CPAC Blogging: Enlist Me in the Dick Armey Edition

Ah, the spirit of '94 rears its head for a brief moment in a kitchen-sink talk from former Rep. Dick Armey. As I walk in, he's blasting Republican officeholders for pouring gas on the Medicare cost inferno, observing that "today we have a lot of officeholders who have let their courage and their creativity atrophy." He dubbed the current tax code "an abomination on the human spirit" and made the case for a flat tax over a national sales tax, emphasizing the importance of making the full size of the tax burden as obvious as possible to taxpayers. And there was a quick riff on the importance of telecom deregulation. Totally standard conservative rhetoric of, say, a decade ago, now striking for how rare it is to hear an elected Republican harping on these issues.

Armey did, however, remind me why whenever I hear a pundit or pol mention "common sense," I reach for my gun. "Common sense" seems to be some kind of rough euphemism for "superficially appealing, but really obviously insane if you think about it for five minutes." In this case, Armey's "common sense" proposal was a tort reform bill barring any attorney from representing a client he hasn't met. I'm hoping this one wasn't intended seriously.

Comments

[Eryk Boston]

Last semester, I would have supported this idea if only to allow me to rip a chapter out of my torts casebook.

[Gimme Back My Dog]

A National Sales Tax would make the burden more obvious. I mean, it would be right there on every purchase. Keeping the current tax scheme but changing the values on the lookup table at the back of the 1040 book allows the true tax burden to continue to be hidden in withholding.

[joe]

Yes, people reject conservive economic policies because they just don't realize that they pay taxes.

That, and they didn't take Econ 101. If only everyone were smarter, they'd be just like you, Dick.

[R C Dean]

Yes, people reject conservive economic policies because they just don't realize that they pay taxes.

Well, a lot of people don't realize how much they actually pay in taxes, because so much is done to hide them via payroll taxes imposed at the employer level, tax withholding, hidden taxes like tax and telecom taxes, etc.

Not to mention the fact that a lot of people don't pay income taxes at all (other than their payroll taxes, half of which are invisible to them).

So, yeah, if everyone had to pay their full tax burden in a visible, transparent way, I think you would see a lot of people take a different view of tax policy. Dunno what joe means by conservative economic policy.

[Hakluyt]

Gimme Back My Dog,

There is probably some truth in that assertion. Income you never see doesn't have as much effect as that which you do see.

[joe]

I've never had any trouble reading my paystub, or my W2. Have you, RC?

Or are you just looking out for the common folk, who can't be expected to understand such things?

[Hakluyt]

R.C. Dean,

The last thing the government (any government) wants to be is transparent.

[Hakluyt]

R.C. Dean,

Nevermind joe; he's just trolling.

When you have to withold the taxes yourself, and of course pay SSI yourself (which because of self-employment means you're paying what you normally pay plus what the employer normally contributes), you are far more aware of how much they're taking from you.

[Stretch]

The sad truth is that most people have no idea how much they pay in taxes. Witholding taxes is simply a way of intentionally obscuring the tax burden. Even worse, many are under the false assumption that a rebate check is actually free money from the government. If you ask most people who received a rebate how much they paid in taxes, they're likely to tell you "none".

I don't harbor any delusions that having accurate and real knowledge their tax burden will make people suddenly embrace "conservative economic policies", but it will certainly change the way they think about the convoluted tax code and they will probably take a much greater interest in just how that money is spent.

[Peter Griffin]

Wait a minute, wait a minute, wait a minute... your name is Dick? Dick... Armey? Ha, haha, ha ha ha ha.

[Hakluyt]

Stretch,

...but it will certainly change the way they think about the convoluted tax code...

When I took a course on the federal income tax one thing which reading the code drove home to me was just how impossibly complex and how this complexity largely drove folks of moderate means from taking advantage of many of its very helpful provisions. Folks with more substantial means could of course hire tax attorneys, etc. to take advantage of these provisions.

[Stretch]

I've never had any trouble reading my paystub, or my W2. Have you, RC? Or are you just looking out for the common folk, who can't be expected to understand such things?

Joe, it's not that people can't understand it. It's that people don't bother to look, especially when many are paid directly into their bank account.

The simple truth is that you don't miss money you never had.

[gaijin]

I don;t think a national sales tax will make anything transparent in a way that will compel anyone to get mobilized about it...hell, we've had gasoline taxes and state sales taxes right there on the reciept for quite some time and I dont; see alot of outrage directed at the fed/state...

[Hakluyt]

gaijin,

You're probably right about that.

