A Thing You Rarely See
May 21, 2013 - by
There’re a lot of clever politicians and smart politicians but there’re not many politicians with the courage to take a stand they know is unpopular.
The other day, baffled by the raft of tax reform plans floating around the State Legislature, I asked an economist to explain the virtues of ‘consumption taxes’ to me – and he did in a simple way even an economic illiterate like me can understand: He said, Income is good, investment is good, saving is good – so tax them less; spending (consumption) is not so good – so tax it more.
Senate Leader Phil Berger sees eye to eye with that economist and he means to reform North Carolina’s tax code to base it on ‘consumption taxes.’
Now, if you’re an average guy studying the tax code, it looks like an irrational muddle. But if you’re a politician studying that same tax code it doesn’t look so irrational at all – instead it looks like the labyrinthine result of legions of smart politicians, over years, carefully calculating which taxes they could raise without getting voted out of office.
For example, those politicians decided not to tax food because everybody eats. They decided not to tax prescription drugs because a lot of older people vote. The income tax code is ‘progressive’ because there’re fewer rich people than poor or middle class people. Farmers get the loopholes when they buy a tractor because rural politicians want to be friends with farmers.
The whole tax code, politically, is highly practical.
And that’s a problem Senator Berger ran into head-on. Because to cut taxes on income and savings, but to do it he had to raise taxes consumption. And to do that he had to close what my economist friend calls tax ‘loopholes.’
That’s logical. But it left Senator Berger facing a helluva fight. Because a senior citizen not paying sales taxes on his blood pressure medicine doesn’t see that as a ‘loophole.’ And neither do a whole welter of other groups who enjoy tax exemptions.
For instance, the Association of Realtors doesn’t see the home mortgage deduction as a loophole. And it doesn’t see switching to consumption taxes as a cure to the housing industry’s doldrums. So it’s running one ad saying folks will pay 25% in sales taxes (consumption taxes) when they buy a home and another ad with a young man saying, It’s wrong to take away my money for tax reform.
The Hospital Association doesn’t see exempting hospitals from paying sales taxes as a loophole either – so it’s weighed in, too, with an ad and website saying hospitals are fighting for their survival and closing their ‘loopholes’ is the worst kind of news for their patients.
And, of course, the Democrats don’t like Senator Berger’s plan – they let fly roaring his idea of tax reform is ‘regressive’ and will tax the rich less and the poor more.
So Senator Berger’s got a tiger by the tail. Before he’s done ‘closing loopholes’ there’s a fair chance he may be the most vilified elected official in North Carolina. But, anyway you look at it, you have to give Phil Berger credit: He’s no finger to the wind politician. People may be arguing for years whether he’s right or wrong – but, either way, you have to admit he’s got the rarest trait in politics: Courage.
A Thing You Rarely See
May 21, 2013/
There’re a lot of clever politicians and smart politicians but there’re not many politicians with the courage to take a stand they know is unpopular.
The other day, baffled by the raft of tax reform plans floating around the State Legislature, I asked an economist to explain the virtues of ‘consumption taxes’ to me – and he did in a simple way even an economic illiterate like me can understand: He said, Income is good, investment is good, saving is good – so tax them less; spending (consumption) is not so good – so tax it more.
Senate Leader Phil Berger sees eye to eye with that economist and he means to reform North Carolina’s tax code to base it on ‘consumption taxes.’
Now, if you’re an average guy studying the tax code, it looks like an irrational muddle. But if you’re a politician studying that same tax code it doesn’t look so irrational at all – instead it looks like the labyrinthine result of legions of smart politicians, over years, carefully calculating which taxes they could raise without getting voted out of office.
For example, those politicians decided not to tax food because everybody eats. They decided not to tax prescription drugs because a lot of older people vote. The income tax code is ‘progressive’ because there’re fewer rich people than poor or middle class people. Farmers get the loopholes when they buy a tractor because rural politicians want to be friends with farmers.
The whole tax code, politically, is highly practical.
And that’s a problem Senator Berger ran into head-on. Because to cut taxes on income and savings, but to do it he had to raise taxes consumption. And to do that he had to close what my economist friend calls tax ‘loopholes.’
That’s logical. But it left Senator Berger facing a helluva fight. Because a senior citizen not paying sales taxes on his blood pressure medicine doesn’t see that as a ‘loophole.’ And neither do a whole welter of other groups who enjoy tax exemptions.
For instance, the Association of Realtors doesn’t see the home mortgage deduction as a loophole. And it doesn’t see switching to consumption taxes as a cure to the housing industry’s doldrums. So it’s running one ad saying folks will pay 25% in sales taxes (consumption taxes) when they buy a home and another ad with a young man saying, It’s wrong to take away my money for tax reform.
The Hospital Association doesn’t see exempting hospitals from paying sales taxes as a loophole either – so it’s weighed in, too, with an ad and website saying hospitals are fighting for their survival and closing their ‘loopholes’ is the worst kind of news for their patients.
And, of course, the Democrats don’t like Senator Berger’s plan – they let fly roaring his idea of tax reform is ‘regressive’ and will tax the rich less and the poor more.
So Senator Berger’s got a tiger by the tail. Before he’s done ‘closing loopholes’ there’s a fair chance he may be the most vilified elected official in North Carolina. But, anyway you look at it, you have to give Phil Berger credit: He’s no finger to the wind politician. People may be arguing for years whether he’s right or wrong – but, either way, you have to admit he’s got the rarest trait in politics: Courage.