation’s tax rates and taxation systems you’ll find remarkably that this is a less significant factor in its economic success and the quality of the lifestyle of its citizens relative to things like their access to natural resources and cultural factors like work ethic, average education level, level of innovation, and level of corruption within the society.

    i.e. marginal tax rates were way higher in the USA in the 1950’s and 60’s than what we have now – yet a single person could support the average family of 4 then – and you generally need to have two income providers to do it now. What is different between now and then? The huge factors is that the USA’s competitors for manufactured industrial goods had their infrastructures wiped out in WWII and were lagging behind in rebuilding these to a level which could compete – and second and also hugely important is the USA’s domestic oil extraction rates were still climbing until they hit their irreversible peak of extraction rate in 1971 – so that the USA was able to have a gigantic incredibly cheap energy supply readily at its own access. The decline in these two factors – we are now competing globally – and we now have to import at least 50% of our crude oil to meet domestic demand – is much more greater significance towards effecting economic activities than the tweaking to our tax rates ever is.

    The same thing can be said with relative economic prosperity in the late 80’s and 90’s. In this period oil from Alaska, North Sea, and Gulf of Mexico came online to break the power of the OPEC cartel – and at the same time the information technology and personal computing industries bloomed with massive innovations who were primarily originating out of the USA. These things created prosperity way way more than any tax breaks effected by the Reagan administration ever did.

    SO – my basic premise is that while tinkering with the tax code may or may not decrease or increase gov revenues, and may or may not increase or decrease personal and business spending – simply doing so is NOT necessarily a panacea to creating (or a single factor in destroying) prosperity!!

    Anyway – Mr. Wrights blog seems to perpetuate a fallacy that lowering tax rates leads to lowering spending. All examination of our history and current events show it hasn’t. The Bush tax cuts led to unbelievably high deficits as revenues decreased but spending increased. If we want a balanced budget the divide from revenue to spending is so massive that we need incredibly great political will to CUT SPENDING – but decreasing revenues means we need to effect even more political will and cut even deeper. I would say based on observing the yellow bellies of the D’s and R’s in full effect that this political will is currently lacking.

    Anyhoo – because the debt hole is so massive to me those proposing decreasing revenues at this time means you are advocating for more inflation or more potential for default on our debts. Again – I’d say the problem is in spending. We need to balance the budget in 2013 – not in some mythical time in the future.

  6. Robert Capozzi

    7 tk: Wrights’s point is not that the means of taxation don’t matter, but rather that the amount of wealth removed from the productive economy by taxation does matter.

    me: Thanks for your take on deciphering this essay. Maybe you can help us understand what THIS means, then: “No tax has every jump started any economy. Taxes have the opposite effect.” esp. in light of the previous point he makes, which is this: “I have heard it said by some that the “revenue-neutral” Fair Tax will “jump-start the economy for the next 100 years.””

    The clear implication of Wrights’s point is that a tax reform (in this case, the FAIR Tax) would not jump start the economy. But, let’s step back. Say the current tax system was a 90% marginal tax rate on capital gains, dividends, and income over $200K. No one else paid taxes. I would think we’d agree that such a tax system would impede economic growth…do we? (If not, I’d like to hear how so.)

    Then, let’s say a revenue neutral land-value tax or a pollution tax was introduced…the 90% tax was abolished.

    I would go out on a limb and say the LVT or pollution tax reform would very, very likely spur economic growth.

    What Wrights appears to be doing here is attacking the FAIR Tax, a position of his most prominent rival. What he does not say is that that rival, Gov. Johnson, also advocates a 43% budget cut in year one.

    So, if this was a veiled attack on GJ, I’d say it wasn’t well done. The argumentation meanders and does drive any particular point home. He uses words of Mitchell and Friedman out of context. If he wants to make the case against the FAIR Tax, make it. If he wants to make the case against revenue neutral tax reforms, make that.

  7. Steven Berson

    The FairTax proposal does have a few things that present definite distinct advantage to our current system.

    One thing I agree with GJ on – is by making a single very visible Federal tax – rather than the numerous ones that are easy to obscure we deal with now – then it would be career suicide for a politican to advocate raising it or going back to adding in an income tax.

    Next – it essentially solves the problem of non-citizen immigrants and visitors not paying towards any social services they might use while they stay in the USA. Unlike income tax a consumption tax can be received from immigrants regardless of their status.

    I agree that the “prebate” program detailed in it is very problematic – but the problem of making it not a punitively regressive tax is not easily addressed – i.e. if you were to exempt necessities such as food and clothing apparently the tax would have to be a draconian 40+% on other goods and services in order to stay revenue neutral.