[R C Dean]

Step 1: Get rid of all payroll tax withholding.

Step 2: Make Tax Day and Election Day the same day.

Step 3: Libertarian revolution.

[Stretch]

I don;t think a national sales tax will make anything transparent in a way that will compel anyone to get mobilized about it...hell, we've had gasoline taxes and state sales taxes right there on the reciept for quite some time and I dont; see alot of outrage directed at the fed/state...

It may not. First, gasoline taxes are hidden in a way that sales taxes are not. You get one price per gallon that includes the taxes, and I've never seen that noted on any gas receipt.

People certainly do take sales taxes into consideration when making a purchase, particularly for large ticket items. Living in Philly, with sales-tax free Delaware a stones throw away, it's very common for people to buy large items down there to avoid even our relatively mild 6%. And I've seen a lot of people attempt to mitigate sales tax on cars by registering them in another state.

In other words, people view the sales tax as something they pay over and above the price of the item, whereas people tend to view the income tax as money that never belonged to them in the first place. The distinction between a tax witheld and a tax added is an important factor in the way people choose to order their finances.

[joe]

I think it's at least as common for people to overestimate the amount of taxes they'll pay. Especially among lower and median wage earners.

There is, after all, a well funded, loud industry of people working to convince the public of that, and it's been quite effective.

[thoreau]

R C-

Not to be nitpicky, but you should have the election the day after taxes. The people who are busiest doing their paperwork at the last minute are likely the most irate, and we don't want them to have to choose between voting and paying taxes.

[Swillfredo Pareto]

Yes, people reject conservive economic policies because they just don't realize that they pay taxes.

The type of people who reject libertarian economic policies seem to be quite happy letting the federal government take something that doesn't belong to them by force and spending it on policies they advocate. This is what they call compassion.

By the way, your W2 is hardly the government's only source of revenue. Businesses taxes are paid by people, not by businesses. I wish my house paid my property taxes, but that would be me too.

[joe]

Stretch, the tax code is designed now with the assumption that its administration will be handled by professionals. Of course people would rebel against having to do their own administration of the tax code.

It's difficult to imagine what an individually-based tax code would look like. Like a credit card company? You get a bill in the mail? You think it's hard arguing with the IRS...

[Hakluyt]

Stretch, the tax code is designed now with the assumption that its administration will be handled by professionals.

Professionals who lobby to make the tax code benefit them. I highly recommend anyone who attends law school to take a course that concerns the federal income tax.

Swillfredo Pareto,

Then there are the various taxes associated with your landline and cellphone, your broadband account, etc.

[Stretch]

I think it's at least as common for people to overestimate the amount of taxes they'll pay. Especially among lower and median wage earners.

I think that's worse than underestimating the amount of taxes you'll pay.

Stretch, the tax code is designed now with the assumption that its administration will be handled by professionals. Of course people would rebel against having to do their own administration of the tax code. It's difficult to imagine what an individually-based tax code would look like. Like a credit card company? You get a bill in the mail? You think it's hard arguing with the IRS...

Heh, that seems to be a poor assumption. And don't people spend significant time each year doing their own "administration" of the tax code? Isn't your W2 essentially a bill you get every year? I don't really understand your point here.

[Hakluyt]

Stretch,

A month to month flat tax based on monthly income would make such a fairly easy to administer tax. You could even make such a tax "progressive" and it would still be easy to administer.

[Hakluyt]

Stretch,

One of the reasons why such might not be possible is because the IRS is too ineffecient to a run a billing scheme like that. After all, they seem to have a hard enough time doing quarterly taxes for businesses.

[Brian24]

Stretch,

I can't speak for the people that you've been hanging around, but in my experience in many bottom-feeder jobs (waiting tables, janitor, hired farm help, bus driver), I've never met anybody who didn't spend a substantial amount of time complaining about the amount of taxes that get taken out of their paycheck in withholding. In fact, when I was making $10 an hour I was extremely conscious of how much less my actual paycheck turned out to be, and I complained about it far less than most other people I knew.

The real problem is that people don't see a strong cause-and-effect relationship between taxes and government spending. And no wonder, given that our recent experience has been a Democratic president who raised taxes and lowered spending and a Republican president who lowered taxes and raised spending.

Furthermore, as has been reported ad nauseum, most people's taxes didn't change much under either Clinton's increases or Bush's cuts, so forgive them if not voting based on politicians' tax promises seems reasonable.

