Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, July 12, 1990 TAG: 9007120408
SECTION: EDITORIAL PAGE: A-14 EDITION: METRO
SOURCE: RAY L. GARLAND
DATELINE: LENGTH: Long
In George Orwell's "1984" there is such a moment when the furtive lovers are caught by Big Brother's thought police. The point being that old-fashioned personal loyalties, unsupervised by the state, are now forbidden. But the real punch comes when the brainwashers go to work. The man remains loyal until he is threatened with the one torture he fears most, whereupon he screams the immortal line, "Do it to her!"
"Do it to him, her, them, anybody but me" is now the guiding light of public discourse in the United States, particularly as it relates to taxes, for truly, the power to tax is the power to destroy. Or, put in less apocalyptic terms, a nation's tax code is the barometer of its respect for the individual's freedom of choice and the rule of law. Yes, the rule of law, for it is as certain as the sunrise that where government tries to extract too large a share of the fruits of effort it will instruct its citizens in the arts of corruption. It is also a fact, as Justice Holmes said, "Taxes are what we pay for civilized society."
In the liberal counterattack on the Reagan Revolution now in progress in the Congress and the media, the certainty is that Reagan's reputation will soon sink to the level enjoyed by that other Republican high priest of prosperity, Calvin Coolidge, after the boom of the late 1920s collapsed in the Great Depression.
But like all presidential reputations, Reagan's will be subject to revision in later times. Once the liberal agenda of new entitlements is enacted - with taxes and business cost increases to match - another generation may look more kindly on Reagan's efforts to curb the automatic growth in taxes through inflationary bracket-creep and reduce rates to levels that sensible people can respect and should honor willingly.
It will come as a shock to some people to discover that taxes in the United States as a whole are the lowest among industrialized nations. That piece of news comes from the 1990 edition of The Statistical Abstract of the United States. Through the 1980s, total taxation in the United States remained remarkably steady at 30 percent of the nation's gross national product. That compared with 34 percent in Canada; 37 percent in Great Britain and West Germany; 45 percent in France and 57 percent in Sweden. Had we been on a pay-as-we-went basis, the tax levy would have been about one-fifth more, but some of these other counties also ran substantial deficits.
The issue might be more easily understood if related to personal income. The total tax bite in the United States has been running around 35 percent of personal income. Putting the federal government on a balanced budget would bring that to almost 40 percent, which might be taken as line well worth defending. That is, the totality of federal, state and local taxation in this country should not claim more than two-fifths of the total efforts of the people.
My wife and I both work and enjoy a substantial income, principally from investments. But it is also a fact that we pay about 42 percent of that income after deductions in federal, state and local taxes. The earnings from this column - hardly grandiose - are taxed closer to 50 percent. You get that by adding the federal income tax rate of 28 percent to the state income tax rate of 5.75 percent to the self-employment tax in lieu of Social Security of 13 percent. When you go to spend the 53 cents left from every dollar earned, you are likely to pay another 4 percent in sales and excise taxes to say nothing of the business taxes that must be hidden in the cost of everything.
In the liberal demonology, no doubt, we are grossly undertaxed. In truth, we would gladly pay a bit more as a proper part of an overal settlement of the issue of the deficit, if it would stay settled. But those higher taxes could be paid in two ways only: decreased consumption or decreased investment. When you multiply that by millions of taxpayers, you begin to see the dimensions of the problem that comes when you increase the size of the public sector by decreasing the discretion of private citizens to establish their own priorities.
In 1987, only 6.3 percent of the households in the United States had incomes in excess of $75,000, and most of those fell below $200,00. There was, according to the IRS, $220 billion in personal income in this country in excess of $200,000. Taxing that income at 90 percent would have generated a theoretical $124 billion in additional federal taxes.
I say "theoretical" because it's impossible to compute the impact of withdrawing so much from the private sector. But assuming you could have done it without injury to the economy, it still wouldn't have been enough to balance the budget. So, what's next?
In words attributed to an anti-Nazi pastor awaiting execution at the end of World War II, "When they came for the communists, I didn't protest because I wasn't a communist; when they came for the Jews, I didn't protest because I wasn't a Jew . . . when they came for me there was no one left to protest." All tax schemes that begin by claiming to soak the rich generally end by soaking the poor.
While we should be prepared to pay now for everything we expect from government and recognize just how much we are getting, we shouldn't expect any citizen to give up more than half of his income to government. And many in high-tax states are now approaching that if they have not already exceeded it.
by CNB