Thursday, February 10, 2005

In Praise of Rep. Bill Thomas for Challenging GOP Tax Policy

Contrary to the rumors of some and the wishes of others, I have not dropped off the face of the earth, but merely have been deluged with "regular work" that has kept me from my general blogging duties until now.

Now that the disclaimer is out of the way, I want to draw attention to Robert Novak’s column in today’s Washington Post. Now I’m drawing attention to this not because its Mr. Novak’s column, but rather because of the column’s subject matter. Mr. Novak’s column reports on statements made by Rep. Bill Thomas (R-CA) who is the Chairman of the House Ways and Means Committee at the recent GOP retreat in West Virginia a couple of weeks ago. Ways and Means, of course is the committee responsible for Social Security Reform, but also the tax laws, which makes Mr. Thomas a very important figure nowadays.

According to Mr. Novak, Mr. Thomas did, in part, a very good thing. Namely, Mr. Thomas refuted and more importantly potentially killed any further debate and consideration of what may be the two worst ideas in American economic and fiscal policy: the flat tax and the national sales tax. With respect to the flat tax, Mr. Thomas pointed out that in order to implement a flat tax individual citizens would have to give up their ability to deduct popular economic policies such as the ability to deduct interest from home mortgage, charitable donations, state and local income taxes. In addition, Mr. Thomas pointed out that if you were to get rid of the graduated income levels the rate would be too high for low-income workers to pay and still be able to avoid government assistance, thus an exception would have to be created, which destroys the entire purpose of the flat tax, namely to have one rate with no exception.

Shifting to the national sales tax, Mr. Thomas reportedly challenged GOP members to guess whether they or their constituents would like to see the cost of goods, specifically consumer goods rise by approximately 30% which is one of the numbers that many have speculated would have to be instituted to generate the necessary revenue to cover the expenses of the federal government. Of course in the wake of new cost estimates for GOP enacted entitlement programs that sales tax number may even rise higher. Further, consider that many of the sales tax proposals exempt food, clothing and other "essential items" which essentially makes this a luxury tax on only the rich or on "entertainment dollars." In other words imagine paying 30% more on your already $9.00 movie ticket, making it at least $12.60. Even worse, imagine a 30% tax on a new car that costs $20,000. That $6,000 just in federal sales taxes, not to mention any applicable state sales taxes or other fees commonly associated with buying a new car.

Praise needs to be given to Mr. Thomas for directly challenging these two ideas, especially considering that they are popular among members of his own party. There needs to be a debate on these issues, and ideas need to continue to be generated, but foolish and unmanageable ideas need to be rejected as soon as they are proposed so that room can be made for ideas that might actually impose sound economic and fiscal policy in the United States.


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