By the way, just because people will travel to another state to escape a 6% sales tax doesn't mean they are making a rational decision to avoid a hated tax. I mean, if your local store was having a 6% off sale, would you go out of your way to make a special trip? Yet people seem to do that all the time if you shout the magic words, "tax free." People get ridiculously excited over duty-free stores at the airport, too.

[Dogzilla]

"Common Sense" is added to an opinion in place of the more honest, but less euphemistic "and anyone that disagrees with me must be a f*cking idiot".

[Hakluyt]

Brian24,

...has been a Democratic president who raised taxes and lowered spending and a Republican president who lowered taxes and raised spending.

You're getting the functions of government confused here. Its the Congress that raises taxes and allocates money; the President's role is secondary in these matters (e.g., the veto).

[MP]

It's difficult to imagine what an individually-based tax code would look like.

Yeah, real hard.

(I know, I know, don't feed the joe...)

[Brian24]

Hakluyt,

That is true, of course, but (a) let's not pretend that it wasn't the Clinton Administration's policy that was enshrined in the tax increase on the top earners and the lowering of the deficit, as well as (even more so) the Bush Administration that pushed for the tax cuts and (substantially) the spending increases; and (b) we were really talking about how people perceive the tax burden, and most people certainly perceive most of what happens in government as being result of the top guy's leadership.

[MP]

In fact, when I was making $10 an hour I was extremely conscious of how much less my actual paycheck turned out to be, and I complained about it far less than most other people I knew.

Yet, you likely still weren't conscious of the additional behind the scenes witholding for the employer share of FICA, as well as unemployment insurance taxes.

I mean, if your local store was having a 6% off sale, would you go out of your way to make a special trip?

For anything over $300, probably.

[Stevo Darkly]

"Common Sense" is added to an opinion in place of the more honest, but less euphemistic "and anyone that disagrees with me must be a f*cking idiot".

Ooh, that's a quotable quote, and dead on.

------------

By the way, in response to joe and whatnot:

I confess that I, personally, don't spend a lot of time staring at each of my paycheck stubs and calculating how much of my income I pay in taxes to the government.

I did at first, when I got the first few paychecks of my life, from my first jobs at the 270 Drive-In and Dairy Queen, but the shock eventually wore off.

I think in part because it's a part of human nature -- and generally a healthy one -- not to dwell too much on unpleasant things if you believe they are beyond your ability to influence anyway.

Later, when I was self-employed for a while (although I actually considered myself "unemployed and free-lance writing to earn a few bucks while living with my parents") and had to pay my own estimated income tax each quarter, I was somewhat more intuitively aware of the taxes I paid.

But still, most times I didn't think about it much, because of that healthy part of human nature mentioned earlier.

However, if I had to pay a hefty tax on every purchase I make, which I may make several times a day ... then I still probably wouldn't have a good intuitive grasp of the total taxes I pay in the year. However, I would have a vague sense of the magnitude and would be reminded of it more often.

And if this were the norm, then I might also give more thought, more frequently, to the possibility that high taxes are not inevitable, and that maybe I could and should do something about them.

Assuming this also applies to most other people, this could indeed spark an active demand for a reduction in the size of government.

In fact, I've read estimates that a National Sales Tax big enough to replace the current income tax would be something on the order of 25% of the purchase -- much bigger than the 6-7% sales taxes I typically pay now. It's both the size and the frequency of such a tax that increases people's awareness.

[Stretch]

I can't speak for the people that you've been hanging around, but in my experience in many bottom-feeder jobs (waiting tables, janitor, hired farm help, bus driver), I've never met anybody who didn't spend a substantial amount of time complaining about the amount of taxes that get taken out of their paycheck in withholding. In fact, when I was making $10 an hour I was extremely conscious of how much less my actual paycheck turned out to be, and I complained about it far less than most other people I knew.

Certainly having wages pegged by the hour as opposed to by the year really serves to drive one's tax burden home. And, of course, those in the tipped profession are always savvy about what they report (which is why I always tip in cash, although I understand many places now automatically deduct tip taxes based on total sales receipts whether or not those tips were actually received). I've been lucky that all my "bottom-feeder" jobs were paid under the table. Your point is well-taken, but I still believe that people at all levels view having to send money-in-hand as greatly different than money withheld (as witnessed with reporting tips), even though they truly feel the burden.

The real problem is that people don't see a strong cause-and-effect relationship between taxes and government spending.

You'll get no argument there, but I will say that people might be inclined to take a little more notice if they actually had to remove a large sum of money from their bank accounts each year.