    Anyhoo – obviously the FairTax Bill is not likely to get passed any time soon regardless of who holds the executive office. GJ seems determined to talk about it to get it in the conversation and public debate as to how to best reform our tax system – as he has stayed consistently with it as an issue in both his GOP and LP bids.

    So the question to the LP delegates is whether the LP is ok with a candidate who advocates for the FairTax but who otherwise to me represents the LP platform pretty well and in a pragmatic/centrist manner that can speak well towards disaffected independent and “swing” voters.

    Don’t get me wrong – I truly love Lee Wrights “Stop All Wars” message and think it’s incredibly well worth getting out there. In fact I’d love to see this focus included in whoever gains the LP nomination’s campaign. But on points of dealing with the actuality of the magnitude of our debts and our deficit I think the “end the income tax and replace it with nothing, now” idea is about an effective plan as just saying lets all decide to start pooping glazed donuts so we don’t have to spend our dollars at the bakery anymore.

    I’d say the most likely thing result is that a Lee Wrights campaign will just end up getting the message out only to those who are already firmly in the choir. As such it’s nice if you want to keep the LP to a small philosophical debating club but not too effective if you want to to spread the awareness of it as an alternative to a much broader audience. Where as a GJ campaign has already demonstrated it is capable of getting national media attention in much greater amounts than any other LP candidate has, and imho will get taken more seriously by the mainstream due to a tangible 8 year resume in office of balancing budgets and returning a State to a surplus even though it started in deficit – and in a way that never involved raising taxes.

    Anyhoo – May will be here soon before we know it – in which case all of this will become much more resolved.

  8. Thomas L. Knapp

    “The clear implication of Wrights’s point is that a tax reform (in this case, the FAIR Tax) would not jump start the economy.”

    Correct. Stealing the same amount of money, from the same people, in a different way (which is EXACTLY what the “Fair” Tax claims to do by being “revenue neutral” and “just as progressive as the income tax”) will not jump start the economy.

    ” let’s step back [and talk about tax systems from my imagination instead of the ones actually in existence and the ones actually being proposed].”

    Have fun. I don’t feel like joining you at the moment.

    “What Wrights appears to be doing here is attacking the FAIR Tax”

    True.

    “a position of his most prominent rival.”

    I was unaware that Barack Obama supportsthe “Fair” Tax, so I can’t really speak to that.

    “What he does not say is that that rival, Gov. Johnson”

    Oh, wow … you think Johnson is more prominent than Barack Obama or Mitt Romney? I suggest therapy.

    “also advocates a 43% budget cut in year one.”

    Um … so? Is Wrights required, in every policy piece that might differentiate himself from one of his opponents, to address every position that that opponent takes?

  9. Steven Berson

    @ 6 –
    George – I agree that the potential re-taxing of any already existing savings is a huge problem of transitioning to a consumption tax. My suggestion in this regard is for a tax “holiday” of a month or so in the transition from repealing of existing taxes to implementing of national sales taxes so that anyone holding savings in cash or equivalents could convert these to hard assets if they wished during this transition without being double taxed on it. Maybe not an optimum situation – but at least potentially better than just a cold switch.

  10. Oranje Mike

    No tax is “fair”. Gary Johnson will hurt himself advocating such a platform among true libertarians. I challenge the credentials of any self-proclaimed libertarian that advocates the Fair Tax. Is it better than the current system? Maybe. Is it “fair”? Is it a genuine fair alternative? Nope.

  11. Steven Berson

    Yup – naming the bill the “FairTax” certainly is an Orwellian bit of marketing. At least Johnson isn’t being a flip-flopper – because if he had wanted to greater guarantee the LP nomination on a first ballot he could have dropped the FairTax advocacy as soon as he left the GOP race.

    Ultimately a completely voluntary society is the goal. The much more difficult problem to assess – is how do you get there without invoking a transition to it – especially when the majority of the nation has indicated the preference for continuing large amounts government run social services – and when we’ve accumulated $15 Trillion and rising of national debt – which either needs to be serviced in payments via revenues – or if there are no revenues – via hyper-inflation (in massive rounds of “quantitative easing”) or default. Both of these two latter choices lead to the absolute destruction of faith in the currency and hugely reduce the ability to easily purchase imports (particularly crude oil) needed to maintain the current level of prosperity we enjoy.

    I will readily grant you our current path we are heading to this situation anyway – but I do need to ask why people would advocate for this to happen more suddenly with no hopes for a transition which can soften the landing, or in best case scenario actually return us to a sound financial state.

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