Friday, April 01, 2005

What's To Like?

When I take on an idiotorial, it is not necessarily to suggest that the author is an idiot, nor that the author is necessarily wrong. It's more of a reaction to the really bad reasoning, or blatant factual error, presented within the editorial itself. For example, I think David Brooks has the capacity to write a well-reasoned column - it's not always clear to me whether his tendency to do otherwise results from laziness or from his ideological blinkers. With George Will, save for the period that the mention of Bill Clinton would leave him frothing at the mouth, there is no such ambiguity - my firm impression is that he knows the facts, understands the issues, and will betray both the facts and a fair understanding in order to advance an ideology. Case in point, yesterday's editorial on taxation.Which of these positions does George Will actually believe?

  • A "23 percent national sales tax on personal consumption ... would not only sensitize consumers to the cost of government with every purchase, it would destroy K Street." The first claim is a matter of opinion - I did not sense that consumers have responded as described to state sales taxes, or to the substantial taxes on cigarettes, liquor, and gasoline, but perhaps a national sales tax would somehow trigger the national consciousness. But destroy K Street? C'mon. I'll concede that taxes play a big role in lobbying, but big business will unquestionably continue to lobby for other purposes, including for new or expanded subsidies and protectionist trade barriers, even if all corporate taxes are eliminated as part of this "reform".

  • "And his bill untaxes the poor by including an advance monthly rebate for every household equal to the sales tax on consumption of essential goods and services, as calculated by the government, up to the annually adjusted poverty level." Hm. So the bill "untaxes corporations" by eliminating corporate taxes. It "untaxes the rich" by removing any taxes from their wealth and inheritance. It "untaxes the poor" by giving them a tax credit. So who, dare I ask, is Will expecting to pick up the tax burden those other groups leave behind?

  • "Corporations do not pay payroll and income taxes and compliance costs; they collect them from consumers through prices." If "payroll taxes" are viewed as a tax on corporations, shouldn't we regard all taxes on wages as a form of corporate income tax? Isn't it fair to assert, under such a model, that unless you're self-employed you don't pay a cent in taxes, as your "income" and "payroll" taxes are really part of your employer's overhead? And with all due respect to Will's notion that corporations consider taxes along with all other expenses of doing business when setting prices or forming policy, does he truly think that the impact of a federal sales tax will be overlooked in the nation's boardrooms? And by recognizing that corporations consider their tax burdens in such acts as setting prices, does Will sincerely believe that free market principles are best served by taking that calculus out of the hands of the market and replacing it with a "one size fits all" national sales tax?

  • Will continues, "Linder says the director of the Congressional Budget Office told him it costs individuals and businesses about $500 billion to remit $2 trillion to Washington. And studies show that it costs the average small business $724 to collect and remit $100." I'm not sure what those statistics mean - perhaps intentionally, Will doesn't provide enough context. But if Will is asserting that the collection of a new, national sales tax will reduce the tax burden on small businesses, he has no clue what he is talking about - this represents a very burdensome type of tax to be collected at the cash register, and imposes an entirely new burden on service providers. (As for the overall cost of tax compliance, in 2002 the Heritage Foundation asserted that the cost of compliance with the Tax Code was about $194 billion each year. Is Will seriously claiming that under Bush's watch that number has almost tripled?)

  • "With no taxes on capital and labor, multinationals would, Linder thinks, stampede to locate here, which would be an incentive for other nations to emulate America." Um... Lindner himself details this proposal as tax on goods and services. How do you tax services without taxing labor?

  • "Linder had better repeal the 16th Amendment, to make sure the income tax stays gone"... But George, why would anybody try to bring back an income tax when this utopia you describe, with businesses clamoring to set up shop in the United States, lobbyists gone from Washington, trillions of dollars sheltered in overseas accounts pouring into our nation's banks, and "freedom [unleashed] around the globe", will result from this tax proposal? Or is your real concern that, if you don't foreclose an income tax, the middle class will insist upon relief when the true burdens of such a tax policy become manifest?

Will's piece also suffers from deliberate omission. For example, he overlooks the impact that would result where services, presently provided without tax, jump in cost by 28%. He overlooks the fact that, while Lindner proposes that the 28% rate would be "revenue neutral", even accepting that claim you would also have to assume that there will be no tax avoidance under the new scheme. Which is unlikely, given how many cash transactions go unreported under the current system.

Here's an idea for a shelter: Create a seller's club - sort of an "Amway on steroids" - which sells pretty much everything, including electronics, furniture, household products, tools, and dry goods. Members would operate from their own homes, and would purchase "demo items" from the club. Guests in their homes could view the items, and if they chose could order them through the club member. Of course, this end customer would pay taxes, but the "demo items" themselves would be tax-free. (And if the would-be customer instead joins the club, and sets up his or her own tax-free home demo, the member gets a commission.) Does it sound like a plan?

And what of the history of the "luxury tax"? Recall the 1990 tax on luxury yachts, a mere 10% tax, which devastated the domestic yacht industry (a tax that, I would venture, Will opposed)? We are to assume that there will be no similar impact from a 28% tax on high end items? That the rich won't find other ways to buy their yachts, without paying a high sales tax? Sure, George. Sure.


  1. I'll take a google gulp cap :)

  2. [Context provided here.]

    Certainly. I understand the caps to be subject to a few regulations affecting shipping, handling and storage, so when you send your address please also forward proof that you hold the required training and permits. Also, if you could provide your account number with your Hazmat shipper, it would expedite the process.

  3. So who, dare I ask, is Will expecting to pick up the tax burden those other groups leave behind?

    Silly person! With K Street gone, all the need to hire accountants gone, and so on, government will be so small and efficient we won't NEED taxes anymore.

  4. But with K street gone, where will K work? (A joke, perhaps, with an audience of 1. ;-)


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