Furthermore, as has been reported ad nauseum, most people's taxes didn't change much under either Clinton's increases or Bush's cuts, so forgive them if not voting based on politicians' tax promises seems reasonable.

Huh? Did I mention anything about that? I think that not voting based on a politician's promise about anything seems quite reasonable.

By the way, just because people will travel to another state to escape a 6% sales tax doesn't mean they are making a rational decision to avoid a hated tax. I mean, if your local store was having a 6% off sale, would you go out of your way to make a special trip? Yet people seem to do that all the time if you shout the magic words, "tax free." People get ridiculously excited over duty-free stores at the airport, too.

While I agree that the words "tax free" have an extra psychological effect, I certainly think that people are making a rational decision to aviod spending excess money. People don't go to Delaware to buy a pair of shoes, and I wouldn't expect a 6% off sale to generate much interest for normal purchases. But you better believe that if you were going to buy something expensive that you'd gladly take advantage of that 6% off, wherever it comes from. Actually, I think the straight sale would generate more interest for smaller items than going to Delaware. After all, the trip just isn't worth it (hell, in gas money alone, let alone time spent) to save $6 on a pair of shoes, but it might be worth it to make a "special" trip to your local store. My only point about sales tax is that people view it as an extra expenditure and so they do take it into account when making decisions.

[Taxman]

I'm not impressed by Army's reasoning for why not to have a national sales tax. The better reason for not having a national sales tax, IMO, is that the burden of collecting and of figuring out how much sales tax to collect is placed completely on the seller. That is, anyone in the business of selling anything taxable is forced to become a proxy tax collector for the government. And that is a lot of work.

Sales tax at the state level is far more complicated than personal income tax. The tax on each of the same item sold can be different depending on whether the products was shipped or will-called, included warranty or not, crossed a tax jusdiction or not, had a race horse involved or not, had farm or petrochemical components or not, had hazardous materials or not, had assembly labor or not, etc, etc. No one, and I mean no one, even understands state sales tax.

[Gimme Back My Dog]

I remember a few years back talking to my dad about a NST. I told him that in order to be revenue neutral, he would have to pay a sales tax of around 25 percent. He replied that he did not want to pay that much in taxes. So there's at least one guy who underestimates the amount of taxes he is currently paying.

Taxman,

Given that something like 46 states have a state sales tax, is adding a national sales tax really that much of a burden? I saw a proposal once that would have the states collect the sales tax in return for a few percent of the money. That way, for most businesses, there is no additional burden.

[Taxman]

Yet, you likely still weren't conscious of the additional behind the scenes witholding for the employer share of FICA, as well as unemployment insurance taxes.

MP:

It is FICA and Medicare that are double what you see on your paycheck stub. Federal Unemployment Tax is, for all practical purposes, $56 per year, per employee. If you are self-employeed or the owner of your own company you have to pay $56 dollars too, but are not elligible to receive benifits.

[Taxman]

Given that something like 46 states have a state sales tax, is adding a national sales tax really that much of a burden? I saw a proposal once that would have the states collect the sales tax in return for a few percent of the money. That way, for most businesses, there is no additional burden.

A couple of objections to that, GMBMD.

First of all, I don't like the idea of the seller being forced to collect tax at all, compensated or not. The seller's expertise and enery should be directed toward running a viable business, not collecting taxes.

Second, sales tax, at least the way it has been implemented at the state level, is ridiculously complicated. This gives a large, established company an edge over a small startup. They both have exactly the same the problem to solve WRT sales tax, but the former has either figured it out or has been successful enough to absorb the cost without significant damage to company's financial health. The small startup gets screwed by comparison.

[Ken Shultz]

I like the sales tax 'cause it seems to me that it makes taxes less inefficient--the decision of whether something is worth buying is made at the point of sale over and over again rather than at the end of the year. I also like it because it makes taxation a little more voluntary or, rather, a little less coercive.

Also, I think the idea of a flat tax is just doomed to fail. The incentive to soak the "rich" will always be there--a relatively small minority pays the majority of taxes anyway because politicians really are responsive to their constituents, and because that's the way the majority wants it.

[Taxman]

I like the sales tax 'cause it seems to me that it makes taxes less inefficient--the decision of whether something is worth buying is made at the point of sale over and over again rather than at the end of the year. I also like it because it makes taxation a little more voluntary or, rather, a little less coercive.

OK Ken, but let's make really inefficient. How about mandating that you have to collect tax from your employer based on the taxable services you provide him. That way we can all enjoy filling out the same sales tax forms.

