Defending Ron Paul’s Tax Plan

The Washington Post takes a swipe at Ron Paul, deriding his plan to abolish the income tax because revenues would fall to 1995 levels (rather than 2000 levels, as Dr. Paul mistakenly claimed in a recent Jay Leno appearance):

Expounding on his proposal for abolishing the income tax, Paul claims this would still leave the U.S. Treasury with roughly the revenues it had in 2000, in the final year of the Clinton administration. A post on the Paul campaign website explains that individual income taxes account for “approximately one third of federal revenue.” Unfortunately for the tax slashers, the one-time Libertarian candidate for president is wrong on both counts. According to the Congressional Budget Office, individual income taxes represent between 45 and 49 percent of federal tax revenues, depending on the year. For financial year 2007, total receipts from individual income tax were in the region of $1.1 trillion dollars. If you eliminated all that revenue, the federal budget would shrink to the size it was around 1995.

The Post’s criticism is akin to condemning a book because the typesetting was not centered on a few pages. The real issue is whether America would be a stronger and more prosperous nation if government was reduced to the levels envisioned by the Founding Fathers. America climbed from agricultural poverty to middle-class prosperity before the income tax was adopted, and federal government spending (with the exception of times of war) was a small percentage of GDP. The Post also fixates on whether the Paul campaign has identified $1.1 trillion of savings to match the forgone revenue from eliminating the income tax.

In attempt to figure out where the $1.1 trillion in annual savings is going to come from in a Paul administration, I talked yesterday afternoon to the candidate’s policy director, Joseph Becker. He pointed out that Paul has promised to bring troops home from Iraq and Afghanistan, eliminate foreign aid, eliminate agriculture subsidies, and get rid of the U.S. Education Department. A President Paul would, however, still have a military sufficient to defend the homeland.

Based on Paul’s rhetoric and record, this presumably is not a problem. The candidate almost certainly would favor the elimination (or transfer to the states) of the Departments of Agriculture, Energy, Education, Housing and Urban Development, Transportation, Labor, Commerce, and Health and Human Services. (What a joyous sentence to type!) Indeed, because he also would gradually turn entitlement programs into systems based on personal accounts (and shift welfare components back to the state and local levels), the long-term savings would significantly exceed the amount of money collected by the personal income tax. Ron Paul may not be a realistic candidate in today’s America, but that is an unfortunate reflection on voters (and the forces that have shaped voter attitudes), not the candidate’s platform.