Ken, who insists on the ridiculous pseudonym of Ken, is kind enough to add to our recent thoughts on taxation. Ken, unedited and without further ado:
Good morning, Dread Czar,
I suppose we’ll have to agree to disagree on what the state should be doing (my “relatively unqualified success stories” list consists of the Navy and the public lending library system, which I realize both conflates different levels of government and takes me out of anarchocapitalist orthodoxy, but indulge me) and consider the ways and means to pay for what the state ought to do, and what the consequences attached to the ways and means are. Quoth the Czar:
Yes, we need to cut spending on a massive level, and the Czar here is all in favor of a flat tax system that makes everybody pay the same percentage rate, and—just as importantly as the first two conditions—we need to wipe out the ridiculous loopholes upon loopholes that makes our tax code impossible for a human to really understand.
Our government could survive indefinitely on such a simplified system, as well put a lot more money in your pocket.
The biggest problem with the loopholes is not that they are nearly impossible for a human to understand, although they are that. However, their complexity pales before the moral enormity of what those loopholes represent: they put the State into the behavioral engineering business, both wholesale and retail. Even the $10,000 exemption you propose does that: people get paid for breeding. Granted, I think having children is a manifestly good thing: we have two. Equally granted, population growth on balance is a net plus, regardless of the claims of the doomers (I’m looking at you, Gore — and you, Kunstler). But my wife and I didn’t have kids for the tax deduction, and the childless should not be required at gunpoint to provide us a subsidy.
Even absent loopholes of any kind, income taxation represents a prior claim by the state against the life and labor of the individual…but hell, forget about that for now. To my knowledge, the next state that establishes a loophole-less income tax system and manages to restrain itself from playing busybody via the mechanism of the tax code will be the first (I would like to introduce at this time People’s Exhibit A, the Twentieth Century). Wherever will we find these incorruptible philosopher kings to man the machinery for us?
I would like to figure out how to pay for 12 carrier battlegroups and a few Marine amphibious units, and a public liberry system at least as good as the one we have now (which I suspect is due largely to the dedication of the typical line librarian — never underestimate the power of true belief), and maybe another thing or two we could possibly talk about. But looking at the sorry history of the last century (the Age of Income Tax), I’m pretty near ready to roll the dice and chance the dire outcome you predict…if for no other reason than “mere” principle: fiat justitia, ruat caelum.
Social engineering through taxation certainly occurs at the federal level, but not really in deduction of dependents. Remember that while children are generally dependents, other people can be as well: it costs a lot to take in granny, what with her penchant for whiskey and her expensive legal bills after punching out the governor at the Christmas play, and a dependent is someone you are footing the bill for. Dependents are not immune from other forms of taxation (even the Czars lads understand the concept of sales tax when they blow their hard-earned money on that Lego Spinjitsu stuff), but if you are supporting them, a little break (deduction) on taxes is a welcome thing.
Rather, you can find many other examples of social engineering in taxation: mortgage deductions. The concept is that a home buyer creates three jobs, on average, and is a stable tax payer. The federal government rewards this behavior by giving home owners a break on their taxes (whereas local governments sock it to them on their property taxes without mercy, dammit).
And how nice for the home owners. But look at the renter, or the guest house occupant, who owns no home…and pays a substantially higher rate of taxes because of it. In this respect, they are penalized for not having enough cash to purchase a home. Again, the government is picking winners and losers.
Dr. J brought up car ownership a while ago. If you bought a car recently, you are helping to save the job of a Japanese robot. The government gives you…right…another tax break. Put a new roof on your house? Another tax break.
Ken is right to be suspicious of all these tax breaks, because they are all tied to something: the government picking winners and losers. The Czar disagrees that dependents are picking winners and losers: thats just common sense. But a huge majority of tax breaks (if not pretty much freaking all of them) are based on social engineering.
By the way, if you got a new roof on your home, good for you! Of course, next year, you will be subsidizing everyone else who gets a new roof. So these tax breaks are often quite farcical: you get a little more cash back this year, but wind up paying more in subsequent years to make up for the next batch of tax breaks.
Any sensible flat tax system must eliminate these tax breaks and tax steps to prevent adoption of future ones. Otherwise, you wind up in a corrupt honeycomb of loopholes (which is easily the most fun sentence we have written today).
Божію Поспѣшествующею Милостію Мы, Дима Грозный Императоръ и Самодержецъ Всероссiйскiй, цѣсарь Московскiй. The Czar was born in the steppes of Russia in 1267, and was cheated out of total control of all Russia upon the death of Boris Mikhailovich, who replaced Alexander Yaroslav Nevsky in 1263. However, in 1283, our Czar was passed over due to a clerical error and the rule of all Russia went to his second cousin Daniil (Даниил Александрович), whom Czar still resents. As a half-hearted apology, the Czar was awarded control over Muscovy, inconveniently located 5,000 miles away just outside Chicago. He now spends his time seething about this and writing about other stuff that bothers him.