[Ken Shultz]

I also like the sales tax, better than a flat income tax, because it crimps congress' ability to use the tax system as a proxy for central planning.

...Okay, we think the world would be a better place if homeowners, buyers of hybrid vehicles and...um...people who generate their own electricity got a tax break. ...Oh, and people who buy really big SUVs!

[Ken Shultz]

In fact, I've read estimates that a National Sales Tax big enough to replace the current income tax would be something on the order of 25% of the purchase -- much bigger than the 6-7% sales taxes I typically pay now. It's both the size and the frequency of such a tax that increases people's awareness.

I'm with you there, Stevo. ...but I think it unlikely that taxes would be as high as they are now if there were a sales tax instead of an income tax, especially if it was on the order of magnitude you suggested. ...and that's precisely because of the factors you described--people are hypersensitive to the size and frequency of such things. I imagine congress would suddenly find it more expedient to cut spending (and, unfortunately, they'd probably find it expedient to introduce an income tax.)

Maybe you remember my old suggestion--the one about making it so that elections at the federal level must be held on the day income taxes are due. ...We could put the tax form right on the back of the ballot. People might think that, right now, the tax forms would dwarf the size of ballot, but that probably wouldn't be a big problem after the first election. ; )

[Kahn]

elections at the federal level must be held on the day income taxes are due

Should make it all state and local taxes too. Might get more people interested in voting all up and down the scale.

But I think thoreau had a really good point about voting the day after tax day. Besides, it gives people a chance to have at least one nightmare about their tax bills before they vote.

________________________

You know, from reading all this I like the idea of hashing out the best way to implement taxation (in a manner that most crimps the ability of politicians to raise them), and then making that a part of the Bill of Rights.

But you realize, of course, that any attempt to use a "democratic" process to establish taxation will end up "soaking the rich" because "they can afford it".

We need a temporary Tax Dictator. Then a temporary Social Security Dictator. Then a temporary Stop The F'ing War on Drugs Dictator.

Then, a few hundred more temporary dictators.

They will all hand power back to the people after doing their dictating, of course.

Hey, I can dream, right?

[Kahn]

Just think. If we had a reasonably transparent tax system, it might even cramp our politician's ability to wage war. Because people would see the cost directly, and it's really stupid to start a war that people aren't going to support to the finish.

Not that politicans are averse to doing really stupid things. But it'd keep them on a shorter leash.

It is exceedingly difficult to make the leash on politicians short enough. It is best, in fact, if you hang them from a post with the leash right from the outset. The idea is to have their feet just close enough to the ground that, on their tip-toes, they won't quite choke to death before their terms expire.

Maybe, the solution is to make the business of being a politician generally miserable. Then nobody wants to go there.

Then we have to figure out how to get people to do the job anyway. Somebody suggested once that we appoint politicians essentially by drawing straws. Sure, we'll end up with as many dopes getting the job as not. Maybe, to actually pass a law, we require that at least two batches of "straw drawn appointees" have to approve it. For really serious laws, maybe require three batches.

You could have a system for appointing batches of people for laws that come up, and that really require immediate attention.

Is this any worse than what we've got now? I doubt it. But I'm not sure it'd be any better in the long run either.

I don't trust democracy. But I don't see a better system, either.

[Kris]

gasoline taxes are hidden in a way that sales taxes are not

A little off topic, but when I was a kid, and actualy into my twenties, there was a gas station chain called "Cheaper"(in n. calif.). They had signs up over all their pumps that said TAX RIP OFF in large red letters. Below that in smaller black print they broke down the tax. I still see small signs at a few (very few) stations listed (currently something like 17.5 cents per gallon federal, 17 cents per gallon state & 2.5% local) but all are small, placed out of the way, and certainly don't say TAX RIP OFF

[Ron]

This is a huge topic, but a few comments:

A national retail sales tax has never gotten much traction because no one can solve the problem of how to exempt people's after-income tax savings from the new sales tax; i.e., you've saved money all your life after paying income tax, now you have to pay sales tax with that money too? The other problem is that there is no good way to translate current popular tax perks (home mortgage interest deduction) into a sales tax regime.

Transparency and simplicity in taxation is a pipe dream, folks. No legislature will pass any tax bill that isn't laden with benefits for contributors to campaigns, and they will never give up their power to do that, either.

[joe]

MP,

That's not a self-administered tax system. That's the reporting form for a system of tax withholding and return, very similar to the one we have now, but simpler.

Maybe a little more with the thinking first, and you won't make an ass of yourself next time.