By Tom Quiner
Why the huge deficits?
Liberals blame the Bush tax cuts. That notion can be quickly discounted. The Federal Government has pretty consistently collected taxes in the amount of 20% of gross domestic product for the past fifty years. It’s the spending that has changed.
The reason for our huge deficits is the increase in federal spending to an unprecedented level of 25 percent of GDP.
We’ve got a spending problem, not a tax problem. So what are the solutions?
It seems to me that three quick ones come to mind:
SOLUTION #1: Congress constrains spending starting now. Perhaps it will happen. This is a unique political climate with a Tea Party movement with a great deal of influence. I suspect the next two years may be frugal ones. But do you trust Congress long term regardless of which party is in control? I don’t.
SOLUTION #2: Implement the Fair Tax. The fair tax is a national sales tax on all consumption. The idea is to eliminate all other taxes and replace it with one tax on every item you purchase. The rate that has been bandied about is 18 percent. So, if you purchased a hundred dollars of groceries, you’d pay an $18 national sales tax on top of the local sales tax. In Iowa, that rate is six percent, so your net tax payment would be $24 in this example.
There are significant pros and cons to this approach. The biggest pro in my mind is this: taxpayers would feel the pain of taxation with every single purchase, which is an excellent way to deter excessive taxation by elected officials. As it stands now, the government takes money from your paycheck before you ever get it, so you’re not as aware of the pain of taxation.
The problem is that Congress could implement some other new tax down the road on top of the Fair Tax and we’re back to square one. And although the Fair Tax would make it tougher for Congress to increase taxes, that may not slow down their spending habits.
SOLUTION #3: Amend the Constitution to limit spending to 20 percent of GDP. In a case of emergency, such as a war, Congress could exceed that limit with a two-thirds majority in both houses of Congress, an act that would have to be repeated each year they wanted to exceed their Constitutional limits.
This approach would force Congress to make the tough spending choices they refuse to make now. We’ve got a spending crisis. Our interest payments on the national debt alone will soon bury us. It may be time to amend the Constitution to force our elected officials to spend our tax dollars responsibly.