US Election 2004

Several years ago at one of Rep. Frank Wolf’s annual town hall meetings, a citizen made an impassioned plea regarding the insanity of our federal tax code and the serious need for fundamental reform.  While Wolf (R-VA 10th) agreed 100%, he said it was useless to do anything with tax reform at that time, because such reform would require presidential leadership that would not focus on the issue until President Bush’s second term.

Next Tuesday, we will decide whether Wolf’s prediction proves to be true.  In the next presidential term, there is likely to be significant tax changes regardless of who is elected.

Based upon Senator Kerry’s rhetoric in the campaign, his tax agenda is clear:  use the tax code to punish producers.  Whether it is higher income taxes on top earners, increasing revenue from corporations, or closing deductions and deferrals, Kerry’s tendency is always to take from those that produce in order to give to those that consume.  Meanwhile, he promises to add to the tax code’s complexity by creating new deductions for individuals who behave in government approved ways.

On the other hand, President Bush has rhetorically recognized that the rewards of productivity belong to the productive not to the demagogues.  To date, there have been three trends in Bush’s tax changes:  (1) reduce penalties on productivity, (2) flatten out the progressive rate structure, and (3) increase the number of low income people who pay no income taxes.  These trends suggest a move towards a flat tax like Russia has successfully implemented.  While a different alternative which did not tax productivity would be preferable, within the context of what could be accomplished in the next four years, it is a definite improvement.

Regardless of who is elected President, the Congress (also to be chosen on Tuesday) will be determine whether the next President’s tax agenda is passed into law.  However, given the success of Governor Warner (D-VA) in getting a Republican legislature to raise taxes, there is no guarantee that a President Kerry could not implement his plan to use the tax code to attack producers, and as an unintended consequence tank the economy.

Regarding tax reform, President Bush’s partial loaf is a better deal for producers in the next four years.

B&WW Reference:  For the consequences of Kerry's tax plans see "Bermuda or Bust" on page 102.

Tax Burden (1/28/2003)

Image Source: Intellectual Activist

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