Commentary

Still Paying For Government

This article originally appeared in Investor’s Business Daily.

Internal Revenue Service reform is all the rage on Capitol Hill. The U.S. Senate voted 97-0 on Thursday to make the IRS “more sensitive.” But until lawmakers tackle serious tax reform, such grand gestures won’t amount to much.

Reasons for junking the current tax code have never been more obvious. Most Americans think they finished paying their taxes on April 15. In fact, the average citizen didn’t start working for himself until May 10.

Federal, state and local taxes consume 35.4% of the average worker’s income. People labored 129 days this year for the government — the longest since the Tax Foundation began marking Tax Freedom Day 20 years ago. The two hours and 50 minutes of every eight-hour workday spent paying for government dwarfs the burden of other expenses. When you break it down, the average worker devotes one hour and 20 minutes a day to pay for housing and household operations, 59 minutes to health care, 49 to food and tobacco, 34 to transportation, 25 to recreation and 20 to clothes. Taxes cost more than housing, food and clothes combined.

Yet millionaire Treasury Secretary Robert Rubin denies that Americans are overtaxed. And his boss, who promised Americans a middle-class tax cut, has sharply increased the tax burden since he took office. Tax Freedom Day fell on April 30 in ‘93, the year Bill Clinton took office.


Tax cuts are necessary even if deficits result. Lower spending and reduced taxes even with red ink are better than higher spending and bigger taxes with black ink.


Not that the GOP Congress has been much better. Tax Freedom Day was May 4 in ‘95, the first year of GOP leadership.

True, the Senate did hold two rounds of hearings on IRS abuses. Senators worked themselves into a lather over taxpayer mistreatment.

In the words of Minority Leader Tom Daschle, D-S.D.: “We need to get on with … restructuring the IRS, sensitizing them.” Even President Clinton said he was “outraged” by the stories of intimidation and abuse.

Such public shows of indignation are insincere. After all, Congress wrote and the president signed the ridiculously complex tax code we have today. They spent the money collected by the IRS. In short, they are the real culprits. Tinkering with IRS enforcement practices is not nearly enough.

But neither party seems very interested in reducing the tax burden. Clinton proposed $150 billion in new spending this year alone. The GOP transportation bill busts budget caps set just last summer. The prospect of a surplus has left both parties with visions of pork dancing in their heads.

Serious reform should start with slashing spending. And no fake “cuts” in an artificial budget baseline for future years - instead, real cuts in outlays this year. Last year’s budget deal put three-fourths of the supposed spending reductions beyond the year 2000 - one presidential and two congressional elections away.

Targets aren’t hard to come by. Why should the U.S. underwrite the retirement and health care of wealthy Americans? Why should the government fund massive job training programs that don’t work?

And spending cuts would allow big tax cuts. Repealing all of Clinton’s hikes would be a good start — but only a start. The moral premise is simple:

Workers’ earnings belong to them, not to the government. They should be taxed only enough to fund genuinely vital programs and no more.

But tax cuts shouldn’t be held hostage to corresponding spending reductions. Tax cuts are necessary even if deficits result. Lower spending and reduced taxes even with red ink are better than higher spending and bigger taxes with black ink. Deficits help restrain congressional spending.

Everybody — even the much-maligned “rich’ — deserves tax relief. The top 1% of earners pay nearly a third of all taxes. Today’s system, based on envy, unfairly punishes success. Instead of discouraging achievement, Uncle Sam should encourage people to prosper.

Along with tax reduction should come tax simplification. That could be a national sales tax or flat income tax. The goal should be to end social engineering by Congress and thuggish enforcement by the IRS. We would all benefit from more freedom as well as greater economic efficiency.

Most politicians who claim to speak for taxpayers do so with forked tongues. They raise tax burdens while promising tax relief. Americans who have just now finished paying off their government tab should consider voting this year on one issue: Which candidate is most likely to move Tax Freedom Day back — way back — where it belongs?

Doug Bandow is a senior fellow at the Cato Institute and the author of The Politics of Plunder: Misgovernment in Washington (Transaction, 1990).